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Four steps to take now for adjusting your therapy contracts before the PDPM transition

Here are four steps for therapy contract adjustment that you should take now to prepare for PDPM implementation on October 1, 2019.

The PDPM Transition: Step 1

  • Analyze your Part A fee‐for‐service utilization data
    • What is your RUG distribution?
    • What is your average length of stay by RUG?
    • What is your reimbursement per RUG category?
    • What is your average RUG rate and annual Part A fee‐for‐service revenue?
  • How much of your overall Medicare revenue is from Medicare Advantage?
    • What kinds of Medicare Advantage contracts do you have? How do they pay
    • (levels, % of RUG, etc.)? What is the revenue derived from each type?

The PDPM Transition: Step 2

  • Use the CMS Provider Specific Impact File to review your SNF’s transition: www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ProspMedicareFeeSvcPmtGen/psf_text.html
  • Take your current claims and run them through a PDPM grouper tool, found here: www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html
  • Analyze the impact from a revenue perspective (recognize that the revenue is GROSS—not net of expenses)
  • If your SNF’s revenue is flat or declining under PDPM, you will need to analyze if operational changes can occur and improve outcomes

The PDPM Transition: Step 3

  • Critically review your current therapy contract and therapy services:
    • Rates for service and how (per minute, etc.)?
    • Therapist productivity: (need to track) minutes billed per Part A patient day vs. total minutes
    • Percent of therapy provided one‐to‐one vs. group or concurrent
    • Therapist participation hours in non‐billable functions and cost for this participation
  • Using your revenue analysis and your grouper results (where your patients are classified under PDPM), can you (should you) make adjustments to your present therapy contract from a cost/rate perspective and structural perspective? If you come out great, there may be no need to adjust, but if you come out losing money, adjustments need to be made.

The PDPM Transition: Step 4

  • Whether you do well or poorly under PDPM, you should review and update your therapy contract—the question is motivation (whether you must do something now or can wait). Minimally, consider doing the following:
    • Your revenue analysis will have given you a good idea of how your case mix and utilization will change under PDPM. Negotiate a new rate structure that conforms better. Unless you are extremely savvy, it’s recommended that you use per diem vs. case mix.
    • Develop a QA and reporting program to identify therapy productivity and non‐billable engagement activity. PDPM is far less therapy‐centric, but it does require therapists to be very engaged in care delivery (especially to maximize LOS efficiency). Consider 80% billable as the best benchmark!
    • A change in your Part A fee‐for‐service cost model will require a change in Medicare Advantage fees. Per diem works well with either/any payer.
    • Consider going in‐house as an alternative.
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