Reg's Blog

Senior and Post-Acute Healthcare News and Topics

PDPM: First Blush Analysis

One quarter (three months and change) down and PDPM appears to be mostly positive for SNFs.  CMS is reporting a higher average per diem payment level than under RUGs.  Despite some added coding complexity, paperwork burdens are down for providers (two MDS’ during most stays now vs. many under RUGs).  Anecdotally, the industry is seeing added access for certain patient types that previously, were difficult SNF placements.  The NTA category is the driver of this additional access as payments help offset, higher clinical costs associated with certain patient needs and comorbidities.  Approximately 2/3rds of facilities have experienced rate increases (67%); 23% experiencing decreases.  Where rate erosion has occurred is in facilities that were heavily skewed under RUGs to RU and RH level therapy payments – 75% or more utilization.  Conversely and logically, the winners have been facilities with a much more balanced book of business; a normative or typical RUG distribution (historically) and a patient/referral base that included more clinical complexity.  Studies that initially showed a 90% plus increase in Medicare per diem rates in October erroneously ignored the initial conversion bounce (NTA pick-up) that came into play for residents in a facility under RUGs on 9/30 that carried-over into PDPM on 10/1.  Suffice to say, the playing field has leveled.

Originally, CMS estimated that PDPM would be budget-neutral with a modest or slight bias toward rates being flat or down just a touch at the facility level.  The projection from CMS using 2017 data was for a 1.37% decrease.  November’s data/results ran 5.7% above the CMS projection.  While CMS has provided no immediate reaction to the “better than expected” trend for providers, the reality is that an adjustment of some form is likely.  MedPac has called for no rate increases for SNFs in FY21.  It is possible that a flat-rate scenario will emerge for at least a few years IF, rate pullbacks aren’t part of the immediate solution.

While fee-for-service rates under PDPM offer encouragement for providers, the overall occupancy trend and payer-mix is a sobering element.  Since 2010, overall fee-for-service utilization is down by 17.7%.  Length of stay for the same period also declined by 7.4% (covered days).

Three factors are heavily influencing the fee-for-service utilization and length of stay trends.  First, Medicare Advantage is a growing payer type (covered lives).  MA plans simply account for shorter stays at reduced rates where SNF care is required.  Second, home health agencies have filled the bill for certain care needs, circumventing altogether, an SNF stay.  It is not uncommon for a routine knee-replacement patient with stable comorbidities to transition home with a home health agency vs. to an SNF or IRF (inpatient rehab facility).   Pneumonias, infections, wounds, etc. can be managed at home; preferable for the patient and often, for the payer.  Third, ACOs and Bundled Payment programs (and MA plans too) work to steer patients to home or outpatient settings either avoiding the SNF entirely or shortening the inpatient stay by a day or series of days.

While the PDPM rate bump may seem good news, and it is, the euphoric feeling is temporary.  Increased revenue is a function of not just rate but utilization.  If utilization continues to remain on a downward path, the dip won’t be offset by rate.  Similarly, utilization patterns are shifting and as of today, I see no progression or shift toward increased SNF utilization.  Frankly, there remains in most markets, too many SNF beds for the functional demand (certainly, for the demand with a good payer source).  Assisted Living models, those adapted to a higher-level chronic care model, continue to erode long-term SNF census.  This erosion causes a two-part dilemma for SNFs. First, fewer patients/residents to occupy beds and second, the remaining patients tend to have Medicaid as a payer source.  For SNFs that can’t play and survive to a large extent in the post-acute realm, alternative options are scarce for long-term resident occupancy (I-SNPs perhaps?).

One last caveat for providers at this juncture, is worth noting.  PDPM rates are up and CMS has yet to begin audits.  I suspect facilities will see some “shock and awe” once these audits begin.  Remember, audits are done by intermediaries and contractors – not by CMS directly.  I have seen some claim funk as facilities have strutted their way to some higher payments by additional speech utilization – utilization that wasn’t there under RUGs.  I’m watching facilities aggressively pursue cognition via Speech Therapy engagement; seeking to score residents at certain times of the day where cognition may be lower (later day, after a nap, etc.).  A note of warning here is warranted.  Coding opportunities are available under PDPM and IF, such an opportunity correlates to a higher payment, that’s great PROVIDED that, the care delivered and documented, supports the coding.  I am already seeing residents coded at one level of cognition, Speech being used for “cognitive training” and nursing documentation stating that the resident is, “alert and oriented x 3”.  Which is it as it can’t be both?  The proper approach is to evaluate the overall needs of the resident and develop a careplan with the whole team that reflects this holistic assessment.  The key then going forward, is for all disciplines to appropriately document the care provided, consistent with the careplan.

 

 

 

 

 

February 10, 2020 - Posted by | Skilled Nursing | , , , , , , , , , , ,

2 Comments »

  1. Reg,
    Hello. What is your source for, “CMS is reporting a higher average per diem payment level than under RUGs.” Has CMS released these numbers?
    Thank you,

    Cynthia Morton
    NASL

    Comment by Cynthia Morton | February 11, 2020 | Reply

    • Cynthia;

      Thanks for commenting. Yes, CMS has provided the information to both major trade associations (AHCA and LeadingAge). I gathered my data from Core Analytics/Zimmet Healthcare Services Group. If you would like the data in-full, please provide me with a working email address and I will send you the PDF.

      Reg

      Comment by Reg Hislop III | February 11, 2020 | Reply


Leave a Reply to Reg Hislop III Cancel reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s