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Clarice Grote, MS, OTR/L

How Understanding PDPM in Skilled Nursing Facilities Can Make You a Better Clinician

Understanding PDPM in skilled nursing facilities can help you better understand how therapy fits into PDPM and thus be a better clinician. The best way to explain this is with a wonderful driving metaphor.

When trying to drive from one location to the next, you usually require some directions. These directions help you be efficient with time and achieve the desired outcome of arriving at your destination on time. In healthcare, the starting point is the patient’s current state of function, and the endpoint is helping them return to their prior level of function, maintain function, or improve function. Healthcare policy is the road map in this journey. So, by understanding health policy, you can better navigate how to provide the best care to patients, document your skill, and be fiscally responsible.

Podcast: Patient-Driven Payment Model (PDPM) in Skilled Nursing Facilities

Since the passage of the Affordable Care Act in 2010, practitioners have seen a lot of change as the US has transitioned to a more value-based care system. In some cases, this transition has been a rocky road, and we experienced that with the transition from RUG levels to the Patient-Driven Payment Model or PDPM in Skilled Nursing Facilities (SNF). PDPM was implemented on October 1, 2019, for Medicare Part A beneficiaries. While PDPM was a difficult transition, it holds tremendous potential for improved clinical judgment for occupational therapy practitioners and enhanced outcomes for patients/residents. So, to best understand PDPM, let’s talk about the old system.

The Old System

 The payment system before PDPM was the RUG-IV system. The reimbursement focused on three primary categories: therapy utilization, nursing, and non-therapy ancillary. The more therapy provided per week equated to higher reimbursement. In this system, practitioners were often told how long they needed to spend treating each patient in each session to meet RUG thresholds. 

  • Low: 45-149 minutes of therapy
  • Medium: 150-324
  • High: 325-499
  • Very High: 500-719
  • Ultra: 720+ (meaning patients received 1.7 hours of therapy per day if therapy was provided 7 days a week!)

This system was problematic, and CMS noted that therapy provision spiked at the threshold levels. Thus, indicating that facilities we’re basing therapy utilization on reimbursement vs. patient needs. Additionally, many clinicians reported a lack of autonomy and clinical judgment in this system.

PDPM changed the entire payment structure of SNF and forced facilities to realign how they provide care to focus more on patient factors vs. service utilization. Facilities that ‘optimized’ profits under the old system most likely had the most significant change in staffing and procedure.

Why was PDPM developed? 

CMS and other government agencies identified numerous issues with the RUG system. These issues and other incentives led Congress to pass legislation that required the creation of both PDPM and the Patient-Driven Groupings Model (PDGM) in home health. Congress mandated CMS develop a more standardized reimbursement system that is more patient-centered as part of the Balanced Budget Act of 2018. Although, it is worth stating that much of this work started with the IMPACT Act of 2014. The IMPACT Act is also responsible for the creation of Section GG. These changes all play into the larger goal of promoting a value-based care system.

What type of payment model is PDPM? 

Before PDPM, facilities received the same amount of money each day throughout the length of stay. As such, RUG-IV was considered a per-diem system. Because of the emphasis on service provision vs. patient factors, it was a fee-for-service model in function.

Under PDPM, reimbursement changes throughout the stay, making it a variable per-diem system. Technically speaking, CMS still categorizes these stays as fee-for-service. However, PDPM operates most similarly to a bundled payment model. 

The variable payment is the largest at the beginning of the stay and then slowly decreases as the stay continues. For therapy services, CMS reimburses the same amount each day for the initial 20 days of the stay. After 20 days, reimbursement decreases every seven days. Non-therapy ancillary (NTA) payments are frontloaded to cover the costs of the medications.

Suppose we assume that the patient improves throughout the stay. It is reasonable that the reimbursement would decrease during the stay because therapy and nursing needs should decrease as the patient improves. So, it is crucial for therapy practitioners to keep this in mind when establishing their care plan. Additionally, it reinforces that therapy provision should be adjusted throughout the plan of care to best meet patients’ needs.

What factors influence reimbursement? 

Image Credit: CMS

When PDPM was rolled out, CMS stated PDPM intends to focus more on patient factors and provide more clinical judgment for therapy practitioners to decide how much therapy is appropriate,

and allow the care plan to be more flexible. Under PDPM, payment categories are separated into five categories: PT, OT, SLP, Nursing, and non-therapy ancillary (NTA), which primarily includes pharmaceuticals. Based on MDS and Section GG data, each category is assigned a case mix index (CMI). 

For OT and PT, certain Section GG items determine the CMI. The Section GG scores are converted to a functional score which is then totaled and used to assign an OT/PT CMI. The speech CMI is calculated based on the presence of an acute neurologic condition, SLP-related comorbidity or cognitive impairment, mechanically-altered diet, and swallowing disorder. Nursing reimbursement factors were unchanged under PDPM.

