PDPM Is Here! Are You Ready?

October 1 is upon us, meaning the Medicare Patient Driven Payment Model (PDPM) is here. Proactive skilled nursing facilities (SNFs) have been preparing for this sea change for months, adapting processes and procedures to align with the new model. It represents a huge shift in reimbursement focus from therapy to patients’ clinical characteristics and skilled services rendered. The change makes profound and perfect sense as, over time, the role of SNFs has substantially evolved from rehabilitation to subacute care for medically complex patients.

Adapting to such a radical redesign in payment process is no walk in the park. Minimum Data Set (MDS) assessments are far more complex, with 168 fields required for PDPM compared to 20 for RUGs IV, and there is a critical need for accuracy in coding our patients’ diagnoses. Instead of therapy minutes driving payment, patient characteristics—including ICD 10 diagnoses; frailty (as measured by functional score and cognitive deficits); and comorbidities such as depression, neurological deficits, dysphagia, and need for altered diets—become critically important under PDPM. Services that previously were unaccounted for and unreimbursed such as intravenous (IV) infusions, medications, and equipment will be reimbursed under the Non-Therapy Ancillaries (NTA) category.

PDPM certainly delivers on the promise for more clinically aligned reimbursement. However, the documentation burden shifts to SNFs to ensure adequate and commensurate reimbursement for the care they provide to medically complex patients. The entire SNF team, including the medical director and medical staff, need to participate in managing the documentation that PDPM requires.

These best practices outline how medical directors and medical staff can help:


WHAT: Timeliness. The Initial MDS assessment (to be completed between days 1 and 8) is the prime driver of reimbursement under PDPM. Therefore, accurate and comprehensive documentation of patient characteristics in the Initial MDS assessment, at the earliest, is of paramount importance.

WHY: SNF patients are at their sickest upon discharge from hospitals, as they are being treated for acute illnesses, often requiring expensive medications and extensive nursing care and rehabilitation. The initial MDS assessment needs to happen as early as possible—perhaps within 48 hours—to capture the patient’s higher acuity and utilization of resources upon admission. An initial MDS assessment completed later in the window (days 1-8) may not capture the acuity from the tail end of the hospital stay using the 7-day look back, that is available for some categories, in PDPM. Accurate documentation of patient acuity is vital due to the higher NTA Case Mix Index (CMI) that is usually afforded to IV therapy, expensive medications and supplies, and nursing care. The cost of a missed opportunity is especially impactful as the NTA payments for the first three days of a SNF stay are multiplied by a factor of three.

WHAT: Accuracy. While timing of the initial MDS assessment is critical, without an accurate capture of patient characteristics, SNF reimbursement will suffer under PDPM. A thorough review of hospital and outpatient records performed by a clinical practitioner who can verify and edit (if necessary) the ICD 10 diagnoses codes for each patient, goes a long way towards ensuring accuracy, relevance, and establishing medical necessity for services.

WHY: Medicare reimburses physicians for the additional time spent reviewing this information during the initial visit with a SNF patient, and SNFs should insist on and facilitate early completion of initial visits. If non-physician practitioners spend time reviewing records or verifying orders, these prolonged visits are reimbursed based on medical necessity. Any administrative time spent by medical directors in this process, especially with patients who are not theirs to follow, needs to be factored into their monthly stipend.

WHAT: Relevance. Of particular importance is the process of choosing ICD 10 codes to populate MDS fields based on their impact on case mix for each category. There are many advertised ‘tools’ that scan documents for ICD 10 codes, or ‘group’ codes for efficiency, but they are generally poor substitutes for much-needed overlay of human intelligence in deciding which ICD codes and patient characteristics are relevant for each MDS assessment.

WHY: Special attention should be given to identifying acute neurological diagnoses, depression, dysphagia, altered diet, and cognitive deficits, as they significantly affect CMIs under therapy categories. A “cheat sheet” listing the high-impact diagnoses for each category will be very helpful at the outset.


WHAT: Change of condition. It is important to note that an IPA does not reset the variable per diem adjustment schedule for therapy and NTA, and therefore any boost in reimbursement is muted when compared with the initial assessment’s impact on reimbursement. However, if the patient’s clinical condition becomes more acute during the SNF stay—and IV infusions, expensive medications, additional nursing care and equipment, or more intense therapy services are needed to optimize care—an IPA should be considered.

WHY: In such scenarios, an IPA likely will bring in higher reimbursements, commensurate with the escalation in care. Since any change in reimbursement only affects the remainder of the SNF stay, and there is no NTA multiplier, each facility may wish to define a threshold increase in per diem reimbursement that will trigger an IPA. A designated clinician (e.g., MDS clinician or director of nursing) would assume ownership of the PDPM process to continually track changes in patient characteristics and functional status (section GG) to initiate IPAs when the time is right. The point is to optimize the revenue stream to align with care delivery by monitoring situations when an IPA could be beneficial. Several electronic therapy and pharmacy systems can integrate with electronic MDS records and trigger alerts when an IPA might be appropriate.

