Proposed Final Rule Introduces New SNF Payment Model

Nursing home

On April 27, 2018, the Centers for Medicare & Medicaid Services (CMS) released a skilled nursing facility (SNF) proposed rule. The proposed rule informed providers of the 2.4 percent market basket payment update, the SNF Quality Reporting Program (QRP) and the SNF Value-Based Purchasing Program. The most talked-about issue is the new proposed SNF payment system, renamed the Patient-Driven Payment Model (PDPM), which would become effective October 1, 2019.

In 2013, the CMS contracted with Acumen, LLC to identify potential alternatives to the current SNF Prospective Payment System (PPS) payment methodology—Resource Utilization Group-IV (RUG-IV)—due to reports from the Office of Inspector General that expressed concern over the current SNF PPS. Specifically, the RUG-IV program “creates an incentive for SNFs to bill for higher level of therapy than necessary.” Thus, the Resident Classification System, Version 1 (RCS-1) was developed and introduced in May 2017 with the Advance Notice of Proposed Rulemaking.

After many comments and concerns about the complexity and number of classification combinations by providers and stakeholders, the CMS made significant revisions to the RCS-1. The revisions resulted in the RCS-1 being replaced by the PDPM. The CMS wants to make clear the purpose and intent is to replace the existing RUG-IV system. The CMS believes the PDPM represents an improvement over the RUG-IV and RCS-1 models because it would account for resident characteristics and care needs while reducing systemic and administrative complexity.

What will the new PDPM look like?

The proposed PDPM was developed to be a payment model that derives almost exclusively from resident characteristics. The proposed PDPM would separately identify and adjust five different case-mix components for the varied needs and characteristics of a resident’s care and then combine these together with a non-case-mix component to form the full SNF PPS per diem rate for that resident. The five case-mix adjusted components are Physical Therapy (PT), Occupational Therapy (OT), Speech-Language Pathology (SLP), Non-Therapy Ancillary (NTA) and Nursing. Each component is further broken down into groups, with 16 PT groups, 16 OT groups, 12 SLP groups, six NTA groups and 25 Nursing groups. Each group has its own associated case-mix indexes and per diem rates. Assignment in one of the five component groups will be determined by specific steps related to cognitive level, ICD-10-CM diagnoses, function score, skilled treatments and services as coded on the Minimum Data Set (MDS). The PDPM calculation worksheet can be found on the CMS website link above.

One step of the PT, OT and SLP components will require determining the resident’s clinical category, referred to as PDPM clinical category mapping, using the primary diagnosis recorded in item I8000 of Section I of the MDS. The clinical categories are Major Joint Replacement or Spinal Surgery, Other Orthopedic, Non-Orthopedic Surgery, Medical Management and Acute Neurologic. The American Health Care Association expressed concern that SNFs will need to have a certified coder or nursing staff who are more highly trained in determining the primary diagnosis using the ICD-10-CM and ICD-10-PCS to help place residents in appropriate therapy groups.

PT, OT and the Nursing components have a step for a function score as well for determining case-mix groups. The PDPM has moved away from the standard “late loss” Activities of Daily Living found in Section G of the MDS, and instead will use selected self-care and mobility codes for the Admission Performance found in Section GG of the MDS. The CMS states use of Section GG will better align with qualify measures used for the SNF QRP and other post-acute care providers. This may present a problem for SNFs, as Section GG isn’t currently being assessed for accuracy, but for completeness and transmission under the SNF QRP requirements.

The NTA group uses a point system for determining the case-mix group based on MDS coding and diagnoses coded in I8000. These NTA points were designed to accurately target payments for NTAs such as drugs and supplies for medically complex residents, which the current RUG-IV case-mix system does inadequately.

The Nursing component’s 25 case-mix groups are a collapsed version of the original 43 clinical nursing RUG-IV categories. The 25 PDPM Nursing case-mix groups continue to use RUG-IV criteria for determining group assignment as well as a depression score from Section D of the MDS and function score from Section GG of the MDS.

How will the MDS assessments be affected?

