Perspective: PDPM

The Patient-Driven Payment Model (PDPM) is the new Medicare payment rule for skilled nursing facilities (SNF) slated to replace the existing RUG (Resource Utilization Group) IV system in October 2019. The purpose of PDPM is to incentivize SNFs for focusing on outcomes and delivering the right amount and right type of care to patients. The new reimbursement will depend on the patient mix classification, which is determined by the amount and types of therapy a patient will need to achieve their rehab goals. SNFs can no longer take advantage of the per-diem reimbursement that incentivized them for keeping the patient longer than necessary. CMS has announced that this rule is budget-neutral, which means there will be no reduction of payment to SNFs overall, however, their provider impact analysis indicates significant shifts in SNFs’ revenue based on their current patient mix. The analysis reveals that reimbursements to some SNFs can decrease by as much as 40% where others may see an increase of up to 70%. CMS, as well as many healthcare experts, have offered guidance to SNFs on best practices under PDPM, but it’s pretty clear that many SNFs and therapy companies are not sure what to expect.

For most SNFs, success under PDPM is defined as sustaining margins while minimizing capital expenditure. The question is what areas of practice should SNFs make investments in order to maximize the return on those investments. The answer to that question varies depending on how prepared a SNF is to properly care for the patient mix they will receive. However, I have listed three specific investments, which will help SNFs achieve their quality and financial goals under PDPM.

• Clinical readiness. CMS’ provider impact analysis provides a pretty good projection of what to expect from a patient mix standpoint once PDPM launches. If a provider is projected to lose revenue because they will see a shift from therapy to skilled nursing services, an investment in ramping up nursing services and resources is worthwhile. This investment can also yield some unexpected benefits in improving patient outcomes since the skills and resources will be better aligned with patient needs. The underlying theory behind this concept is specialization. If you know what type of patients you will be receiving, why not specialize in caring for those types of patients?
• Business intelligence tools. Investing in technology that can better predict the types of care and therapies your patients will need at the point of admission. Most technology vendors that SNFs already partner with – EMR vendors, for example – offer predictive analytics that can predict key outcomes and recommend the optimal path of care for patients entering the SNF after a hospitalization. Business intelligence tools are used throughout the healthcare industry to improve outcomes and improve operational efficiency, which are two areas that SNFs must focus on in order to succeed under PDPM.
• Operational excellence. I have heard many SNFs contemplate outsourcing therapy services. But that seems like a knee-jerk reaction because a shift toward group and concurrent therapy sessions does not mean you have to re-staff or find new resources to deliver those therapies. This is more of retraining and repurposing exercise – with some exceptions, of course – than a retooling exercise. What I recommend is to take a clean slate approach and create new workflows, therapy schedules and training programs based on what you will need and then assess the staffing necessary to execute within the construct of those new workflows, schedules and programs. Many consulting firms specialize in this kind of transformation, and the investment to properly lay down a new foundation will pay substantially large dividends in the future.

In the end, those who align their practices with the objectives of PDPM – improving quality and patient outcomes, reducing waste, and lowering cost of care will succeed. It’s also critical to understand that, in most cases, status quo will simply lead to failure under this new model. I estimate that nearly half the Skilled Nursing Facilities are prepared for success under PDPM and others are still trying to find their footing. I encourage leaders of those organizations who are still defining a strategy to think long-term and not worry so much about reduced profitability for a couple of quarters. Although easier said than done, this one needs and deserves long-term focus.