WHAT: Interdisciplinary collaboration. This is perhaps the most overlooked, and yet the most important, singular attribute that results in PDPM success for SNFs. Therapy, pharmacy, nursing, administrators, clinical practitioners, and the medical director must collaborate closely to achieve anything more than a modicum of success with PDPM. Once the Initial MDS assessment has established a payment schedule for the SNF stay, the reimbursement mechanism under PDPM mimics the DRG system for hospitals, and just as hospitals receive payments based on patients’ clinical conditions, and not for individual tests, medications and services, SNFs also aren’t reimbursed for unnecessary care and services, and therefore need to always be mindful of medical necessity.

WHY: Utilization Review is not just a hot topic for hospitals from now on. A dollar saved is two dollars earned, and antibiotic stewardship, deprescribing, timely reconciliation of medications, and timely discharge to a lower-cost care setting are all extremely important in maintaining financial health. Payments under PDPM are frontloaded (with the NTA multiplier in effect for days 1 to 3, and therapy modifiers after 20 days) to encourage transitions to value-based care. It is vital, however, that clinical practitioners initiate the orders to reduce unnecessary utilization. Whether it is deprescribing, stopping IVs and antibiotics, or reducing therapy minutes, the decision needs to be correlated with medical necessity and signed off promptly by the practitioner to avoid potential audits and litigation.

WHAT: Data analytics. In addition to revenue forecasting and timing of IPAs using changing patient characteristics, continued success with PDPM requires SNFs to analyze their revenue streams and expenses closely.

WHY: These analyses should break down revenue and expenses under each reimbursement category, correlated with lengths of stay, to look for discrepancies. Any and all discrepancies should trigger a root cause analysis to help isolate process errors and identify areas for improvement on an ongoing basis.


WHAT: Formulary compliance. A robust formulary is invaluable for PDPM success. But even the best formulary cannot deliver cost savings when prescribers do not comply.

WHY: While pharmacy cost is reimbursed under the NTA category, Medicare does not distinguish, nor account for, cost differences between branded and generic medications. For example, SNFs receive higher reimbursement for patients receiving IV therapy, but branded IV medications may cost more than the entire NTA allowance. Confirming formulary substitutions in a timely manner is essential to realizing cost savings.

WHAT: Deprescribing. Discontinuing the multitude of nonessential medications that routinely accompany patients from the hospital is crucial.

WHY: Deprescribing needs to be embraced—not just cost containment, but for patient safety.

WHAT: Antibiotic stewardship. Closely managing antibiotics is important for patient safety and cost reduction.

WHY: Antibiotics as a class are expensive and formulary substitution and timely cessation are imperative. It also affects patient safety by preventing resistance, opportunistic infections, and rehospitalizations.


WHAT: Physical and occupational therapy. It is quite natural that PDPM’s reimbursement curve for nursing services is linearly dependent on frailty. The lower the functional score and cognition, the higher the reimbursement. For physical and occupational therapies, the relationship is represented by a bell-shaped curve. This ensures that the frailest and the most independent patients on either extreme of the curve receive less reimbursement for therapy than the patients in the middle who have the greatest potential to improve their function. Therefore, there typically comes a time in most patients’ care episodes when their functional scores improve, and they become candidates for greater benefit from PT and/or OT.

WHY: Capturing patient progress via an IPA could result in better reimbursement for therapy services, which more than offsets the modest decline in nursing CMI that accompanies functional improvement. Since the information captured by the IPA is used to calculate reimbursement for the remainder of the care episode, it is important to gauge if the relative improvement in therapy and/or nursing CMIs is not offset by a potential decline in the NTA score due to expected lower utilization as the patient improves. Careful monitoring of section GG scores on the MDS will help identify the opportunity for a potential IPA.

At the same time, however, stinting of therapy is an audit risk and potentially a liability risk. If therapy utilization significantly deviates from past patterns or state and national standards as published in PEPPER (Program for Evaluating Payment Patterns Electronic Report) reports, Medicare and surveyors will likely take note, and so will malpractice attorneys seeking any resultant adverse outcomes. The medical practitioner needs to be closely involved in the initiation, care planning, and cessation of therapy services to streamline and safeguard their efficiency and integrity.

WHAT: Speech therapy. Neurological disease, depression, cognitive deficits, dysphagia, tube feeding, or a need for mechanically altered diet must be carefully documented on MDS.

WHY: Payment for Speech therapy can change by a factor of six depending on the patient’s diagnoses and comorbidities, from the least complex CMI to the most. If the listed conditions were not initially present or went unrecognized on admission, an IPA will help improve reimbursement for speech therapy once the clinical documentation supports the change.

While PDPM is a welcome change that will allow SNFs to receive reimbursements more accurately reflective of services provided, the increased need for accuracy in documentation, interdisciplinary collaboration, and clinical leadership are great opportunities for quality clinical practitioners and medical directors to enhance and showcase their value in the SNF world.

Rajeev Kumar, MD, CMD, FACP

Chief Medical Officer, Symbria

Co-Chair, Practice Group Network and AMDA Secretary