The PDPM will require a significant decrease in Medicare MDS assessments. The initial five-day PPS assessment will classify a resident for the entirety of the Medicare Part A stay. The five-day PPS assessment will no longer require grace days and the window for setting the assessment reference date would be days 1 to 8.

The proposed rule will allow SNFs to complete an Interim Payment Assessment (IPA) to reclassify a resident when clinical changes occur to capture changes in a resident’s condition. To complete an IPA, two criteria must be met: 1) There’s a change in the resident’s classification in at least one of the case-mix groups and 2) The change(s) are such that the resident wouldn’t be expected to return to his or her original clinical status within a 14-day period.

Finally, a PPS Discharge Assessment would be required for all Medicare Part A residents, whether remaining in the facility or not.

What about therapy minutes?

A significant number of commenters expressed concern that the amount of therapy provided to SNF residents would drop if RCS-1 were implemented and CMS believes the same potential for reducing therapy may occur under the proposed PDPM. To track therapy utilization and ensure residents receive appropriate amounts of therapy under PDPM, CMS has proposed to add therapy collection items to the PPS Discharge assessment beginning October 1, 2019. The items would require the reporting of total days, total minutes in each therapy mode, therapy start and end dates for each discipline. These proposed items will allow the facility and CMS to monitor volume and intensity of therapy services provided to residents. Another caveat to the proposed rule in regard to therapy is that no more than 25 percent of total therapy minutes provided can be in concurrent and/or group therapy. CMS has proposed that providers would receive a nonfatal warning edit on the validation report when a submitted assessment exceeded the 25 percent therapy threshold.

Effect on rural swing bed providers

Non-critical access hospitals that have entered into a swing bed agreement with Medicare are paid under the SNF PPS program and will see changes to the MDS assessments with the implementation of the PDPM. Three items that will be included on the Swing Bed PPS Assessment will be added beginning October 1, 2019. The items proposed include:

  • K0100 – Swallowing disorder
  • I4300 – Active diagnosis of aphasia
  • O0100D2 – Suctioning while a resident

Payment rates

With the decrease in PPS assessments, you may be asking about Medicare payments using the PDPM. Under the PDPM, each resident is classified into one and only one case-mix group for each of the five case-mix adjusted components. Each of the associated case-mix indexes has its own per diem rate, which is combined with a non-case-mix per diem rate for an overall per diem rate. The CMS’s analysis found that costs declined over the course of a stay, notably in PT, OT and NTA services.

Payments would taper for PT, OT and NTAs but begin on different days for PT and OT. The now-separate PT and OT components begin to taper on day 20, rather than day 14 for the RCS-1 PT/OT component. NTA tapering remains unchanged in terms of start date—day three of a stay. The SLP and Nursing component payments will remain consistent through the length of the Medicare stay.

The HIV/AIDS 128 percent add-on will go away with PDPM, but points would be added to the NTA group. Since the HIV/AIDS diagnosis, code B20 cannot be coded on the MDS but must be added to the claim. The PRICER software, which the CMS uses to determine the appropriate per diem payment, would make the adjustment to the resident’s NTA case-mix group as well as adjust the associated per diem payment. The HIV/AIDS diagnosis on the claim also will affect the nursing component with an 18 percent increase on the nursing case-mix group.

Whether the proposed rule goes into effect or not, the PDPM will definitely affect providers. Some will see a decrease and some an increase in Medicare daily rates depending on their current facility practices. SNFs with excessive length of stays may be looking at a decline in reimbursement. SNFs that aren’t diligent about coding primary diagnosis on the MDS and claim could see an effect as well. But whatever the impact, the MDS will still play an important part in generating case-mix groups. BKD recommends internal and external MDS reviews for accuracy and compliance with the Medicare program.

The CMS will accept comments on the proposed rule until June 26, 2018.

To see how this rule affects the SNF QRP read this article by Carol Smith. To see how the proposed rule updates the SNF VBP read this article by Bob Lane. Stay tuned for updates and contact Suzy or your trusted BKD advisor if you have questions.

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