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The Patient-Driven Payment Model (PDPM) is the Prospective Payment System (PPS) that the Centers for Medicare and Medicaid Services (CMS) recently introduced to address Medicare reimbursements for Skilled Nursing Facilities (SNFs). PDPM is a case-mix classification model used to classify SNF patients who are covered for Medicare Part A stays. 

Why PDPM? 

The patient-driven payment model was officially rolled out on October 1st, 2019, and has focused on the complexity of care to maximize financial and human resources. One reason the CMS introduced the patient-driven payment model was to combat the inefficiencies in the previous RUG-IV payment system that calculated reimbursements according to the number of therapy minutes incurred. This resulted in facilities taking advantage of a loophole that enabled them to over-administer therapy services to residents, so facilities receive more reimbursement payments.  

The CMS sought to rectify this problem with the patient-driven payment model, which takes a holistic approach to classify residents into case-mix categories. This means that to qualify for Medicare reimbursements, facilities must now consider each resident’s needs, along with the assessments from several experts, including nurses, social workers, dietitians, admissions staff, and the billing department. 

This has been made possible due to the gradual move towards modernization in healthcare, resulting in facilities investing in long-term care EHR software systems, which allow caregivers across different departments to communicate more easily with each other. This has dramatically improved the efficiency of nursing documentation and communication, as authorized staff can now enter real-time healthcare updates and access relevant information when needed. 

Criticisms of PDPM

The move to PDPM has resulted in dramatic cutbacks in therapy services, which, critics note, has impacted the available work hours for therapists (occupational, speech, and physical) and increased the number of layoffs since PDPM’s deployment, with some healthcare providers laying off more than 40% of their therapist staff

Another criticism of the patient-driven payment model is that too much weight is placed on the five-day assessment, which determines a resident’s case-mix classification and per-diem payment for the entire SNF stay. 

Critics believe that further assessments should be made to reclassify patients for a new per-diem rate, providing the patient qualifies for a change in clinical status after the five-day assessment. This would ensure facilities are covered for additional clinical services that need financial reimbursements. 

What is a HIPPS Code?

Now that we better understand the patient-driven payment model, we will discuss a key element behind the PDPM model, the CMS HIPPS code. The CMS HIPPS codes represent the case-mix groups (specific sets of resident characteristics) on which reimbursements are calculated under the patient-driven payment model. 

The patient-driven payment model HIPPS codes can be complex because there are approximately 28,000 code combinations, which are made up of five characters:

The family of a resident is visiting besides him in the facility with less money concerns, as the facility has calculated the correct payments, according to the CMS' patient-driven payment model.
The patient-driven payment model takes a holistic approach to classifying residents into case-mix categories.
  • The first two characters relate to the RUG category, which indicates the intensity of therapy minutes (level of rehabilitation) a resident needs. For example, if a resident’s HIPPS code starts with an RU, this indicates that the resident needs an ultra-high level of therapy. Alternatively, if a resident’s HIPPS code starts with an RM, this indicates that the resident needs a medium level of rehabilitation. 
  • The third character represents a resident’s ADL score (Activities of Daily Living), which is reflected with one of the following letters: A, B, C, X, or L.
  • The last two characters represents the assessment used to determine the patient classification, such as the five-day MDS assessment. 

While there are many variations of HIPPS codes, an experienced MDS nurse or coordinator whose primary job is to code accurately will be able to determine a HIPPS code easily. An MDS nurse is specifically trained to review all PDPM documentation via the facility’s nursing home software program. And that means ensuring all documentation is correct so the facility can receive accurate reimbursements. 

A particularly useful tool that MDS nurses use to validate HIPPS codes is the PDPM HIPPS Projector. The tool’s primary purpose is to provide facilities with an estimated HIPPS score and PDPM rate of what they can expect to receive when they do their formal MDS assessment. Furthermore, because the tool is available online and for free, MDS nurses simply need to create a profile, answer the questions, and wait for the estimated score and reimbursement rates, which are usually determined within ten minutes.  

Contact us here to learn more about calculating accurate PDPM reimbursements.

The Advantages of Using a Skilled Nursing Facility Prospective Payment System

As mentioned earlier, the patient-driven payment model is the skilled nursing facility prospective payment system in use today. Prospective payment systems are favored over traditional fee-for-service because they incentivize healthcare providers, like long-term care facilities, to deliver high-quality care without overtaxing the available resources, such as Medicare

This means that the patient-driven payment model places more accountability on the facility to treat residents with the appropriate level of care while formulating a fairer payment structure between payers and facilities.

Other reasons why SNFs use the PPS patient-driven payment model include:

An MDS nurse is calculating a resident's HIPPS codes to determine what PDPM reimbursements they can expect to receive.
The CMS HIPPS codes represent the case-mix groups by which reimbursements are calculated.
  • More Accurate Coding and Billing: PPS models are code-based, meaning efficient long-term care EHR software systems can be integrated to capture more accurate HIPPS code scores and PDPM values. Furthermore, using long-term care software with computerized HIPPS code lists means users do not need to manually enter data but instead can simply select the appropriate codes, thus reducing human error to ensure more accurate reimbursements.
  • Smoother Payment System: Prospective payment systems encourage and support smoother payments because they are less likely to be impacted by external factors such as the COVID pandemic, which caused major uncertainty and disruption in the long-term care industry. The COVID pandemic resulted in fewer seniors moving into facilities, as these environments were deemed unsafe due to high mortality rates. This negatively impacted census and, consequently, reimbursements.  
  • Better Proactive and Preventive Care: Fee-For-Service (FFS) payment systems have a reputation for inefficiency, overprovision, and uncontrollable health expenditures because physicians are more inclined to deliver unnecessary services to maximize their income. In contrast, PPS systems encourage more teamwork to provide better care and coordination. This means that caregivers—physicians, nurses, and Certified Nursing Assistants (CNAs)—work together in unison, so the facility’s data is more accurate, thus enabling the facility to receive accurate PDPM reimbursements.

As the PPS patient-driven payment model continues to grow, the CMS will undoubtedly make adjustments to address some of the mentioned challenges. Also, once facilities become more familiar with the patient-driven payment model, they will be able to focus more on accurate nursing documentation to improve coding accuracy and reimbursements. 

How To Maximize Patient-Driven Payment Model Reimbursements

Ultimately, skilling nursing facilities want to maximize their reimbursements from the patient-driven payment model with precise and efficient documentation processes that ensure the CMS’ requirements are met. This can be done by having a long-term care EHR with real-time update capabilities to support the care and services rendered. Failure to do so (submit accurate documentation) will result in facilities under-valuing their services and receiving inaccurate Medicare reimbursements. 

The family of a resident is reading about different payment systems, like the skilled nursing facility prospective payment system.
The skilled nursing facility prospective payment system delivers high-quality care without overtaxing Medicare.

An effective way for facilities to gather the relevant data needed to calculate HIPPS codes and PDPM reimbursements is to adopt a nursing home software program with clinical, financial, and operational modules. These systems gather and provide the necessary data for MDS nurses to determine the facility’s PDPM reimbursements. 

A useful PDPM tool that facilities can look forward to is the highly-anticipated PDPM Maximizer, which automatically reviews hospital paperwork to identify diagnosis patterns for the MDS nurse. This alerts the MDS nurse to highlighted items, drawing their attention so they can request that a physician review the items and add them to a patient’s chart, thus ensuring the facility is sufficiently reimbursed. 

Additionally, if facilities want to learn more about an efficient nursing home management software that can collect care-related data, comply with federal regulations, and automatically calculate PDPM scores to maximize reimbursement. You can schedule a free demo here

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