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What is PDPM and How Will it Affect You?

Episode 5 with Marc Zimmet

CEO and President of Zimmet Healthcare





What does Zimmet Healthcare actually do?


Zimmet Healthcare is a consulting support firm specializing in skilled nursing facility reimbursement, compliance and strategic planning. Initially started as a service vendors creating cost reports and appeals for Medicare and expanded as the industry has matured.


Zimmet Healthcare currently employs about 60 people servicing about 300 facilities across the country.


Do you see a significant trend in the reimbursement method for SNFs from when you started out to today?


There’s a complete shift in SNF reimbursement.


To be frank, clinical reimbursement is a complex topic and the goal of this conversation is to get a better understanding of the big picture, the coming changes and how they will affect day to day operations of your nursing home.


With that in mind, let’s go back to Marc’s answer.


In the earlier days, reimbursement was based on the costs a facility incurred when caring for a particular resident. The more the facility spent on the resident, the more was their reimbursement within reason.


This is now changing to a model that is based on price and not cost. There is a fixed rate per day for a residents’ condition, diagnosis and plan of care. The facility will get reimbursed at that rate regardless of the actual costs incurred by the facility.


Why is Medicare Changing the Reimbursement Methods?


One of the biggest challenges with the current PPS/RUG method of reimbursement is that there is too much of an emphasis on the therapy received by the resident.


For example, if there are to residents who receive the same level of therapy, the facility will receive similar reimbursement for them even if one has significant other clinical challenges (such as wound care or cognitive issues etc.).


PDPM - Patient Driven Payment Model


PDPM which is starting October 2019, enhances the reimbursement sensitivity of the all the different payment drivers and takes the focus away from therapy as the primary driver of payment.

PDPM Vs. RUGs


To understand the difference in reimbursement consider the following.


We are going from a RUG system which has 66 RUG scores (of which we only use 20 or so of them), to PDPM which has almost 29,000 rate composite possibilities, which boils down to 15-20,000 rate combinations that will actually be used.


In simpler terms, with more words in the language we can be that much more precise.


How Does This Affect the MDS Process?


The MDS job description will change a bit. There will be fewer assessments, however, it will require working more extensively with the other disciplines.

Whereas in the past the reimbursement was driven primarily by therapy and ADLs, now the other disciplines will play a significant role in the reimbursement process.


For example, dietary will need to capture a mechanically altered diet. The psychologists, respiratory therapists and others will play a large part in this process.


Who is Pushing for These Changes?


The federal government is pushing for these changes. MedPac (The Medicare Payment Advisory Commission) has been almost begging congress and CMS to implement a patient specific payment model that does not recognize the frequency and duration as the payment driver because it provides an incentive to over treat the patient.


Is the Government Trying to Save Money With This?


Theoretically, this is supposed to be budget neutral. It’s a redistribution from facilities that focus primarily on the therapy intense patients, to facilities that take the sicker, more compromised patients on the vents and trachs.


The medically complex patients reimbursement will go up considerably and the therapy intense patients will go down.


Will Facilities Make More Money in PDPM?


Zimmet Healthcare expects that facilities will get better at taking credit for the care they provide and in the first year Medicare will actually spend more than their budgeted amount.


This will be followed by a rate reduction that will recalibrate the dollars to make it budget neutral.


So perhaps in year 1, the facilities that learn and implement programs to accurately take credit for the care they provide, may make some extra money. However, once the rate is adjusted, it should remain budget neutral.


Who Gains by These Changes?


Ultimately, these changes are indeed in the best interests of the patient. The problem with the system is that you almost have to provide a high level of therapy in order to keep your doors open.


Let’s take the dialysis patient as an example.


In the RUG reimbursement model, the facility would lose money.


The rates are simply inadequate.


Facilities would try an aggressive treatment approach where they would take the resident to therapy early in the morning knowing that the resident will not be able to tolerate the therapy on their return.


With PDPM, this will not be necessary because the other clinical challenges will be considered as well in the reimbursement rate.


What is Changing in the Medicaid System?


Being that Medicaid is not a national system, and each state runs their own program, it’s difficult to speak about the specifics of the program.


However, in general terms, Medicaid started out as a cost based model, many states then went to a case mix and acuity model, to a priced based system and finally to managed care. This is not universal but is the general trend.


More importantly, every state has x number of dollars to spend on their Medicaid program. The main concern is not the distribution of reimbursement for the program, rather, it’s the overall total funding of the program.


An astute operator will learn to maximize their Medicaid reimbursement dollars in any Medicaid system. The problem lies in the total dollar amount that the state allocates to the Medicaid program.


Are the Articles That State the Amount a Nursing Home Loses Per Day Accurate?


It may be true that the rates are inadequate, however, the facility was never going to be profitable just by the reimbursement payments. In order for a facility to be profitable they will need a good short term rehab census as well.


This together with the Medicaid payments can make the facility viable and profitable.


If the facility was 100% filled with Medicaid patients with the right acuity mix, and everyone had Medicare Part B you would not be losing $37 a day.


Is Owning and Operating Nursing Homes Still as Profitable Now as it was 25 Years Ago?


In the early 90’s it seemed like a really simple business to run. Nowadays, it’s a very complex business.


Today, there is tremendous potential in the post acute care continuum which SNFs are such an important part of, is where the opportunity lies. In post acute care management, there real opportunity to meet the new demands of the new nursing home residents.


A stand alone nursing facility that is well managed can absolutely be a profitable business and serve the community well.

Where are Those Baby Boomers?


We are always being fed information by the media that with the baby boomers are coming of age and nursing homes will have to scramble to meet the need.


While in reality, nursing homes are struggling to survive due to lack of patients.


As mentioned earlier, there are a variety of variables that are causing this to happen, including the push to provide for these elders within the community.


However, the statistics do show a sharp increase in the Alzheimers disease in the coming years of which 75% of those over 80 will need to be admitted to a SNF.


That is something that will significantly increase the utilization of SNF care and should sharply affect the overall occupancy.


Contact Marc Zimmet at ZHealthcare.com