Section GG

The Section GG Items used for PDPM are:

  • GG130 A: Eating
  • GG130 B: Oral Hygiene
  • GG130 C: Toileting Hygiene
  • GG170 B: Sit to Lying
  • GG170 C: Lying to Stting on side of bed
  • GG170 D: Sit to Stand
  • GG170 E: Chair/bed-to-chair transfer
  • GG170 F: Toilet Transfer
  • GG170 J: Walk 50 ft with 2 turns
  • GG170 K: Walk 150 ft

The table below, courtesy of CMS, demonstrates the functional score conversion. To learn more about scoring Section GG, check out this article.

Image Credit: CMS

The Importance of Accurate Scoring

The MDS is a standardized interdisciplinary assessment completed on all SNF patients, including Section GG. If these assessments are not scored accurately, facilities will not receive accurate reimbursement for services under PDPM. 

CMS recognizes that patients with lower functional levels and more comorbidities typically require more services than those with a high functional level and no comorbidities. As such, CMS reimburses a higher rate for more complex patients. So, if data isn’t corrected accurately, it can negatively impact reimbursement and negatively impact quality measure outcomes. Many of which are collected using the above Section GG data. If your facility isn’t receiving adequate reimbursement to cover necessary services, the first place to look for issues is the MDS and Section GG. 

How Occupational Therapy is Part of the Solution

Occupational therapy practitioners have significant value to add under PDPM because of their expertise in function, mobility, medication management, falls, and cognition. Occupational therapists are eligible to score Section GG and other areas of the MDS. Additionally, OTs observe the activities being completed by the patient as part of a comprehensive assessment. Observation is key to obtaining the most accurate score for function and mobility items. OT is also well within their scope of practice to complete swallowing and feeding screenings and cognitive screens. So involving OT in documenting Section GG and the MDS is crucial in ensuring accurate reimbursement under PDPM and demonstrating high-quality outcomes. 

Additionally, OT practitioners can provide training on assessing and observing functional levels to the rest of the care team to ensure consistent and accurate scoring beyond patient care. Not all patients require OT, but the MDS and Section GG is required on all Medicare Part A patients. Therefore, all eligible clinicians must be adequately trained on these assessments. 

As practitioners, it is easy to forget how our services contribute to the bigger picture. It is faster to just put a number down for the score and goal, but that lack of precision can negatively impact job availability and pay. It can also prevent the patient from receiving appropriate services due to a lack of reimbursement. Section GG’s admission, discharge, and goal scores influence quality outcomes. It is in the clinician’s and facility’s best interest to have the quality measures accurately reflect the actual quality of care provided in a facility.

How Our Actions Now Impact OT in the Future

CMS is continuously collecting data through claims to make assumptions about the care provided and develop future care models. We know that CMS is looking to expand value-based purchasing for SNFs nationwide and is discussing implementing a unified payment system for post-acute care. The services provided now inform what services look like in the future. So, if therapy practitioners do not accurately document and report the services provided, this can negatively impact how CMS views the role and value of OT in the future.

These coming changes also serve as a warning to facilities. If our healthcare system cuts therapy provision too harshly in an effort to improve profit margins, then we could continue to see therapy reimbursement dwindle. Therefore, it is essential to remember the goal of CMS is to protect patients and achieve quality outcomes while remaining cost-effective. So if it is documented that fewer services lead to better outcomes, payment models will reflect that in the future.

How to Provide Cost-Effective and High-Value Care

So what can be done? Well, first and foremost, training is vital. Both the practitioner’s and the facility’s responsibility is to provide high-quality and consistent training on documentation, billing, quality measures, and assessments. Now is an excellent time to reflect on the care we provide and ask, “How do I know I’m providing a high value-care?” and “How do I know I’m providing a skilled service?” Articulating the value of OT services is crucial for ongoing advocacy and positive change in our system.

As value-based care expands, practitioners need to remain innovative and increase participation in quality care. Each visit is an opportunity to consider if the next visit is necessary. Providing unnecessary therapy may harm the patient and is harmful to the facility.

Focusing on providing services that can only be provided by that discipline is another way to deliver high-value care. This is also known as ‘operating at the top of our license.’ Suppose therapy practitioners spend a lot of time doing services that don’t require their skill, such as ancillary work, cleaning equipment, obtaining equipment, etc. In that case, facilities may not be optimizing reimbursement.

Overall, there are many opportunities to improve care provision for patients and clinicians. Don’t hesitate to email me at if you have questions about PDPM or are interested in having me present on this topic to your group. We know value-based care isn’t going away and that how care is provided will continue to change. The best we can do is stay informed, flexible, and focus on providing evidence-based care.

Dive Deeper & Resources

Clarice standing in a light room smiling wearing black pants and a light green puff sleeve shirt

hi there,

I’m  Clarice

Occupational therapist & medicare specialist helping practitioners understand policy, engage in advocacy, and own their value!

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