What Is the Patient Driven Payment Model: How Skilled Nursing Providers Can Get Ahead of PDPM

By Jayne Warwick, director of market insights, PointClickCare.

Jayne Warwick
Jayne Warwick

The Patient Driven Payment Model (PDPM) is more than just a new name attached to Medicare payment reform. The shift from Resource Utilization Group (RUG) IV to PDPM moves the skilled nursing reimbursement model away from therapy provision as its main driver. Instead, payment will be determined by the provision of nursing care with higher rates being attached to more clinically complex patients.

PDPM will also align reimbursement with the industry-wide shift to value-based care (as opposed to volume).

It is designed to:

 Why do we need it?

The skilled nursing industry has advocated for payment reform for years. In response to requirements in the IMPACT act of 2014 and the resulting PAMA act, post-acute care must have a unified prospective payment system by 2024. Different post-acute settings use different data to determine payment. PDPM is the beginning of unifying the data tied to reimbursement.

In addition, the Medicare Payment Advisory Commission (MedPAC) and the Office of the Inspector General criticized the current RUG IV system for incentivizing therapy over the provision of clinical care. Essentially, the more therapy minutes provided, the higher a skilled nursing facility would be reimbursed. Since the majority of minimum data sets (MDS) that were submitted in the highest RUGs categories were within five minutes of the 720-minute threshold, the RUG IV system was scrutinized for promoting the threshold as a goal for care, rather than the outcomes of the therapy.

Also, RUG IV has been criticized for its strenuous administrative requirements. Providers needed to complete many assessments for a single Medicare A stay.  For many years, CMS has been under pressure to reduce the administrative burden associated with RUG IV.

These factors illustrate the need to link reimbursement to patient need, as well as the imperative to focus on good clinical care.

 Timeline

The Resident Classification System, Version 1 (RCS-1), was proposed in May 2017. In May 2018, RCS-1 was replaced with PDPM. It was finalized on July 31, 2018 and will go into effect on October 1, 2019.

Benefits

How you can start preparing now

To adequately prepare for PDPM, there are several activities facilities can begin performing to ready themselves for the transition. These steps to change management for PDPM will help any facility succeed through the immediate shift in payment. They will also strongly position a facility to readily adapt to future payment reforms or shifts that may be imposed as all payors transition to the PDPM methodology.

To start, facilities need to understand the plan and the financial, cultural and operational impact it will have on their business. Providers need to consider their current state, as well as areas they want to be successful in once PDPM goes into effect. Homes should be looking at staff skills and competencies to support the shift to a more clinically driven patient population and determine where changes, education, or upskill training is required.

Facilities need to understand the impact of the conversion. For example, will they have the right mix of residents and needs to support revenue goals? This is also the time homes should examine how they capture required documentation and ICD-10 coding practices. Do they have the right information to code appropriately? To get the right code? To accurately code the MDS? This is the foundation for being successful with PDPM.

After facilities understand PDPM and its impact on their business, it is crucial that they standardize their processes and content to capture the right data elements. This will better enable facilities to gain insights into what else they may need to change to be successful, as well as identify gaps, level the playing field for staff care provision, and make possible the measurement of expected outcomes against actual outcomes. This standardization will also serve homes well in the future. PDPM affects Medicare A residents in 2019, but when CMS retires the PPS item set in 2020, homes that have mastered the move to standardization will find the shift to PDPM for all payers much smoother.

Once standardization has occurred, facilities should analyze how their process changes have impacted the facility. Is your facility getting the right information, at the right time, to support optimization of revenue? Insights gained from that scrutiny can prove that these shifts in process were the right ones to support the transition to the new payment paradigm. Facilities should also review how these changes affect potential PDPM scoring for their Med A residents.

Afterwards, facilities should leverage their data to optimize their protocols to support the most advantageous reimbursement. This may include adapting their business model in order to qualify for higher reimbursement. For example, a facility may want to offer more specialized service provisions, such as an IV med unit or dialysis, to close the gap between occupancy and revenue.

Once all of the processes and business models have been adopted, homes need to operationalize these changes. During this stage, facilities should continue to test their operations for accuracy, efficiency, and functionality. This may include testing various processes, such as completing an MDS with the new PDPM rules or completing a transition plan within a seven-day period, to ensure that all of the changes made continue to be beneficial and that the gains made during the previous steps are maintained.

Oct. 1, 2019, is not the far off. Homes need to start implementing their change management strategy now to be prepared for the transition – there is no time to waste. And mastering the transition to PDPM now with the smaller Medicare populations in homes is great preparation when all payers move to PDPM.

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