New reimbursement method will compensate SNFs for caring for medically complex residents
Editor’s note: Effective Oct. 1, 2019, your SNF customers began receiving Medicare reimbursement based on a new model of payment, called the Patient Driven Payment Model, or PDPM. This article, edited and reprinted from December 2018 Repertoire, discusses how PDPM may affect SNFs’ approach to patient care and their supply chain partners.
The Patient Driven Payment Model, or PDPM, is designed to be budget-neutral and, in a global sense, it very well might be. But there will be winners and losers.
The winners? Skilled nursing facilities that accurately assess the needs of the resident upon admission, and tailor their care accordingly.
The losers? Facilities that cling to the old reimbursement method, which rewards SNFs that maximize the number of hours they spend providing physical therapy, occupational therapy or speech/language pathology therapy. In the new system, more therapy hours won’t add up to more reimbursement dollars. (That said, the level of therapy anticipated for each resident will continue to be one factor in the new reimbursement scheme.)
SNFs that admit medically complex residents, that is, those who need higher levels of potentially expensive care (e.g., expensive drugs, ventilator care, care for residents with HIV/AIDS, etc.) will receive reimbursement that more closely reflects those higher costs.
“It’s good for residents,” says Robin Hillier, RLH Consulting, Westerville, Ohio, and director of reimbursement and quality metrics for Welcome Nursing Home in Oberlin, Ohio. She spoke about PDPM at the 2018 Convention and Expo of the American Health Care Association and National Center for Assisted Living in San Diego.
“The current Prospective Payment System (PPS) used by CMS to pay for Medicare stays in skilled nursing facilities had the unintended consequence of leading to a ‘one size fits all’ approach to providing skilled care. The new Patient Driven Payment Model focuses more on the unique characteristics of each individual beneficiary, rewarding SNFs for focusing on the holistic, individualized plan of care that will help the person meet their specific post-acute goals.”
“PDPM is a resident-centered model,” says Nate Ovenden, senior Medicare and managed care consultant, Good Samaritan Society, Sioux Falls, South Dakota, who also spoke at the recent AHCA/NCAL convention. “It will help us focus on the resident as an individual, instead of our current system, which relies on the amount of therapy minutes delivered.”
Existing method to fade out
Until October 2019, Medicare paid SNFs a prospectively determined rate for each day of care. That daily rate had three components: nursing, therapy, and room and board.
The nursing and therapy portions of the payment for each patient were adjusted for differences in case-mix using a classification system called resource utilization groups, or RUGs. The most recent iteration – RUG-IV – classified patients into one of 66 possible resource utilization groups, depending on the resident’s nursing care needs; amount of therapy provided; other services furnished, such as respiratory therapy and specialized feeding; the patient’s ability to perform activities of daily living; and certain medical conditions, such as pneumonia and depression.
The RUG-IV system included payment for staff time spent on nontherapy ancillary (NTA) services, but not the cost, which can be high for SNF residents who require expensive drugs, a ventilator, tracheostomy care, wound care, IV medication, etc. (“Nontherapy ancillary services” refers to any ancillaries a provider uses other than therapy services, such as drugs, supplies and equipment.)
The patient-driven approach
Under PDPM, residents are classified into one group for each of the five case-mix-adjusted components:
- Physical therapy
- Occupational therapy
- Speech/language pathology
- Nontherapy ancillary services
- Nursing
And, whereas under RUG-IV, therapy minutes delivered was the primary determinant for reimbursement, under PDPM, therapy minutes have no impact on reimbursement.
SNF administrators and staff will enjoy another benefit from PDPM – less time spent completing assessments of their residents.
RUG-IV called for SNFs to perform five scheduled assessments of the resident, at Day 5 of the stay, Day 14, Day 30, Day 60 and Day 90. In addition, SNFs were expected to perform unscheduled assessments throughout the stay, depending on the needs of the resident. Under PDPM, however, SNFs need only perform one scheduled assessment – at Day 5 – and unscheduled assessments as needed.
While PDPM will save SNFs time spent on assessments, it also will demand a higher degree of accuracy at that Day 5 assessment.
“For many – if not most – Part A beneficiaries, reimbursement will be based solely on the information captured on the initial (5-day) assessment,” says Hillier. “Under certain circumstances, facilities will have the ability to complete an ‘Interim Payment Assessment’ to adjust the reimbursement rate if new conditions arise during the stay that would increase the payment rate. But accurate and complete coding on the initial assessment will be critical to a facility’s success.
“In order to achieve complete and accurate initial assessments, facilities will need to evaluate their admissions processes to ensure they are considering all relevant clinical information.”
Simplicity
CMS hopes that PDPM will simplify the payment system, says Ovenden. “We currently spend so much time meeting regulations and doing assessments that our nurses don’t have as much time to see residents face to face. With PDPM, we will get to know our residents on a more personal basis, and our MDS [Minimum Data Set] assessments will be more accurate. We will have the resources to focus on our clinical competency skills, and make sure we’re providing great care for our residents with comorbidities.”
In addition, by recognizing 50 nontherapy ancillary services for which SNFs can be reimbursed, the PDPM model will more accurately reflect the time, effort and cost of caring for clinically complex residents, rather than emphasizing therapy minutes, says Ovenden.
