Senior Living Health Care Connection: Patient driven payment model

Oct 31, 2019
Health care

The federal Centers for Medicare & Medicaid Services (CMS) now reimburses skilled nursing facilities (SNFs) using the patient driven payment model (PDPM). Providers are encouraged to closely monitor documentation for nursing and other clinical services as this documentation supports the PDPM categories submitted on the minimum data set (MDS) and on the claim. While the reimbursement rules have changed, the requirements for skilled nursing inpatient care have not. There must be a need for “skilled” inpatient care as evidenced through diagnostic codes, nursing procedures and other documentation regarding resident needs. Providers are also encouraged to check their rates under the PDPM system. Reimbursement for each PDPM score combination is calculated and generated based on CMS base rates and CMS case mix indexes, which are based on the PDPM score and CMS wage indexes determined by the facility location. The location is determined by the facilities core-based statistical area (CBSA) code, which is based on the county information where the facility is located.

Many managed care payers, especially the Medicare Advantage programs, have agreed to use the PDPM payment methodology to determine facility payment. On Sept. 26, 2019, the CMS confirmed that Health Insurance Prospective Payment System (HIPPS) codes are still required to be submitted on Medicare Advantage Organization (MAO) claims. Per regulations from 2014, these codes were to originate from the initial Omnibus Budget Reconciliation Act (OBRA)-required comprehensive assessment. However, additional guidance allowed MAOs and other payers to use other assessments that took place during the stay. Because SNFs are now reimbursed through the PDPM effective Oct. 1, 2019, MAOs will use the Medicare Advantage Encounter Data System (EDS) to incorporate the new code sets. The CMS will accept existing Resource Utilization Group (RUG) HIPPS codes as well as the PDPM HIPPS codes that are submitted by the MAOs.

  • SNF encounters with “from” dates on or after Oct. 1, 2019, dates of service may be submitted using the existing HIPPS codes or the new HIPPS codes.
  • SNF encounters with “from” dates of service prior to Oct. 1, 2019, should continue to be submitted with existing HIPPS codes.

For SNF stays less than 14 days that do not contain the OBRA required admission comprehensive assessment prior to discharge, MAOs may submit HIPPS codes from other assessments. These PDPM assessments include the “initial Medicare assessment” (five-day scheduled PPS assessment), the interim payment assessment (IPA), the PPS discharge assessment and the optional state assessment (OSA). Additionally, the default HIPPS code for missed assessments prior to Oct. 1, 2019, was “AAAOO.” After Oct. 1, 2019, the default HIPPS code is “ZZZZZ.”

Continue to monitor the CMS PDPM website for more changes and alerts.

Questions? Contact Joan McCarthy at

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