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This is a PDPM for dummies guide that highlights how PDPM started, why the CMS developed the model, the most common PDPM reimbursement mistakes and helpful PDPM resources nurses and facilities can use to ensure they receive accurate PDPM reimbursements. Let’s first discuss what PDPM is. 

What is PDPM?

The Medicare Patient-Driven Payment Model (PDPM) is the new payment model that replaced the former RUG-IV system. Unlike the RUG-IV, which calculated reimbursements according to the number of therapy minutes provided, PDPM payments are calculated by classifying residents into a case-mix component, with the reimbursement rate made up of the used resources during a resident’s Medicare Part A stay in a long term care facility. 

PDPM rate is determined by an MDS nurse or coordinator who performs a five-day MDS assessment on a resident. The final rate is found by combining the five case-mix components with the non-case-mix component, which are:

  • Physical Therapy (PT)
  • Occupational Therapy (OT)
  • Speech-Language Pathology (SPL)
  • Nursing
  • Non-Therapy Ancillary (NTA)
  • Non-case mix 

During a resident’s Medicare Part A stay, the PDPM rate may vary and change upon completing the Interim Payment Assessment (IPA). To make this process easier, MDS nurses can use free online PDPM tools to calculate a resident’s PDPM rates and ensure the facility is adequately reimbursed for its services. 

Calculating PDPM reimbursements can be confusing, as thousands of HIPPS codes and possible variations exist. Therefore, this PDPM for dummies guide will also discuss how PDPM rates are calculated in further detail. 

How Are PDPM Rates Calculated?

Each resident is assigned a case-mix classification by an MDS nurse or coordinator, and the results determine the daily reimbursement rate for each resident. Each case-mix classification group has several components and case-mix points multiplied by each component’s base rate and Variable Per Diem Adjustment on the case-mix components (PT, OT, and NTA.) By adding these corresponding rates, MDS nurses can calculate the daily PDPM rate for each resident who qualifies for Medicare Part A stays. 

What Are the PDPM Components?

There are six case-mix adjusted components in the PDPM that determine how the daily payment rate for each resident is calculated:

An MDS nurse is with a resident and showing him how payments are calculated using the plethora of PDPM for dummies resources and tools.
There is a plethora of PDPM for dummies resources and tools at caregivers’ fingertips, like the HIPPS Projector.
  • Physical Therapy (PT) – The PT component is calculated from the primary diagnosis to determine a resident’s function score, case-mix group, case-mix points, and diagnostic category.  When calculated correctly, on day 21, this component decreases reimbursement by 2% every seven days until the resident leaves the facility.
  • Occupational Therapy (OT) – This component is calculated using the primary diagnosis to determine the diagnostic category and the function score, which determines the applicable case-mix group and points. The OT component also decreases reimbursement by 2% every seven days, starting from day 21 until the resident leaves the facility.
  • Speech-Language Pathology (SLP) – To determine the SLP rate, an MDS nurse must first assess whether a resident has a neurological condition, impaired cognition, or speech comorbidities. Afterward, they will assess if the resident has any swallowing difficulties or has a mechanically-changed diet. The SLP reimbursement remains consistent throughout the resident’s Medicare Part A stay in a facility, regardless of the condition.   
  • Non-Therapy Ancillary (NTA) – Specific comorbidities or extensive services determine the NTA component. Up to 50 diagnoses or extensive services are given a point value, which is based on the cost and relative value of each service. The case-mix points for NTA are based on the total number of points a resident accrues. This variable component results in multiplying the rate by three for the initial three days of the resident’s stay, followed by one for the remainder of the stay.
  • Nursing – The same nursing RUG categories are used for the PDPM with some variations of categories based on the Nursing Function Score, which came about as a result of reducing the categories from 43 to 25. Depending on a resident’s clinical needs and services, there are multiple category qualifiers. This component’s rate also stays the same for the duration of a resident’s stay.  
  • None-Case Mix – This is the same as the facility base rate that the CMS used under the RUG-IV system to calculate the facility’s base rate. This rate is the same for all Medicare Part A residents and does not change during a resident’s stay.

Now that we have a better understanding of PDPM, we will dive deeper into why the CMS developed the PDPM.

When Did PDPM Start and Why was the Model Developed? 

When did PDPM start? The PDPM was adopted on October 1st, 2019. Previously, long term care facilities used the Resource Utilization Groups (RUG) system, which was developed during the 1990s. And before the RUG-IV system, nursing homes were hindered by the inability to classify residents for reimbursements, leading to inaccurate reimbursement payments and the need for better management, regulations, and adequate reimbursements for nursing homes. 

Unfortunately, the RUG system proved to be ineffective because the system allocated payments according to the number of therapy-based minutes a resident had. It became clear that some nursing facilities took advantage of the system by administering unnecessary therapy services, placing residents into a higher RUG payment category, and consequently declaring excessive therapy minutes that increased the facility’s revenue and reimbursements. This was detrimental to Medicare, which saw a significant increase in its expenditures. 

Upon realizing this adverse incentive, the CMS addressed the problem by developing the PDPM, which no longer reimburses facilities according to the volume of therapy minutes. Instead, the PDPM focuses on diagnosing the resident and categorizing them into the appropriate case-mix component, giving residents therapy services only when needed. 

Furthermore, while the RUG-IV system incentivizes more extended stays and therapy services, the PDPM incentivizes shorter stays with less therapy, thus, providing better and more focused care. Of course, it is only natural that many MDS nurses make mistakes under the relatively-new PDPM, negatively impacting the facility’s reimbursements. That’s why this PDPM for dummies guide will discuss common PDPM mistakes and how to avoid them.  

