PDPM Rate Analysis: What’s in Store?

  • Regulations
  • 8/30/2021
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Explore the impact of proper clinical documentation on the calculation of the various components in the PDPM rate.

Key insights

  • The intention of PDPM is to provide payments corresponding with patient needs.
  • PDPM payments exceeded CMS expectations and have not been budget neutral, as intended.
  • Accurate documentation should continue to be a priority for facilities as CMS contemplates recalibration and the potential for future rate reductions due to recalibration.

Accurate reimbursement matters.


View CLA’s PDPM Services

On October 1, 2019, the Centers for Medicare & Medicaid Services (CMS) implemented the Patient Driven Payment Model (PDPM) for Medicare Part A skilled nursing facility (SNF) stays. The transition to PDPM is intended to reimburse SNFs for services based upon clinical characteristics of the residents served, rather than the volume of therapy minutes provided.

It was CMS’s intention for PDPM to be budget neutral; however, CMS could not predict the increased focused on clinical documentation in areas impacting the rate calculation. Due to the changes in behavior related to accurate documentation, the PDPM payments exceeded CMS expectations and have not been budget neutral.

We will explore the impact of proper clinical documentation on the calculation of the various components in the PDPM rate.

Calculating PDPM rates

The patient characteristics that drive the PDPM rate calculation are captured when the minimum data set (MDS) and primary diagnosis are completed for each patient’s SNF stay. The interdisciplinary team (IDT) is responsible for capturing the appropriate information about each patient and properly reporting it on the MDS.

During the transition to PDPM most facilities focused on training the IDT to accurately document patient characteristics, particularly in areas on the MDS that would drive the rate calculation. MDS sections such as section C-Cognitive Patterns, GG-Functional Abilities and Goals, I-Active Diagnosis, K-Swallowing/Nutritional Status, and O-Special Treatments, Procedures and Programs are the primary drivers of the PDPM rate calculation.

The PDPM rate calculation is made up of five case mix adjusted groups and one non-case mix adjusted rate. The five case mix adjusted groups are physical therapy (PT), occupational therapy (OT), speech language pathology (SLP), nursing, and non-therapy ancillary (NTA).

CMS claims data reveals trends

CLA obtained CMS claims data for all SNFs that have filed claims since the start of PDPM on October 1, 2019. We analyzed this data to look at trends under each of the PDPM rate case mix groups.

The graph below highlights the case mix index (CMI) trend for each of the case mix groups between the first and fourth quarters of 2020. The CMI distribution is a reflection of how the MDS is completed for each Medicare Part A patient in the facility.

Click to enlarge.

Not surprising, the top PT and OT case mix group is K, which is the medical management clinical category with a function score between 10 and 23. Due to the public health emergency (PHE), the data doesn’t show a major joint replacement category until ninth on the list for PT and OT. This would be anticipated because of the cessation of elective surgeries during the PHE.

Pay attention to the primary diagnosis code, one of the determinants of the PT and OT categories. It is possible that a primary diagnosis may have a secondary clinical category that would result in a higher per diem. Utilize the CMS ICD-10 crosswalk to make sure the correct clinical category is identified.

Also note that for the SLP case mix group, the top two CMIs are for A and D. The case mix group A indicates no acute neurologic condition, SLP related comorbidity, cognitive impairment, mechanically altered diet, or swallowing disorder. The case mix group D does indicate that one of either acute neurologic, SLP related comorbidity, or cognitive impairment are identified. The data indicates an increase in identifying conditions that would result in a higher SLP rate. This is likely due to an increased awareness of the IDT in identifying and properly documenting these conditions rather than relying only on the dietary team to make identifications.

In addition to the function scores from the MDS, the primary diagnosis is a driver of the PT, OT, and SLP components of the PDPM rate. The chart below shows the top 15 diagnosis codes by quarter for 2020.

Diagnosis 2020.1 2020.2 2020.3 2020.4
2019-nCoV acute respiratory disease 14.4% 13.0% 18.9%
Urinary tract infection, site not specified 3.2 3.1% 3.1% 2.8%
Metabolic encephalopathy 2.5% 2.3% 2.5% 2.3%
Pneumonia, unspecified organism 3.1% 2.6% 1.8% 1.6%
Encounter for other orthopedic aftercare 2.4% 1.7% 1.9% 1.7%
Sepsis, unspecified organism 2.2% 1.7% 1.8% 1.6%
Cerebral infarction, unspecified 1.9% 1.7% 1.6% 1.6%
Aftercare following joint replacement surgery 2.3% 1.0% 1.5% 1.4%
Chronic obstructive pulmonary disease, unspecified 1.4% 1.6% 1.5% 1.4%
Parkinson’s disease 1.3% 1.5% 1.5% 1.4%
Encephalopathy, unspecified 1.4% 1.3% 1.4% 1.2%
Acute respiratory failure with hypoxia 1.5% 1.2% 1.0% 1.1%
Chronic obstructive pulmonary disease with (acute) exacerbation 1.8% 1.1% 0.8% 0.7%
Encounter for orthopedic aftercare following surgical amputation 1.0% 0.9% 0.9% 0.8%
Displaced intertrochanteric fracture of left femur, subsequent encounter for closed fracture with routine healing 1.0% 0.8% 0.9% 0.8%

The top diagnosis for second through fourth quarter is the COVID-19 related diagnosis. Due to this diagnosis code and the nursing component grouping linked to this diagnosis codes, the average PDPM rates were higher in 2020.

CMS has reviewed this data to determine the impact of the PHE on the increase in the PDPM payments. As part of the CMS analysis, they determined that with these claims removed from the analysis, the PDPM payments were still higher than anticipated and resulted in the change to PDPM not being budget neutral. CLA will continue to monitor these diagnosis codes to determine the potential impact on the PDPM rates.

Due to the prevalence of the COVID-19 diagnosis code, we saw an increase in the infection isolation nursing component code (ES3). The ES3 nursing code increased from 2% to 14.5% during 2020. The nursing component rate for ES3 is the one of the higher nursing component rates and also contributed to the overall higher PDPM rates.

What does this mean for providers?

As identified by the data, completing the MDS accurately and selecting the appropriate primary diagnosis code is important for accurate payments under PDPM. As the data suggests, the intention of PDPM to provide payments corresponding with patient needs is occurring. This is likely the result of SNFs’ focus on capturing appropriate patient clinical data from the entire interdisciplinary team. Adequate documentation should continue to be a priority for facilities as CMS contemplates recalibration and the potential for future rate reductions due to recalibration.

The following are the implementation options CMS discussed in the SFY 2022 SNF final rule.

  • Delayed implementation ― 5% reduction would take place in FY 2023 or FY 2024 to give SNFs time to plan
  • Phased implementation ― 1% reduction for five years starting in FY 2022, 2.5% reduction for two years starting in FY 2022
  • Combination ― 1% reduction for five years starting in FY 2022, or 2.5% reduction for two years starting in FY 2022

CLA will continue to analyze the Medicare claims data for all SNFs and provide a more in-depth analysis of each of the components and trends in future articles.

How we can help

Now is the time to make sure your facility is documenting accurately to capture high and appropriate PDPM rates. CLA can help your facility review clinical and billing documentation for strong revenue and compliance with regulations.

CLA has worked with numerous SNFs since the implementation of PDPM, performing Medicare compliance and PDPM assessments. Our senior living team has also provided benchmarking of the various PDPM components, analyzing trending from implementation as well as comparison to other facilities and state and national trends. We use assessment results and benchmarking analysis to create action plans designed to improve patient characteristics documentation and maintain compliance with the Medicare program.

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