News, Skilled Nursing Facility

PDPM Q&A: Payment overview and billing

CMS has released its FAQ sheet on PDPM:

Q. What is PDPM?

A. The Patient Driven Payment Model (PDPM) is a new case-mix classification system for classifying skilled nursing facility (SNF) patients in a Medicare Part A covered stay into payment groups under the SNF Prospective Payment System. Effective beginning October 1, 2019, PDPM will replace the current case-mix classification system, the Resource Utilization Group, Version IV (RUG-IV).

Q. Why is CMS changing from RUG-IV to PDPM?

A. Under RUG-IV, most patients are classified into a therapy payment group, which uses primarily the volume of therapy services provided to the patient as the basis for payment classification. This creates an incentive for SNF providers to furnish therapy to SNF patients regardless of the patient’s unique characteristics, goals, or needs. PDPM eliminates this incentive and improves the overall accuracy and appropriateness of SNF payments by classifying patients into payment groups based on specific, data-driven patient characteristics, while simultaneously reducing administrative burden on SNF providers.

Q. How are SNF patients classified into payment groups under PDPM?

A. The PDPM classification methodology utilizes a combination of six payment components to derive payment. Five of the components are case-mix adjusted to cover utilization of SNF resources that vary according to patient characteristics. There is also an additional non-case-mix adjusted component to address utilization of SNF resources that do not vary by patient. Different patient characteristics are used to determine a patient’s classification into a case-mix group (CMG) within each of the case-mix adjusted payment components. The payment for each component is calculated by multiplying the case-mix index (CMI) that corresponds to the patient’s CMG by the wage adjusted component base payment rate, then by the specific day in the variable per diem adjustment schedule when applicable. The payments for each component are then added together along with the non-case-mix component payment rate to create a patient’s total SNF PPS per diem rate under the PDPM.

Q. How does the PDPM classification methodology differ from the RUG-IV?

A. Under RUG-IV, payment is derived from a combination of two case-mix adjusted payment components and two non-case mix adjusted components. The RUG-IV payment methodology assigns patients to payment classification groups, called RUGs, within the payment components, based on various patient characteristics and the type and intensity of therapy services provided to the patient. Under the PDPM, six payment components are utilized to derive payment. The PDPM uses clinically relevant factors, rather than volume-based service for determining Medicare payment. Under the PDPM, patient characteristics are used to assign patients into CMGs across the payment components to derive payment. Additionally, the PDPM adjusts per diem payments to reflect varying costs throughout the stay.

Q. How do providers bill for services under PDPM?

Providers would bill for services under PDPM using the Health Insurance Prospective Payment System (HIPPS) code that is generated from assessments with an ARD on or after October 1, 2019.

Q. What does the HIPPS code represent under PDPM?

A. The HIPPS code under PDPM is still a five-character code, as under RUG-IV. However, under RUG-IV, the first three characters represent the patient’s RUG classification and the last two characters are an assessment indicator (AI) code, to represent the assessment used to generate the patient classification. Under PDPM, the first character of the HIPPS code represents the patient’s PT component and OT component classification. The second character represents the patient’s SLP component classification. The third character represents the patient’s nursing component classification. The fourth character represents the patient’s NTA component classification. The fifth character represents the AI code. 1.7 Will providers still report the patient HIPPS code in the same way on the UB-04? Yes, SNF billing practices related to the use of the HIPPS code and revenue codes remain the same under PDPM.

Q. Is it required that the principal diagnosis on the SNF claim match the primary diagnosis coded in item I0020B?

A. While we expect that these diagnoses should match, there is no claims edit that will enforce such a requirement.

Q. What is the default code under PDPM and what does it represent?

A. The default code under PDPM, which may be used in cases where an assessment is late, is ZZZZZ. The default code under PDPM represents the sum of the lowest per diem rate under each PDPM component, plus the non-case-mix component. In cases where the default code is used, the variable per diem schedule must still be followed.

To read CMS’ full FAQ sheet on PDPM, click here.