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[Blog Series] Preparing for the Patient Driven Payment Model (PDPM): Week 1

June 21, 2018
Reimbursement By Kay Hashagen, Senior Consultant

 Thank you for joining us for week 1 of our blog series, “Preparing for the Patient Driven Payment Model (PDPM).” Over the next 7 weeks, we will review:

  • The intricacies of the new Patient Driven Payment Model,
  • How the new Patient Driven Payment Model will affect coding of Section GG,
  • Therapy usage and modes of care,
  • How medical necessity affects claims payments,
  • The impact length of stay has on your facility’s success under the new payment model, and
  • The importance of adopting measures that are patient-centered and outcome-driven.


On Friday, April 27, the Centers for Medicare and Medicaid Services (CMS) released a 266-page document proposing a new Patient Driven Payment Model (PDPM) to replace the most recently proposed RCS-1  as the method of reimbursement for Medicare Part A for skilled nursing facilities (SNFs). The Final Rule will be published in August 2018. 

To help providers prepare and gain an understanding of the critical areas that will determine reimbursement, check back weekly. In addition, CMS has provided a wealth of information on their website.

Overview of the PDPM

Perhaps the most notable area for review is coding of the patient’s medical diagnosis.  Although the content in this blog is geared towards rehabilitation providers, therapy providers should not work in a silo. Therapy and nursing staff should work closely to identify accurate diagnosis codes and to ensure that the documentation supports those codes.

Capture of the Case Mix Index

Diagnosis coding is the most critical area for review since the proposed PDPM will use the data to capture the Case Mix Index (CMI). This is true for Physical Therapy (PT), Occupational Therapy (OT), Speech-Language Pathology (SLP), Nursing and Non-Therapy Ancillary (NTA) components in the PDPM. If the diagnosis codes are incorrect or missing, then the CMI will be reimbursed at a lower rate; thus, reducing overall payment for care delivery.

Under the Resource Utilization Group-Version 4 (RUG-IV) case-mix model, residents are first categorized based on the amount of rehabilitation therapy they received, then on additional aspects of the resident’s care. Under the proposed PDPM, the resident would first be classified based on the clinical reasons for the resident’s SNF stay. Information in the Federal Register 42 CFR Parts 411, 413 and 424 states that empirical analyses demonstrate the clinical basis for the resident’s stay (the primary purpose for the resident stay in the SNF). This is a strong predictor of therapy costs. 

The initial RCS-1 model contained a set of ten inpatient clinical categories expected to capture the range of general resident types found in an SNF.

These categories include:

Category  Type
Major Joint Replacement or Spinal Surgery Cancer
Non-Surgical Orthopedic/Musculoskeletal Pulmonary
Orthopedic Surgery (Except Major Joint Replacement or Spinal Surgery) Cardiovascular and Coagulations
Acute Infections Acute Neurologic
Medical Management Non-Orthopedic Surgery

As described in the SNF PDPM Technical Report prepared by ACUMEN, the categories for PT and OT were collapsed into 5 categories.
Table 16, pictured below from the Acumen Technical Report, shows the Clinical Categories and the Average PT and OT costs per day.

Clinical Category Average PT Cost Per Day Average OT Cost Per Day
Major Joint Replacement or Spinal Surgery $88 $65
Other Orthopedic $73 $61
Medical Management $65 $56
Non-Orthopedic Surgery $68 $58
Acute Neurologic $68 $58

For Speech Language Pathology, the original 10 clinical categories were collapsed into only two clinical categories. Table 32, pictured below from the Acumen Technical Report, shows the SLP costs per day by collapsed clinical category.

Clinical Category Average SLP Cost Per Day
Acute Neurologic $35
Non-Neurologic $17

The resident will be organized into a clinical category on MDS 3.0 and mapped on one of the clinical classes listed in the table above.  The code representing the primary reason for the resident’s Part A SNF stay should be entered on line I8000 of the MDS 3.0.

Click here to download the Centers for Medicare and Medicaid Services (CMS) instructions for ICD-10-CM-PCS Coding to PDPM Clinical Category Mapping.

The MDS Coordinator or coder must review documentation from the hospital which supports the primary reason for the resident’s Part A SNF stay. Then, using these mapping tools, identify the correct ICD-10 diagnosis codes to enter into the MDS. This drives the clinical category for PT, OT, and Speech-Language Therapy (ST).  Comorbidities will be included for further clarification of the CMI for speech.

The Non-Therapy Ancillary (NTA) category will also be supported by additional diagnosis lists. Click here to download the lists.

Every code that is supported by documentation and treatment from the NTA list will add points to the overall CMI. Therapy can assist and support the SNF by evaluating residents and developing plans of care for diagnoses in the NTA list. 

Some programs that relate to NTA diagnoses include:

  • Wound care
  • Low vision programs, and
  • Continence management

The most important consideration for the therapy PDPM components will come from the correct coding of the ICD-10 diagnosis, supporting the clinical reason for the SNF referral. The codes will be entered by the facility into the MDS which will support the basis for the PT, OT and ST components for the entire stay [unless there is a change in the resident’s classification through an Interim Payment Assessment]. The CMI rates for PT, OT, and ST will be reimbursed to the facility regardless of whether any therapy is provided by the discipline. 

The CMS regulations for documentation supporting the reasons for the SNF admission meeting reasonable, necessary, and skilled requirements are not changing. Therapists will have to work closely with the MDS department and/or coders to know which codes are being entered in the MDS and document appropriately.

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