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On October 1, 2018, the CMS introduced a case-mix classification model, the Patient-Driven Payment Model (PDPM). PDPM reimbursement, which was put into effect on October 1, 2019, shifted the emphasis from the number of visits or services and therapies provided to the particular situations and needs of patients and residents. 


Before PDPM reimbursement there was the RUG-IV model, which was not a holistic payment system. Facilities were reimbursed for therapy, but other forms of care provided were often not taken into consideration. There are a number of things to consider when comparing PDPM vs RUG, but the bottom line is that the nature of long-term care has changed. It is more complicated than it was just a couple of decades ago. Whereas previously, hospitals received government support to retain patients for months at a time, they now must move patients to long-term care facilities. This was a cost-cutting move, as nursing homes received only about $100 per day for services for which hospitals charged hundreds or thousands of dollars. All of a sudden, hospitals requested that nursing homes accept patients with major wounds or those who are just two days out of surgery. The industry was not prepared for this change. 

PDPM reimbursement is largely paid through Medicare and Medicaid.
PDPM reimbursement involves reporting patient complexity to payors.

Long-term caregivers had to develop a new set of skills and learn how to perform difficult tasks like treating wounds and inserting feeding tubes. Nurses in these facilities arguably have the toughest jobs after, perhaps, those in psychiatric nursing. Though these facilities were providing care and treatment that rivaled acute care, they were not being funded as such. 

Meanwhile, a prospective payment system (PPS) like RUG-IV encouraged facilities to compete with one another for less complicated cases. The unfortunate outcome was that it was difficult for hospitals to find nursing homes that were willing to accept patients who created extra burdens for the staff, like those who had undergone a tracheostomy. That is why we now see that PDPM reimbursement has become the standard. To find relevant resources, refer to the CMS’ official page on PDPM. 

A Patient Driven Payment Model

The reality is that under this new patient driven payment model, for-profit facilities still seek patients that will bring more revenue to nursing homes as residents, only the nature of the game has changed. While under PDPM reimbursement they might still avoid accepting patients on expensive medications, like cancer drugs, or those who are violent, there is less of an emphasis on finding potential residents who will require therapy. Rather, facilities are paying more attention to how a potential resident will be coded and then carefully entering that information into their long term care software or long term care EHR. 

nurse documenting on electronic health record
The PDPM Payment Model has changed how facilities document care.

Furthermore, diagnoses no longer tell the entire story. For instance, a patient who finished his or her antibiotics may no longer have a septicemia diagnosis. However, while they are not perceived as septic, they may still suffer from fatigue or have major issues eating. Learning to document such a situation in a nursing home software system requires a new skill. Another example is a resident with congestive pulmonary disease who has trouble breathing lying flat or shortness of breath. Such an individual is at a higher risk for pneumonia that can place him or her back in the hospital. It is, thus, necessary to spend more time with such residents. 

The complicated process of calculating scores in a long term care EHR or long term care software system has led many to search for a PDPM cheat sheet. The CMS provides a calculation worksheet that can be quite helpful. Meanwhile, many will still want to learn the difference between PDPM vs RUG or need PDPM training courses

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How PDPM Reimbursement Affects Care

There is an implied message in the new PDPM reimbursement model: the care provided should be more closely aligned with what is to be reimbursed. This is backed by scientific research that determined which conditions most affect the life and health of a resident. By addressing these, it is less likely that they will have to return to the hospital. It is, therefore, imperative that facilities look to perfect the PDPM process. This will result in wider profit margins, which means more resources, better care, and earning a sterling reputation. 

Of course, no payment model is without drawbacks. Facilities must be careful to not use the incentive of added funding to provide treatment that is not warranted clinically. For instance, speech-language pathologists must be careful to avoid keeping residents on mechanically altered diets longer than necessary on account of the difference in reimbursement. 

nurse walking old lady
Understanding PDPM vs RUG involves learning how long term care has changed.

If the PDPM model is mastered, residents will receive the precise amount of care they need and the facility will be reimbursed accordingly, a true win-win. Teaching CNAs to pay attention to detail alone can improve outcomes by 20 to 40 percent. Some facilities can improve profit margins by as much as 50 percent. Struggling nursing homes can also be turned profitable by predicting quality outcomes, maximizing documentation using their long term care software, and having the capacity to accept more complex cases due to the greater resources available in a larger organization. 

Facilities with great resources are at an advantage in terms of PDPM. Smaller facilities may not have the means to accept patients who have had a tracheostomy or those who require wound treatment. After the move to PDPM, those who could not accept such complicated patients lost money, while those with the resources and ability to train their staff on such care found themselves at an advantage. 

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