The Patient-Driven Payment Model (PDPM) is the system used by the Centers for Medicare and Medicaid Services (CMS) to determine Medicare Part A reimbursement for covered stays in Skilled Nursing Facilities (SNFs). Implemented in October 2019, PDPM calculates a facility’s daily payment rate based on the individual characteristics and clinical needs of each patient. As a case-mix classification model, PDPM groups patients with similar anticipated resource needs to set a fair payment rate. This structure is designed to align payment with the actual complexity of a patient’s condition and the resources required to provide appropriate care under Medicare’s Prospective Payment System (PPS).
The Shift to Patient-Driven Care
The introduction of PDPM represented a fundamental change in philosophy for SNF reimbursement. The previous payment system heavily relied on the volume of therapy minutes provided to determine the payment rate. This volume-based approach incentivized facilities to deliver high amounts of therapy, sometimes without a direct correlation to the patient’s clinical needs or outcomes.
PDPM shifted the focus entirely to the patient’s clinical status, diagnoses, and comorbidities. The goal was to incentivize individualized, holistic care that addresses a patient’s entire profile, including nursing, therapy, and ancillary needs. By classifying patients based on their characteristics and anticipated resource use, the model encourages providers to focus on quality of care and appropriate treatment rather than the quantity of services delivered.
The Five Components of PDPM Reimbursement
A patient’s total daily payment rate under PDPM is calculated by combining a fixed non-case-mix component with five separate case-mix adjusted components. Each of these five components has its own base rate and a case-mix index (CMI) that determines the portion of the daily payment. The five case-mix components are Physical Therapy (PT), Occupational Therapy (OT), Speech-Language Pathology (SLP), Non-Therapy Ancillary (NTA), and Nursing.
The PT and OT components are classified based on the patient’s primary clinical category and functional status. The SLP component is determined by factors such as the patient’s clinical category, cognitive function, and the presence of swallowing disorders or specific comorbidities. The Nursing component uses patient factors like clinical conditions, the need for extensive services, and functional status to assign a classification group.
The Non-Therapy Ancillary (NTA) component covers services and supplies not related to therapy or nursing, such as certain drugs, medical supplies, and special procedures. Classification for the NTA component is based on the presence of specific comorbidities and extensive services, which are assigned a numerical score. The payment for all five case-mix adjusted components, along with a flat rate for non-case-mix resources, determine the single, comprehensive daily rate.
Patient Classification and the MDS Assessment
The data required to classify a patient into the five payment components is collected through the Minimum Data Set (MDS) assessment tool. The MDS is a standardized, comprehensive assessment mandated for all Medicare and Medicaid-certified nursing homes. Initial patient classification is established using data from the 5-day scheduled assessment, which covers the first eight days of the SNF stay.
The clinical information gathered includes the patient’s primary diagnosis for the SNF stay, which places them into one of ten clinical categories for therapy components. Functional status, such as the patient’s performance in self-care and mobility tasks, is captured in Section GG of the MDS. This functional score is a key determinant for the PT and OT classification groups.
A classification system uses this MDS data to assign the patient to a specific group for each of the five payment components. This process results in a unique five-character Health Insurance Prospective Payment System (HIPPS) code, which the facility uses to bill Medicare for the patient’s daily rate. The HIPPS code encapsulates the patient’s classification across all five components, reflecting their distinct resource needs.
Variable Payment Adjustment Schedule
The daily rate calculated under PDPM is not static for the entire length of a patient’s stay, as the resource needs for certain services often change over time. To account for this fluctuation, the model includes a Variable Per Diem (VPD) adjustment factor.
This adjustment modifies the payment for three components: PT, OT, and NTA. Resource use for physical and occupational therapy is highest at the beginning of a stay and gradually declines.
Consequently, the per diem rates for the PT and OT components are reduced by 2% for every seven days, beginning on Day 21 of the patient’s stay. Similarly, the NTA component has a distinct adjustment, where its rate drops by two-thirds after the third day of the stay. This variable schedule ensures that the payment rate more accurately reflects the decreasing intensity of resource utilization as the patient progresses through their recovery.