Skilled Nursing Facility Staffing Impacted by New Payment Rules

March 09, 2021 - Skilled nursing facility (SNF) staffing levels across several provider types have fallen since Medicare implemented new payment rules meant to drive value over volume of services, according to a new Health Affairs study.

The study published last week found that physical therapist and occupational therapist staffing levels at SNFs fell by 5 percent to 6 percent from October to December 2019 compared to the period before Medicare implemented the Patient Driven Payment Model (PDPM).

Physical therapy assistant and occupational therapist assistant levels also decreased following PDPM implementation, falling by 10 percent compared to the pre-implementation period.

These reductions were concentrated among contracted employees and were more likely to occur in larger SNFs with higher shares of Medicare-eligible short-stay residents, researchers found.

Notably, researchers did not observe a reduction in nursing staff or occupational therapist aide levels in response to PDPM implementation.

“As SNF administrators prepared for the PDPM, it is likely that many made decisions regarding their use of in-house therapists versus third-party therapy companies based on assumptions of how their revenue streams would be affected under the PDPM,” the study stated.

PDPM went into effect on Oct. 1, 2019, replacing the per diam payment mechanism Medicare used to reimburse SNFs. The new reimbursement methodology means to incent greater value in SNF spending by tying payments to clinical and functional characteristics of patients at the time of SNF admission rather than number of weekly therapy minutes provided to patients.

Under PDPM, patients are categorized into different payment categories, which reflect expected therapy and nursing costs.

The new Medicare payment model is budget-neutral according to CMS regulation, meaning SNF reimbursement should be about the same as it was under the per diam payment structure. However, the model has “completely altered SNF financial incentives around patient mix, staffing mix, and care delivery,” researchers said.

For example, researchers explained the observed declines in SNF staffing levels of therapy assistants compared to therapists to the new Minimum Data Set Medicare assessment schedule under the PDPM.

PDPM streamlined the schedule to require less frequent assessments, and since only therapists are licensed to complete the assessments, demand for therapy assistants may have declined as therapists could spend more time on patient care versus administrative responsibilities.

Additionally, PDPM relaxed the rules around group therapy, researchers added, which allowed therapists and therapy assistants to treat two to six patients in a group setting versus exactly four patients.

New group therapy rules under the new payment model may have encouraged SNFs to deliver more treatment minutes in a group setting, thereby resulting in less demand for therapy assistants who were primarily used under the previous payment system to generate more individual therapy minutes, researchers stated.

The financial incentives of the PDPM have been associated with SNF staffing changes shortly after implementation, but further research is needed to determine whether staffing changes—or changes in types of therapy, as a result—have impacted patient outcomes.

“It is unclear, however, whether reductions represent a ‘right-sizing’ of therapy departments that were previously designed to deliver financially motivated therapy of limited clinical benefit or a form of skimping that limits patients’ access to needed rehabilitation services,” the study said.

But researchers are not optimistic that this work will be done in light of the COVID-19 pandemic.

The first SNFs to provide COVID-19 care did so about five months after PDPM implementation in October 2019. Since then, SNFs have faced severe staff shortages as well as inadequate supplies of personal protective equipment, according to a previous study from lead author Brian E. McGarry of the University of Rochester and co-author David C. Grabowski of Harvard Medical School.

Grabowski was also involved in another analysis published in the March 2021 edition of Health Affairs. The analysis found that nursing staff turnover at nursing homes is higher, based on newly derived Payroll Based Journal data being used by CMS on the Nursing Home Compare website.

Mean and median annual turnover rates for total nursing staff were about 128 percent and 94 percent, respectively, indicating a need to incent changes to reduce turnover.