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If you have PDPM questions or recommendations for AHCA education, resource development or training, please email the Association at

Responses to questions will be posted in FAQ documents bi-weekly.

Patient-Driven Payment Model (PDPM) Resource Center

PDPM will Replace the RUG-IV per-diem SNF PPS Payment System on October 1, 2019
On July 31, 2018, the Centers for Medicare and Medicaid Services (CMS) published the Prospective Payment System (PPS) and Consolidated Billing for Skilled Nursing Facilities (SNF) Final Rule for Fiscal Year (FY) 2019.  In this rule, CMS finalized a proposal to replace the current SNF PPS Resource Utilization Group (RUGs) payment model with a new per-diem payment system called the Patient-Driven Payment Model (PDPM) beginning on October 1, 2019. 

In the Balanced Budget Act of 1997, Congress established a SNF prospective payment system (PPS) for Medicare Part A fee-for-service (FFS) payment called the Resource Utilization Group (RUGs) system. However, since its inception,
RUGs has been criticized for not truly being a PPS. Specifically, critics note RUGs is utilization driven by therapy minutes and is a per diem. Additionally, the strong tie of payment to therapy minutes is perceived to be a powerful flaw in RUGs which incentives therapy delivery. At the same time, critics, as well as the original RUGs evaluation reports, indicate that the RUGs nursing and nontherapy ancillary services (NTAS) component likely is underfunded and that use of nursing does not relate to NTAS utilization.

In June 2017, CMS used an unusual regulatory vehicle called an Advanced Notice of Proposed Rulemaking (ANPRM) to request feedback on a payment system reform proposal called the Resident Classification System Version 1 (RCS-1) to replace the existing Medicare Part A FFS payment system.  Based on feedback on RCS-1, CMS made an array of changes and released a new, and formally proposed, payment system in our fiscal year 2019 (FY19) Notice of Proposed Rulemaking (NPRM).  The proposed payment system was called the Patient-Driven Payment Model (PDPM).  After a public comment period, and with some modifications based on those public comments, the PDPM payment model was adopted in the July 30, 2018 SNF PPS Final Rule, with an implementation date set for October 1, 2019. 

Patient-Driven Payment Model (PDPM)
PDPM is a fundamental shift from RUGs IV and will replace RUGs entirely for Medicare Part A FFS payment to SNFs.  Payment is based upon an array of patient characteristics, primarily medical information, associated with newly designed direct care components.  Therapy minutes no longer drive payment.  See Figure 1 for a comparison of RUGs IV and PDPM payment components.

Figure 1.  RUGs IV Payment Components Compared to PDPM
Screen Shot 2018-08-15 at 11.27.00 AM.png 
Therapy minutes no longer play a role in determining payment.  While CMS still will require therapy minute reporting on the Discharge MDS, therapy minutes and related thresholds no longer drive payment.  Rather, patients are assigned to a CMG for each component using clinical information entered onto the SNF PPS Admission MDS which differs by component.  The only clinical information on the claim that impacts PDPM payments will be related to residents with HIV/AIDS.  In the final rule, CMS made no substantive changes to the patient characteristics and related classification.  See Figure 2 for a basic overview.  

Figure 2.  PDPM Component and Patient Characteristics Used for Case-Mix Group (CMG) Assignment

​Component ​Patient
​Per Diem
​# of Case Mix
​PT ​- Primary reason for SNF Care ICD-10
- Functional Status – MDS Section GG Early and Late Loss
​Payment Decreases
After Day 20
​OT ​- Primary reason for SNF Care ICD-10
- Functional Status – MDS Section GG Early and Late Loss
​Payment Decreases
After Day 20
​SLP ​- Primary Reason for SNF care  ICD-10
- Cognitive Status
- Presence of swallowing disorder or mechanically altered diet
- Other SLP related comorbidities
​Average Daily Payment
No Variable Payment
Nursing​ ​- Clinical information from SNF Stay
- Functional Status – MDS Section GG Early and Late Loss
- Extensive Services Received
- Presence of depression
- Restorative nursing services received
​Average Daily Payment
No Variable Payment
NTAS​ ​- Comorbidities present
- Extensive services used
​Payment Decreases
After Day 3
While considerable analysis is needed to understand how SNFs may optimally deliver quality care under PDPM, five key elements of the payment system are critical to understand when considering preparations for the transition from RUGs to PDPM.  See Figure 3., below.
Figure 3.  PDPM is a New Medicare Part A Fee-For-Service Payment System: Key Elements to Understand

Screen Shot 2018-08-15 at 11.38.13 AM.png

AHCA Education and Training
As when RUGs were implemented, extensive regulatory clarifications, sub-regulatory guidance, information technology development, and operational changes must be developed before PDPM goes live on October 1, 2019. 

Click here to view our final rule and PDPM summary and here to view AHCA’s webinar on the final rule which includes an overview of changes to the SNF Re-hospitalization Value-Based Purchasing (VBP) Program, IMPACT Act Quality Reporting Program (QRP) as well as the new SNF payment system, the Patient-Driven Payment Model (PDPM). AHCA also will be releasing an array of PDPM strategic and workflow tools as well as data analytic resources in fall 2018.  

PDPM 101 webinar - This presentation provides an introductory overview of the new Medicare Part A Skilled Nursing Facility Prospective Payment System (SNF PPS) payment model that will be implemented on October, 1, 2019 (Fiscal Year 2020). Specifically, the current Resource Utilization Groups, version IV (RUG-IV) per-diem case-mix payment model, which is based on resident characteristics and therapy utilization, will be replaced by a Patient Driven Payment Model (PDPM), which is based solely on resident characteristics.

PDPM Readiness Toolkit - The AHCA PDPM Readiness Toolkit was designed to facilitate discussions among Skilled Nursing Facility (SNF) management and front-line clinical and support personnel as you begin your journey in preparing your administrative and clinical operations to be successful in the change of the per-diem SNF prospective payment system (PPS) from the current Resource Utilization Groups, Version 4 (RUG-IV) case-mix model to the Patient-Driven Payment Model (PDPM) starting on October 1, 2019. These files should be shared and reviewed by SNF administrative and clinical staff as part of training efforts. Additionally, these tools should be used in identifying your baseline readiness status, and conducting gap-analysis as part of planning to implement those changes necessary to be successful under PDPM.

AHCA also will offer monthly PDPM update WebEx events and provide bi-weekly PDPM FAQs. These resources will be posted at this webpage. 

Finally, if you have PDPM questions or recommendations for AHCA education, resource development or training, please email the Association at Responses to questions will be posted in FAQ documents bi-weekly. AHCA staff anticipate the need to seek CMS clarification on many questions.