That said, it would be a mistake to believe that PDPM will lead to a flood of new clinically complex residents in SNFs, he says. Those residents are already being cared for. But PDPM will reduce the incentive for some SNFs to pick and choose residents who may require many therapy minutes, but who do not present clinical complexities.
Making adjustments
“Under PPS, providers are paid based on the amount of therapy they provide,” says Hillier. “If two beneficiaries receive the same level of therapy, the rate is the same – regardless of their overall medical complexity. Under PDPM, providers who treat people with greater clinical complexity will finally be compensated for that care.”
All facilities have the ability to be successful under PDPM if they take the appropriate steps to prepare for it, says Hillier. Some will develop clinical programs that attract more medically complex patients, since reimbursement will be available to properly care for them, she says.
The first step for SNFs is to evaluate the need in their specific market for such programs, she says. They could start by identifying patients whom hospitals are having difficulty placing, given their medical complexity. Then they should focus on what they need to do to accommodate such residents.
In some cases, that may mean making physical changes to the facility, or acquiring additional capital equipment, she says. Just as important, it may call for upgrading the clinical skills of the nursing staff. “You have to make your clinical team comfortable and confident that they have the ability to provide that type of care.
“Providers and their suppliers should educate themselves about the new payment system and understand the new incentives contained within. I encourage strategic planning to identify opportunities to provide skilled care in a way that is more patient-centered and will achieve better outcomes with higher customer satisfaction.”
Nontherapy ancillary services
Under the Patient-Driven Payment Model, SNFs will be reimbursed for their Medicare residents based – in part – on the nontherapy ancillary services needed. Medicare has assigned a certain number of “points” for 50 conditions. More points mean more reimbursement. The following 15 conditions receive the highest number of points.
Nontherapy ancillary service Points
| HIV/AIDS | 8 |
| Parenteral IV feeding: level high | 7 |
| Special treatments/programs: Intravenous medication post-admit code | 5 |
| Special treatments/programs: Ventilator or respirator post-admit code | 4 |
| Parenteral IV feeding: level low | 3 |
| Lung transplant status | 3 |
| Special treatments/programs: transfusion post-admit code | 2 |
| Major organ transplant status, except lung | 2 |
| Active diagnoses: multiple sclerosis code | 2 |
| Opportunistic infections | 2 |
| Active diagnoses: asthma, COPD, chronic lung disease code | 2 |
| Bone/joint/muscle infections/necrosis- except aseptic necrosis of bone | 2 |
| Chronic myeloid leukemia | 2 |
| Wound infection code | 2 |
| Active diagnoses: diabetes mellitus (DM) code | 2 |
Source: American Association of Nurse Assessment Coordination
The distributor’s role in PDPM
Repertoire readers might be especially interested in the variable rate adjustment (or “tapering”) that applies to the nontherapy ancillary services (NTA) component of Medicare reimbursement under PDPM, says Robin Hillier, RLH Consulting, Westerville, Ohio, and director of reimbursement and quality metrics for Welcome Nursing Home in Oberlin, Ohio.
“Nontherapy ancillary services” refers to any ancillaries a provider uses other than therapy services, such as drugs, supplies and equipment – but not labor.
For the first three days of the stay, providers will receive 300 percent of the calculated NTA payment component. Starting on Day 4, this will drop to 100 percent.
CMS has created a list of conditions or diagnoses that call for higher-cost supplies or equipment. Each is assigned a certain number of points (with more complex conditions earning more points). The more points, the greater the reimbursement.
“[Repertoire] readers can play an important role in helping providers identify clinical conditions and needs that contribute to the NTAS scoring early in the stay, so they can be captured on that initial assessment,” she says. “This will give providers more money at the beginning of the stay, which can be used to pay for additional supplies and equipment needed as a result of those conditions.
“It’s important that whatever is applicable to the resident gets captured right away.”
Deborah Haywood, vice president of sales and strategic development for McKesson Medical-Surgical, says the industry is “very early into understanding the full financial impact that PDPM will have for our SNF providers. The NTA case mix provides additional resources to facilities for treating potentially vulnerable populations, such as ventilator, infection isolation, end-stage renal disease (ESRD), diabetes, wound infections, IV medication, bleeding disorders, behavioral issues, chronic neurological conditions, and bariatric care. The initial admission assessment will set the case-mix reimbursement level and will be important for manufacturers and distributors to support their SNFs in driving the best outcomes for the residents’ care.”
Haywood notes that SNFs can gain a better understanding of the financial impact of PDPM from their RUG data from CMS. “McKesson’s partner Pathway Health offers providers tools, such as the PDPM Financial Impact Analysis Tool, which can help them understand their current data, potential impact and clinical impact to their organization.” In addition, SNFs can use automated tools such as McKesson Quality One to focus on continuous performance improvement to quality care, performance outcomes and resident satisfaction, she says.
“SNFs that adopt technology, drive training competencies on the new PDPM model and provide improved patient outcomes will be successful,” she says. “Those facilities that do not have some type of adoption will struggle with the new PDPM change.”