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Resource Utilization Groups, or RUG-IV, was a system for grouping nursing home residents according to their clinical and functional status as identified by way of a facility’s minimum data set, which is published by the US Department of Health and Human Services. RUG-IV served as a classification system that would be used by the federal government to determine the reimbursement levels for long term care facilities. Payment was determined by classifying residents into groups based on their care and resource needs.

The Centers for Medicare and Medicaid Services (CMS) notes that the minimum data set is part of a federally mandated process that provides a complete assessment of a resident’s ability to function independently and helps long term care staff identify any potential health problems. MDS assessments are conducted when a resident is first admitted to a long term care facility, periodically during their stay in the facility, and on the resident’s discharge from the facility.

On October 1, 2019, Resource Utilization Groups were replaced with the Patient Driven Payment Model (PDPM) as was first proposed by CMS on April 27, 2018.

Why PDPM Replaced Resource Utilization Group

As helpful as the resource utilization group system was for skilled nursing facilities and their reimbursements, it had a number of problems:

Elderly resident sitting by the window
In RUG-IV, long term care facilities would be reimbursed for therapy services provided to residents, but other care services would not be reimbursed.
  • RUG-IV was not a holistic payment system: Long term care facilities would be reimbursed for therapy services provided to residents, but other care services would not be reimbursed. For example, if a nursing home took the residents out for an excursion to improve the residents’ quality of life, RUG-IV would not reimburse the facility for this.
  • Facilities would compete for cases: When RUG-IV was still being used, nursing homes and other long term care facilities would compete for less complicated cases and referrals. This resulted in hospitals finding it difficult to refer patients with more complicated medical conditions to nursing homes and SNFs.

The new reimbursement model, PDPM,  places less emphasis on therapy. Instead, nursing homes and other long term care facilities pay attention to how a potential resident will be coded before entering the resident information into the nursing home software. The differences between RUG-IV and PDPM can be summarized as:

  1. RUG-IV is a therapy driven payment model, while PDPM payments are driven by medical diagnosis of the resident, clinical complexity of the resident’s condition, and care outcomes.
  2. RUG-IV primarily focuses on therapy disciplines, while PDPM is multi-disciplinary.
  3. RUG-IV does not focus on outcomes, while PDPM is outcome driven, hence it is better for residents in nursing homes and skilled nursing facilities.
  4. RUG-IV requires five scheduled PPS assessments, while PDPM only requires one PPS assessment.
  5. RUG-IV has constant rates for length of stay, while PDPM has a Variable Per Diem (VPD) adjustment, meaning the per diem rate adjusts over the course of stay of the patient or resident.
  6. The primary diagnosis is not as important in RUG-IV, while in PDPM the primary diagnosis is crucial, as it starts the classification process of the patient or resident and enables nurses to begin creating a care plan in the care plan software.

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What Is the RUG Medical Term?

Sometimes, one can confuse the RUG medical term with resource utilization groups. According to Medscape, a retrograde urethrogram is also referred to as RUG and is a medical procedure performed to diagnose urethral pathology such as trauma to the urethra. This is completely different from resource utilization group (RUG) as used in long term care.

Elderly resident undergoing physical therapy, which used to be documented as part of resource utilization groups.
PDPM has five case-mix adjusted components, two of which are Physical Therapy (PT) and Occupational Therapy (OT).

It is also worth noting that the resource utilization group classification system consisted of eight major classification systems:

  1. Rehabilitation Plus Extensive Services,
  2. Rehabilitation, Extensive Services,
  3. Special Care High
  4. Special Care Low
  5. Clinically Complex
  6. Behavioral Symptoms
  7. Cognitive Performance Problems
  8. Reduced Physical Function

This is unlike PDPM, which has five case-mix adjusted components:

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

The End of Resource Utilization Groups

Elderly nursing home resident reading a book
As of October 1, 2019, resource utilization groups were replaced by the Patient Driven Payment Model (PDPM), which focuses on care outcomes

As of October 1, 2019, resource utilization groups were replaced by the Patient-Driven Payment Model (PDPM), which means long term care organizations must strive to improve only their PDPM documentation in their long term care software. With Resource Utilization Groups now out of the picture, facilities must do all that they can to perfect their reimbursement process under PDPM by seeing the big picture and staying on top of quality measures. 

Some of the keys to maximizing reimbursements under PDPM are: hiring a capable MDS nurse, supporting him or her with the information and management they need to best document care, and checking to see if your reimbursement systems are broken, meaning, you are not documenting all of the care that is being administered or reported to the insurance companies. 

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Elijah Oling Wanga