Patient Driven Payment Model (PDPM)

Skilled nursing facilities need to be prepared NOW for Patient Driven Payment Model (PDPM).

Center of Medicare and Medicaid Services (CMS) has introduced a new payment model/case-mix model called Patient Driven Payment Model, which will take place starting October 1^st, 2019. Ultimately, Patient Driven Payment Model (also known as PDPM) is going to affect the Medicare patient’s stay in skilled nursing facilities across the country. PDPM is replacing the current RUG (Resource Utilization Group) IV system. In the RUG-IV system, the payment is based on the quantity of services provided. PDPM, however, bases payment on the quality of services provided to the patient. Needless to say, this is a huge shift for healthcare providers working in the skilled nursing world.

Issues with The Current Case-Mix Model:

The current case-mix model (RUG-IV) calculates reimbursement based on the quantity of the services, primarily the amount/minutes of therapy provided. This causes several issues:

1. The current model does not consider the uniqueness of a patient’s medical status, goals, or needs. Thus, it does not determine the payment accurately for each patient.
2. The payment is based on index maximization. This means that out of all the RUG-IV groups for which a patient qualifies, the current payment model chooses the RUG-IV group that represents the highest CMI.

What is Patient Driven Payment Model (PDPM)?

PDPM is a reimbursement method which will determine a payment rate for any patient who is under stay in skilled nursing facilities. Essentially, therapy minutes will be removed as the basis for payment in favor of resident classifications and anticipated resource needs during the course of a patient’s stay.

How PDPM Will Solve the Current Payment Issues:

1. The model focuses on the patient and his/her uniqueness (not on the volume of the services provided) to determine the reimbursement.
2. The model is intended to improve the accuracy and appropriateness of reimbursement by individualizing the payment system for each patient.
3. It improves SNF reimbursements without increasing total Medicare payments.
4. It will reduce the administrative burden on providers significantly.

Who will be most impacted by PDPM?

Since PDPM is a case-mix model that will replace the current RUG-IV payment model, it is going to be the primary payment method for Medicare patients receiving skilled services, and will, therefore, impact skilled nursing facilities the most. Medicare Advantage providers (HMO part A) have not yet decided whether to continue following Medicare PPS RUG-IV guidelines or to follow the new PDPM model yet. As such, Medicare Advantage providers should stay abreast of any upcoming changes (see CMS updates here). Similarly, states have not made any specific announcements for Medicaid patients. Currently, nursing home providers are getting paid based on the case-mix index which follows the PPS RUG-IV system in some states. With PDPM replacing the PPS system, states may decide to follow the PDPM methods in the future. It is not clear if and when this will happen.

What Does Not Change with Patient Driven Payment Model:

There are few crucial items which remain unchanged under PDPM. Specifically, the guidelines for a patient to quality under part A services are unchanged. For a patient to qualify under Part A:

1. The patient needs to have 4 days/3 nights of hospital stay.
2. The patient needs a physician certification that he/she requires skilled care for the condition which required hospitalized OR a condition that arose out of hospitalization.
3. The patient needs daily skilled services (nursing 7 days/week and/or therapy 5 days/week).

How PDPM Will Replace the Current Payment Model:

With RUG-IV, there are around 66 total “rugs”. This system requires ongoing assessments to stay or change the patient’s current RUG, which is based on very fixed criteria. All of this is considered part of the total therapy minutes provided in a seven-day period. But, this does not account for any change in the patient’s functional status (improvement or decline). Thus, the reimbursement is based on minutes and the number of days per week the services were provided for all 100 days (or the total length of stay). With PDPM, each patient will have five different rugs and one fixed rug/rate. Therefore, PDPM will utilize a combination of a six payment component to derive the reimbursement of one patient. Unlike the current RUG system, under PDPM, there is also going to be a variable per diem rate. That is, there is an adjustment that will be applied to certain PDPM components that varies the per diem reimbursement over the course of stay (called the Variable Per Diem or VPD adjustment). It is hypothesized that this will help decrease the length of stay in nursing homes for Medicare part A patients significantly. In summary, PDPM should help shift providers’ thinking processes from focusing on the quantity of services to focusing on functional outcomes, quality of treatment, and uniqueness of each patient’s needs. As the name suggests, it is supposed to keep the PATIENT at the center of each case – which should be done by healthcare providers regardless of the payment system model! Learn More in our online CE course, Patient Driven Payment Model Overview (PDPM).