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A Change is Coming! Are You Ready for a New Medicare Payment Model?

May 07, 2018
Reimbursement By Deena Farley, Consultant

On Friday April 27, 2018, CMS released a 266-page document proposing a new payment model entitled Patient Driven Payment Model (PDPM). This is to replace the most recently proposed RCS-1 which was introduced in May of 2017. PDPM was created in response to much of the feedback and comments the Centers for Medicare and Medicaid Services (CMS) received regarding the proposed RCS-1 payment system. Despite changes in the name and the model, one thing remains constant; now is the time to act. While CMS will not have a final rule until August of this year, the amount of necessary preparatory work should not be underestimated. There is no time like the present to equip your facilities and staff with the tools needed to prepare for this monumental shift since the question is no longer, “Is this going to happen?” but rather “When will this change occur?” October 1, 2019 is the proposed date.


It is no surprise that CMS has been monitoring therapy trends for the past several years. Two trends that CMS has been tracking are the percentage of patients classified under the Ultra-High Therapy category and the number of patients meeting just the needed amount of therapy minutes to classify them under a certain RUG category (with little to no overage or underage). CMS took notice and decided to take further action, stressing concerns that suggested financials were being dictated by minutes rather than resident need. In May 2017, CMS proposed RCS-1. After obtaining input from stakeholders, CMS revised RCS-1 and called the revised payment model “PDPM.”  With this new name, there is no question where CMS stands—patient driven care, which is how it should be.

Here’s what CMS says about PDPM: The improved structure of this proposed model would move Medicare towards a more value-based, unified post-acute care payment system that puts the unique care needs of the patient first while also reducing significantly the administrative burden associated with the SNF PPS.”

What Are the Differences Between RCS-1 and PDPM?

According to CMS,

Consistent with stakeholder comments encouraging a more simple payment model, the proposed SNF PDPM would reflect an approximately 80 percent reduction in the number of payment group combinations compared to the RCS-I. Additionally, it would reflect updates to the data used as the basis for our analyses, to ensure that the results reflect the current resident population. PDPM, as compared to RCS-I, would also make greater use of certain standardized items for payment calculations, such as in using function items also used for the SNF QRP. Finally, PDPM would simplify complicated paperwork requirements for performing patient assessments by significantly reducing reporting burden (approximately $2.0 billion over 10 years), helping to create greater contact between health care professionals and their patients.

You should see this as a win, as it is clear CMS was listening to comments they received, and they have devised a more simplistic model with patient-focus care at the forefront.

Are You Ready?

Will your practice be able to adapt successfully to the new reimbursement model? CMS’ main objective for this new implementation is to ensure patient care is being delivered based on patient needs and not the bottom dollar. Are you fully aware of the major differences between RUG-IV, which is based on utilization of therapy resources and set reimbursement rates vs. the proposed PDPM, which is based on a classification case mix?

There are key components you should be thinking about regarding strategy, operations, Electronic Health Record (EHR), and clinical outcomes. This paradigm shift requires an incredible amount of planning, strategizing and allocation of resources.

An upcoming change is imminent.  Have you thought about these key points?

  • New billing patterns and a shift in therapist allocation
  • Expanding your referral sources and ensuring demonstration of high quality outcomes
  • Necessary dialog with your EHR vendors
  • Are you in need of expanding into other business avenues within your therapy company to brave the wave with “PDPM” changes?
  • How will the new classifications affect your balance sheet?
  • What are your clinical protocols-do you have any established?
  • How will you adapt your mindset in terms of how services will be delivered? Are you in-house, or a contract therapy company? The effect will be different, and we can equip you with the knowledge and training you need.

There may be a financial impact; however, if you are prepared and aligned with the right resources, you will be able to embrace this change with less anxiety. The drive to pay for outcomes is stronger than ever. The demand for solid data in therapy outcomes is the key element in ensuring your ability to adapt to this new payment model.

If anything highlighted here today gives you concern, please contact us in learning how we can help you prepare by conducting a Therapy Systems Assessment. Adequate preparation will help alleviate the financial impact and together, we can discuss how to best brace for these impending changes. LW Consulting, Inc. can assist in ensuring your readiness for the coming changes.  


 Now is the time to conduct a Therapy Systems Assessment. Protect your revenue and prepare for the shift to the Patient Driven Payment Model.

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