As Medicaid transitions across states from the Resource Utilization Group (RUGS) system to the Patient-Driven Payment Model (PDPM), nursing home operators face significant challenges. It's crucial to dispel common misconceptions—such as the assumption that these transitions will always result in additional Medicaid funds—and to implement the proper practices to ensure appropriate payments.
Understanding Medicaid Transitions: Complexity and Impact
The shift to PDPM is more complex. The complexities of Medicaid transitions among states, particularly the impact on case mix and payment rates, require careful navigation. Proper documentation and communication are essential to accurately identify resident acuity under the new system. These topics were prominently discussed at the recent Zimmet Healthcare Annual Conference.
Dispelling Myths: The Reality of Medicaid Funding Under PDPM
A critical point for providers to understand is that as states adopt PDPM-based models for Medicaid, not all will increase the total funds available to nursing homes.
"There's a misconception that the pizza is getting larger. That there's an opportunity to capitalize when there's a Medicaid payment system, that it's going to result in additional funds being added," said Zimmet Director of Analytics Vincent Fedele. "The reality is, unless the state adds additional funds to the Medicaid program, the pie doesn't get larger at all."
Current State of PDPM Adoption Across the U.S.
Currently, 35 states have implemented some form of a case mix index (CMI) system to establish Medicaid rates for nursing homes. Of these, 20 states have opted for the nursing component of PDPM, primarily influenced by the accounting firm Myers and Stauffer, which services the majority of states across the country.
"It's probably the most straightforward in terms of adjusting to it at the building level," said Fedele. All states are expected to have a transition plan to PDPM in place by October 2025.
The Evolution of PDPM and Its Impact on Medicaid
The introduction of PDPM in 2018 for Medicare Part A reimbursement to Skilled Nursing Facilities (SNFs) marked a significant shift. Coupled with the long-awaited changes to the Minimum Data Set (MDS) last year, including the elimination of Section G, states are now compelled to adjust their Medicaid models accordingly.
Optimizing Reimbursement Under State PDPM Models
As states explore various options for transitioning to PDPM, nursing home operators must be proactive. Zimmet COO Michael Sciacca and Fedele outlined a step-by-step process to optimize reimbursement under state PDPM updates:
Identify Residents Included in the CMI Calculation: This varies by state, so understanding the specifics is crucial.
Maintain Compliance with MDS Requirements: Regular interdisciplinary meetings should be conducted to review CMI updates.
Focus on Reimbursement-Sensitive Clinical Acuities: This includes add-on items and active diagnosis codes that can be documented with attending physicians.
Review and Code MDS Assessments Carefully: Ensure adherence to the Resident Assessment Instrument (RAI) manual coding guidelines.
Monitor Changes in Clinical Acuity: Review electronic medical records regularly to identify any changes that may require MDS completion.
State-Specific Approaches to PDPM Transition
For Medicare Part A, PDPM includes five case-mix adjusted components: physical therapy (PT), occupational therapy (OT), speech-language pathology (SLP), non-therapy ancillary services, and nursing. Most states are basing their Medicaid methodologies on the nursing component of PDPM due to its relevance to the long-stay Medicaid population.
Some states, like Wisconsin and Texas, are adopting hybrid approaches. Wisconsin, for example, uses a combination of nursing and non-therapy ancillary systems, while Texas has proposed a blended hybrid system.
"Even if a state had multiple components, the heaviest weighted component in most of these states has been nursing," noted Fedele.
Preparing for PDPM Transition: Strategies for Success
As the transition to PDPM continues, nursing home operators should compare their current performance against other operators or the Medicare nursing component rather than relying on old RUGS scores. Clinical proficiencies, particularly in capturing high-acuity in-house services like respiratory therapy and IVs, will become increasingly important.
"Clinical programs that are deemed reimbursement sensitive under a PDPM system are going to become more prevalent in the next year as more states transition," said Sciacca. "If you're not thinking about it now, you probably should take this down and go back to your team to see if this is possible."
Maximizing Medicaid Reimbursement: Focus on Documentation
Improving Medicaid case mix and special care capture rates starts with proper documentation. This includes accurately coding for conditions like COPD, particularly the documentation of shortness of breath. Properly coding for Section GG is another crucial step to ensure maximum reimbursement under the new Medicaid systems.
"It really has a crippling impact on your CMI, and we're seeing that on Medicaid, which makes sense … we don't see it with Medicare," Fedele said of special care capture rates. The long-term care PDPM construct presents new challenges, especially when compared to the therapy-based services captured under RUGS.
Challenges Ahead: Enhanced Documentation Guidelines
States like Maryland have already begun implementing enhanced documentation guidelines as part of their PDPM transition. These guidelines make it more challenging to capture certain items in Medicaid compared to Medicare.
As states continue to roll out their PDPM transitions, nursing home operators must stay informed and adaptable to optimize reimbursement and ensure compliance.
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