Despite high spending in the Medicare program – $702 billion in 2017 – ensuring consistent, high-quality senior care is often an elusive goal. To tackle the challenge, the Centers for Medicare & Medicaid Service (CMS) continues to evolve its Medicare payment structure. The newest system is the Patient-Driven Payment Model (PDPM), a Medicare reimbursement plan for patient stays of 100 days or less in a skilled nursing facility (SNF). The new model, which will launch October 1, 2019, is designed to trim costs, enhance senior care, and simplify a complex payment system.

Pulling out the RUG

PDPM represents a monumental shift in how CMS pays nursing homes for Medicare patients. It replaces the current SNF case-mix methodology – Resource Utilization Groups Version Four (RUG-IV) – with an entirely new way of calculating reimbursement.

“In the RUG system, Medicare rates are tied to the volume of therapy minutes a patient receives,” says Eddie Parades, senior vice president of government affairs at StoneGate Senior Living, a leading provider of senior living services in Texas, Oklahoma, and Colorado. “The current RUG model is based on utilization of services, and that translates into a built-in incentive to potentially drive up cost of care.”

With the new PDPM, therapy minutes are no longer the basis for payment. The system hinges on how patients are classified and the resources they will need in their stay. PDPM assigns every patient a case-mix classification that determines the daily reimbursement rate for their care. “The payment rate is patient specific and established by patient need, not services delivered, Parades says. “The patient classification is primarily driven by the ICD-10 diagnosis code, and that is then influenced by case-mix multipliers associated with individual patient co-morbidities and care needs captured by clinical assessments.”

Putting patients first

“I believe PDPM will be an improved payment model and will be the most accurate payment-driven system in two decades,” Parades predicts. “Historically, our SNF payment system has been based on the volume of services the patient receives. PDPM flips the equation and bases payment on the patient’s condition and needs. This patient- centered care model will recognize higher medication costs and allow providers to accept more medically complex patients.  Basically, the sicker and more complex a patient is, the more payment recognition you will receive.

“This will also provide for new care metric data gathering, which should provide patients with more insight in making informed decisions about which SNF offers services best tailored to their condition and preferences.”

Preparing for change

“PDPM requires careful preparation, and StoneGate Senior Living is investing considerable thought, time, and education to ensure we are well prepared before the transition,” Parades says. Key readiness steps include:

  • Processes to ensure improved information exchange with acute care providers
  • Accurate and complete ICD-10 coding solutions
  • Improved clinical assessment accuracy for capturing care needs
  • Automation and electronic health record interoperability with key PDPM high-impact drivers
  • New therapy delivery models and full integration of group/concurrent services
  • Assessment of any potential gaps in clinical competencies toward admitting more complex patients

“PDPM is more than just another government payment change,” Parades says. “It will transform Medicare-covered skilled nursing from a therapy-driven model to a patient-driven approach and will reinforce that SNFs remain the best-value, lowest-cost provider of skilled nursing services in the healthcare delivery system today.

“With PDPM, everyone wins. Patients win because their needs will be at the center of treatment plans. Hospitals win with more transparency into SNF performance – and the increased assurance that they are discharging patients to a high-quality post-acute care setting. SNF providers win because their improved performance will result in increased referrals from hospitals and patients. The government wins with a plan that improves senior care, and advances continued efforts to build a patient-centered health care system.”