Contact us here if you want to save hundreds of hours calculating PDPM.

What Does PDPM Stand For?

What does PDPM stand for? As discussed above, PDPM stands for the CMS-developed Patient-Driven Payment Model that classifies long term care residents into an appropriate case-mix group so facilities can be adequately reimbursed for Medicare Part A stay. 

An MDS nurse is telling a resident about PDPM and when did PDPM start.
When did PDPM start? The PDPM was adopted on October 1st, 2019.

As part of our PDPM for dummies guide, we will mention that one of the patient-driven payment model basics is the MDS 3.0 assessment. MDS nurses conduct this assessment because it is critical for identifying a resident’s problems and conditions and whether they qualify for Medicare reimbursements. MDS nurses must follow a standardized protocol to screen a resident’s clinical and functional status. 

Upon completing the MDS 3.0, the MDS nurse will determine a core set of coding categories, elements, and standard definitions, providing a comprehensive assessment to determine if the resident qualifies for Medicare or Medicaid reimbursements. This serves as the foundation for the facility to create a personalized care plan for the resident. 

The 5 Most Common PDPM Reimbursement Mistakes

Factoring in the relative newness of PDPM and when did PDPM start, it is understandable why MDS nurses struggle with calculating PDPM reimbursements. Therefore, we will highlight five common mistakes MDS nurses make.

  1. Failure to Collect Relevant Data From All Three Shifts Before Coding the ADL Scores

Coding for Activities of Daily Living (ADLs) can be overwhelming because several caregivers often contribute toward a resident’s medical documentation. And accurate ADL coding directly impacts Quality Measurements, consequently affecting how much reimbursement the facility receives. Therefore if the ADL coding has been underscored, this can be a costly error for the facility.

The relevant ADL data is collected on multiple occasions and from different team members to determine ADL scores. Thus, it is not a process that a single member can complete. So facilities must ensure that their ADL charting is accurately documented in the care plan software so that each team member can monitor for compliance and accuracy. 

  1. Failure to Query the Physician for Diagnosis Clarification

Selecting the correct ICD-10 code for a specific NTA component can be challenging, especially if a nurse is busy. In such cases, it is common for MDS nurses to use a simple or unspecified ICD-10 code written by the physician. 

Further complicating the matter is the fact that a resident may have multiple comorbidities. In such cases, MDS nurses must ask the physician to establish and confirm the diagnosis. Failure to do so will result in an incorrect HIPPS code and an inaccurate PDPM reimbursement. 

Unspecified codes are a significant problem because they do not accurately represent a resident’s diagnosis. Therefore, it is up to the NDS nurse to check, collaborate, and communicate effectively with the physician to confirm a specific diagnosis. 

  1. Insufficient Charting to Guide Staff On What Items to Assess and Document 
An MDS nurse is researching what does PDPM stand for so she can understand the payment model better.
What does PDPM stand for? PDPM stands for the CMS-developed Patient-Driven Payment Model.

MDS nurses will perform an initial chart review when assessing new admissions in a skilled nursing facility, allowing them to become familiar with the new residents while alerting them to any NTA comorbidities. Reviewing a resident’s admissions chart, preferably on day one, is essential. Hence, MDS nurses know upfront which NTA comorbidities a resident will have, consequently allowing them to create a better care plan

Failure to gain such information can impact the resident’s care, as caregivers are less aware of the problems due to inaccurate nursing documentation. Additionally, accurate reimbursements can only result from precise documentation of all NTA comorbidities. 

The reality is that the quicker the nurse identifies a resident’s needs, strengths, and weaknesses in the nursing home software, the faster the facility can process the reimbursement and receive payment. 

  1. Not Reviewing Documentation Thoroughly Enough 

Failure to review documentation thoroughly will negatively impact PDPM reimbursements, as the missing documentation will not accurately reflect the services provided. Therefore, MDS nurses must ensure that all clinical documentation is accurate and up-to-date in the facility’s long term care EHR. Additionally, facilities can provide PDPM training courses for their nurses to ensure their staff are up-to-date on all the latest PDPM regulations and know the facility’s expectations.  

  1. Failure To Obtain a Complete Diagnosis 

It is common for MDS nurses to fail to get a complete diagnosis for NTA qualifiers. This means that the resident’s medical records in the care plan software lack the supporting documentation to back up any MDS item. Of course, all coding and diagnosis information is available in the RAI User’s Manual. So MDS nurses can simply refer to the manual if they need further guidance. 

To provide a complete diagnosis, the nurse must ensure the code and documentation is accurate while working closely with the physician, obtaining a physician-signed diagnosis, and ensuring all requirements are met and acted upon accordingly. 

Useful PDPM for Dummies Tools and Resources

There is a plethora of PDPM for dummies resources and tools at caregivers’ fingertips, like this free HIPPS Projector, which can automatically calculate HIPPS scores within 10 minutes, giving users a projected PDPM score. This innovative PDPM calculator allows MDS coordinators to know if the resident is a good fit for the facility before admission. Furthermore, it gives them an idea of what to expect before conducting the formal MDS assessment, and thus works as a way of checking the math. 

There is also a variety of free training materials, such as the MDS 3.0 Training and this list of PDPM resources that includes various PDPM blogs, PDPM webinars with industry experts, and PDPM white papers that outline the most recent PDPM changes and how facilities can embrace PDPM for better reimbursements.

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