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Effective October 1, 2019, CMS will replace the prospective payment system for skilled nursing facilities, Resource Utilization Group (RUG-IV), with a new prospective payment system called the Patient-Driven Payment Model (PDPM).[1] In all significant respects, the final rules are unchanged from proposed rules published in May.[2]

The new system, which is budget-neutral, bases payment on resident characteristics, rather than on services provided. CMS cites its own research showing that, under RUGs, SNFs classify residents into the highest (and most highly-paying) RUG categories.[3] In Fiscal Year 2017, for example, more than 60% of Medicare-covered SNF stays were billed for one of three Ultra-High Rehabilitation categories (out of 66 RUG-IV categories).[4]  CMS cites additional studies by the HHS Inspector General and by the Medicare Payment Advisory Commission that similarly criticize the RUG system for encouraging excessive therapy and not paying adequately for non-therapy ancillaries (NTA) (chiefly drugs).[5]

Unfortunately, as CMS expressly confirms, PDPM changes the financial incentives for SNFs so dramatically that SNFs will actually receive higher reimbursement when they do not provide residents with any therapy at all.[6]

CMS notes in the preamble to the final rules that more than 99% of therapy is now provided on an individual basis and that individual therapy “should be considered the primary therapy mode and standard of care in therapy services provided to SNF residents.”[7] Nevertheless, PDPM allows up to 25% of therapy services to be provided in group or concurrent settings, rather than individually.[8] Providing group or concurrent therapy is considerably less costly for facilities because it allows a single therapist to work with multiple residents at the same time. CMS confirms that a SNF exceeding the 25% limit on group and concurrent therapy will receive only “a non-fatal warning edit,” – a “reminder” that it is out of compliance[9] – but “no penalty.”[10]

Effective October 1, 2019, CMS adds new items to the PPS Discharge Assessment to identify minutes for each therapy discipline and the mode of therapy (that is, whether the therapy is individual, group, or concurrent), in recognition of concerns by commenters on the proposed rules and CMS itself that PDPM may lead to a considerable decline in therapy services.[11] The new items will allow CMS to monitor the total number of minutes a resident receives therapy as well as the mode of therapy.[12]

The Center for Medicare Advocacy is especially concerned about maintenance therapy under the Jimmo v. Sebelius Settlement.[13] In a single dismissive response to some commenters’ requests for clarification on how PDPM would accommodate Jimmo, CMS says that no special tracking of maintenance services is needed.[14]

PDPM is extremely complex. Each resident’s payment depends on the summation of five case-mix adjusted components (physical therapy, occupational therapy, speech language pathology, nursing, and nontherapy ancillaries),[15] each with its own case-mix groups; application of a variable per day adjustment schedule, which reduces the daily payment for three of the case-mix categories on a sliding scale;[16] and addition of these sums to the non-case-mix adjusted component.[17]

Under the guise of reducing burdensome paperwork, PDPM uses the five-day resident assessment for determining the Medicare rate for the resident’s entire Part A stay, eliminating the RUG requirement for additional assessments on days 14, 30, 60, and 90.[18] The Center for Medicare Advocacy sees this change as promoting gaming by facilities. The rules allow a SNF to reclassify a resident after the five-day assessment under an optional Interim Payment Assessment (IPA), but, in one of the few changes in the final rules, CMS did not include criteria for triggering an IPA.[19]

The final rules include two tables describing the impact of PDPM’s changes on residents[20] and on facilities[21] and summarizing some of the most significant changes in payments under PDPM. According to CMS, rates will be higher under PDPM for residents “who have high NTA costs, receive extensive services, are dually enrolled in Medicare and Medicaid, use IV medication, have ESRD, diabetes, or a wound infection, receive amputation/prosthesis care, and/or have longer prior inpatient stays.”[22] Facilities will receive higher reimbursement if they have “high proportions of non-rehabilitation residents” and if they “are small facilities, non-profit facilities, government-owned facilities, and hospital-based and swing-bed facilities.”[23]


The new SNF payment system does not bode well for nursing home residents who need therapy, especially for individuals who need one-on-one therapy for longer periods of time.  Advocates should remain alert to help people in need of this care and contact the Center if access to necessary therapy is denied.

August 23, 2018 – T. Edelman

[1] 83 Fed. Reg. 39162, 39183-39265 (Aug. 8, 2018).
[2] 83 Fed. Reg. 21018, 21034-21080 (May 8, 2018).  See CMA, “CMS Tries Again: Another New Skilled Nursing Facility Medicare Reimbursement System Proposed – If Implemented, Would Gut Therapy” (CMA Alert, May 17, 2018),
[3] 83 Fed. Reg. 39162, 39183-39184 (Aug. 8, 2018).
[4] 83 Fed. Reg. 39162, 39194 (Aug. 8, 2018).
[5] 83 Fed. Reg. 39162, 39184-39185 (Aug. 8, 2018).
[6] See Table 37, PDPM Impact Analysis, Resident-Level, at 83 Fed. Reg. 39162, 39257-39259 (Aug. 8, 2018).
[7] 83 Fed. Reg. 39162, 29238 (Aug. 8, 2018).
[8] 83 Fed. Reg. 39162, 39237-39243 (Aug. 8, 2018).
[9] 83 Fed. Reg. 39162, 39239 (Aug. 8, 2018).
[10] 83 Fed. Reg. 39162, 39250 (Aug. 8, 2018).
[11] 83 Fed. Reg. 39162, 39235-39236 (Aug. 8, 2018).
[12] 83 Fed. Reg. 39162, 39237 (Aug. 8, 2018).
[13] See
[14] 83 Fed. Reg. 39162, 39187 (Aug. 8, 2018).
[15] 83 Fed. Reg. 39162, 39225 (Aug. 8, 2018).
[16] 83 Fed. Reg. 39162, 39225, 39226-39229 (Aug. 8, 2018).
[17] 83 Fed. Reg. 39162, 39225 (Aug. 8, 2018).
[18] 83 Fed. Reg. 39162, 39229
[19] 83 Fed. Reg. 39162, 39233 (Aug. 8, 2018).
[20] 83 Fed. Reg. 39162, 39257-39259 (Table 37) (Aug. 8, 2018).
[21] 83 Fed. Reg. 39162, 39260-39261 (Table 38) (Aug. 8, 2018).
[22] 83 Fed. Reg. 39162, 39257 (Aug. 8, 2018).
[23] 83 Fed. Reg. 39162, 39259 (Aug. 8, 2018).


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