What You Need to Know about the New Patient Driven Payment Model (PDPM)

November 19, 2019 | Article

By Joleen Waldbillig

Effective October 1, 2019, the Centers for Medicare and Medicaid Services Prospective Payment System (PPS) replaced the Resource Utilization Group Version IV (RUG-IV) with a new Patient Driven Payment Model (PDPM) case mix classification system for skilled nursing facility patients who are under a Medicare Part A stay.

In the past, patients were classified into a RUG-IV based on volume of therapy services received regardless of the patient’s unique characteristics, goals or needs. The new PDPM classifies patients into case mix groups based on specific clinical characteristics. PDPM is part of a plan by CMS to improve payments made under skilled nursing facility PPS by:

  • Improving payment accuracy and appropriateness by focusing on the patient, rather than the amount of services provided
  • Significantly reducing burden on providers
  • Improving skilled nursing facility payments to currently undeserved beneficiaries without increasing total Medicare payments

Eide Bailly’s healthcare payment strategy consultants are continually monitoring the latest Medicare and Medicaid reimbursement regulatory reforms and trends to keep you abreast of emerging issues.

RUG-IV Versus PDPM Components
Under RUG-IV, payment was driven from a combination of two case-mix adjusted payment components and two non-case mix adjusted components. The RUG-IV payment methodology assigned patients to payment classification groups, called RUGs, which were based on various patient characteristics and the type and intensity of therapy services. Under PDPM, five payment components are utilized to drive payment factors, rather than volume-based service for determining Medicare payment. PDPM utilizes patient characteristics to assign patients into case mix groups to drive payment. In addition, PDPM adjusts per diem payments to reflect varying costs throughout the stay.

PDPM consists of the following five case-mix-adjusted payment components:

  1. PT – Covers utilization of physical therapy (PT)
  2. OT – Covers utilization of occupational therapy (OT)
  3. SLP – Covers utilization of speech-language pathology (SLP) services
  4. Nursing – Covers utilization of nursing services and social services
  5. NTA – Covers utilization of non-therapy ancillary (NTA) services

Let’s break down those components.

Physical and Occupational Therapy Components
Two categories are used to determine the case-mix classification—the clinical reason for the skilled nursing facility stay and functional status. The clinical reason is driven by one of the ICD-10 codes from item I0020B from the MDS and function is measured using Section GG of the MDS.

Speech Language Pathology Component
PDPM uses several different patient characteristics that are predictive of increased SLP costs including acute neurologic clinical classification, specific SLP related comorbidities, presence of cognitive impairment, use of mechanically altered diet and presence or absence of swallowing disorder.

Nursing Case-Mix Component
PDPM uses the same payment structure as RUG-IV for assigning patients with modifications which decreases the number of nursing groups from 43 to 25. Base function scores from Section GG on the MDS is also utilized.

Non-Therapy Ancillary Component
The NTA component is intended to capture cost for care related to other conditions and services that patients may require. Various options are considered to incorporate comorbidities into payment. CMS identified specific conditions and services and then determined weighted “points” for each. A patient’s total score is the sum of the points associated with their conditions and services. Comorbidity and extensive services for NTA classification are derived from a variety of MDS sources, with some comorbidities identified by ICD-10-CM codes reported in Item 18000.

ICD-10 codes and PDPM
There are two ways in which ICD-10 codes will impact PDPM. First, providers will be required to report the patient’s primary diagnosis for the skilled nursing facility stay on the MDS. Each primary diagnosis is mapped to one of 10 PDPM categories, representing groups of similar diagnosis codes, which is then used as part of the patient’s classification under PT, OT, and SLP components.

Secondly, ICD-10 codes are used to capture additional diagnoses and comorbidities, which factor into SLP morbidities which classify patients under the SLP component and the NTA comorbidity component.

MDS accuracy under PDPM
Accurately capturing the clinical condition early “within the first seven days of admission” will be essential to receiving the correct reimbursement. The initial assessment will impact the reimbursement for the first 180 days.

In summary, documentation reflecting the patient’s condition in the MDS in conjunction with accurate and complete ICD-10-CM code assignment are necessary for the appropriate PDPM classification and subsequent reimbursement.

The switch to PDPM is going to impact many health systems. Be sure your organization is ready. Eide Bailly health care professionals can help you make sense of these and other changes in the industry. Contact us with any questions or to talk through your specific scenario.

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