Why Health Systems Need to Strategically Align with Skilled Nursing Facilities Now

Inevitably, healthcare incentives continue to transition from the traditional fee-for-service (FFS) model to a value-based payment system. A recent modernization to how the Centers for Medicare & Medicaid Services (CMS) will pay providers for skilled nursing facility (SNF) performance is proof. And if you want to achieve success in alternative payment models (APMs), such as bundled payments and accountable care organizations (ACOs), the new SNF payment model is something to pay close attention to.

Over the summer, CMS announced the Patient-Driven Payment Model (PDPM), which was confirmed in the Final Rule for the SNF Prospective Payment System. Effective Oct. 1, 2019, the PDPM replaces the current case-mix classification model (the Resource Utilization Group system) for Medicare Part A FFS payment to SNFs. While skilled nursing providers have some time to prepare, those participating in bundled payments or ACOs should also take note of this major change.

The Skinny

The PDPM remains a case-mix reimbursement model but will pay SNFs more specifically for patient needs, rather than the volume of therapy services provided. It is intended to be a more simplistic payment model compared to its predecessor and is expected to reduce administrative burdens stemming from complicated and taxing paperwork requirements on patient assessments.

How it Works

In a nutshell, there are three major things to understand about the PDPM:

1. ICD-10 coding, patient characteristics and clinically relevant factors will be used as the basis for patient classification. The model adjusts payments based on each aspect of a resident’s care.
2. The SNF per diem payment is adjusted to reflect fluctuating costs throughout a patient’s stay.
3. The PDPM builds in safety measures against potential financial incentives to ensure patients are receiving care that is in line with their specific needs.

Relevance to Alternative Payment Models

Aligned with the value-based payment movement, the PDPM is designed to improve incentives to treat the needs of the whole patient instead of focusing on the volume of therapy delivered. As such, changes in reimbursement will be reflected in the post-acute care costs captured within an ACO’s spend or in bundled payments. The intention is to provide more adequate and appropriate care to the patient, with the expectation of shorter SNF stays and a shift in total SNF costs.

It’s important to note, however, that the direction of these costs is likely to depend heavily on SNF operating practices. For those providers who have historically delivered a high-volume of therapy services, the PDPM will lead to reduced SNF payments in the short term.

In the long run, the PDPM will likely be a win for SNFs, ACOs and bundlers because they can all share in the cost savings associated with better patient care. This represents another reason why health systems need to be moving to APMs, such as bundled payments, to better align with post-acute care providers. These models incent specific engagement efforts, such as forming a high-performing post-acute care network by starting up an internal network “collaborative” with select acute/post-acute partners.

Preparing for Change

This conversion will challenge many SNFs across the U.S. as they prepare and implement these changes. Much like the obstacles hospitals faced in converting from ICD-9 to ICD-10 or from DRG to MS-DRG, SNFs will have a similar shift in thinking. It will be a major culture change for SNF providers that requires effective preparation, education and training programs. As CMS implements these new processes, it is important to show support for both patients and SNFs throughout the transition. Think of the shift as an opportunity to further health system engagement with SNFs.

Ultimately, these renovations will make life a lot easier for ACOs and bundlers to achieve improvements in both community health and costs.

To learn more about the PDPM or APMs, such as bundled payments, download Ready, Risk, Reward: Keys to Success in Bundled Payment Models.