Patient-Driven Payment Model Reimbursement Exceeds CMS Prediction

February 20, 2020 - Initial analysis of the Patient-Driven Payment Model (PDPM) shows success in the model’s rollout, exceeding the Centers for Medicare and Medicaid’s (CMS’s) predictions.

The model, introduced in October of 2019, recently completed its first billing cycle. Analysis by Z-CORE Analytics, LLC (CORE), an analytics group founded by Zimmet Healthcare Services Group, LLC, estimated that the PDMP per diem rate was 5 percent above CMS’s predictions.

The report analyzed three months of claims data from over 1,000 skilled nursing facilities (SNFs) across 38 states in CORE’s database. While not a statistically valid sample of all SNFs across the country, the analysis provides insight into a subset of SNFs until more robust data allows for further analysis.

A majority (91.5 percent) of facilities had a higher PDPM rate than they would have achieved under the previous payment structure, Resource Utilization Group (RUG).

A recent KLAS report also indicated that large, long-term care organizations saw the biggest financial impact on the payment model change. Bigger skilled nursing facilities are more likely to feel the impact of this change. 

The KLAS report also showed a majority of long-term care EHR vendors were effective at helping their clients prepare for PDPM, but therapy vendors were more likely than EHR vendors to be seen by their provider partners as helpful.

EHR reporting and therapist workflow need to be optimized in order for SNFs to receive fair compensation and make the transition from one payment model to the next seamless.

Most providers report acclimating well to the change in payment structure. But analysis from CORE revealed six components in the payment model that are driving variation in rates: physical therapy (PT) rate performance, occupational therapy (OT) rate performance, swallowing disorder, mechanically altered diet, nursing groups, and non-therapy ancillaries.

PT and OT rate performance is calculated based on the SNF resident’s clinical diagnosis and the number of therapy hours associated with that diagnosis. These categories are relatively broad, so SNF’s with a high population of residents with these conditions can receive dramatically larger payments.

CORE’s analysis revealed that PT and OT performance rates do not change drastically from RUG’s methodology. The average payment prior to PDPM’s implantation was $177 per day and after PDPM’s model, it was $176 per day.

The speech-language pathologist (SLP) component of PDPM is linked to Medicare patients with a record of swallowing disorders or mechanically altered diets. While this variable is responsible for only a small proportion of reimbursement, the rates are expected to increase dramatically as the definitions of swallowing disorders and mechanically altered diets that qualify for SLP have broadened.

The nursing component is linked to a resident’s function score, so the lower functioning a patient is, the higher the reimbursement rate. PDPM has shown an overall drop in physical scores from 23.5 percent to 18 percent indicating an associated increase in reimbursement. Yet CORE’s report encourages SNFs to review their documentation in order to ensure reimbursement aligns with services provided and documented as not ever SNF has seen this change in physical scores.

Non-therapy ancillaries are easy to define yet difficult to extract conclusions from, according to CORE’s analysis. This is the final component responsible for rate variation. But CORE postponed analyzing this element of the PDPM until there is further data.

Understanding which factors drive reimbursement rates will allow SNFs to deploy strategies that ensure they are compensated appropriately for the care they deliver. Providers will understand where in their systems and workflow they should be investing time and resources in order for their care to reflect the best practices and most up-to-date reimbursement models.