Modern Healthcare reported that CMS, the federal agency that regulates nursing homes, will  propose a new pay model called  Patient-Driven Payment Model which would replace the resource utilization groups model they are paid under now. This is the second time in two years the CMS has suggested a payment model to replace resource utilization groups. The proposed Patient-Driven Payment Model (PDPM), a switch from last spring’s originally pitched RCS-1, will replace the Resource Utilization Group system, or RUG-IV, used to categorize Part A residents into various payment groups based on their level of need.  The nursing home industry panned last year’s proposed model, known as the Resident Classification System, because it used outdated data to establish payments.

The nursing home lobbyists are worried that the new model could pay them less for services provided to Medicare patients.  The CMS said the new system should save nursing homes 2 million administrative hours annually, or $200 million per year in labor costs.  CMS also announced an $850 million pay raise for skilled nursing facilities for fiscal 2019.

The CMS pays skilled-nursing facilities on a prospective fee schedule, which means they are a paid a predetermined amount for services they provide. The current skilled-nursing pay system separates patients into two broad care categories based on the level of care they require: patients who need general nursing services and patients who need physical, occupational and speech therapy.

The new system will have five patient categories: nursing, non-therapy ancillary, physical therapy, occupational therapy and speech training in an attempt to add more precision to the payment system so providers receive more accurate reimbursement reflecting the costs for care of all SNF residents, according to the CMS.  The proposals would allow rehabilitation physicians to conduct some meetings without being physically in the room and also remove overly prescriptive admission documentation requirements.

The CMS proposed restricting group and concurrent therapy use in order to ensure that patients can receive individual sessions when clinically appropriate. In the past, SNFs would overutilize group therapy hours because they weren’t subject to the same limitations as individual sessions. The agency also worried the providers over-relied on group sessions to curb employee hours and costs.

Under the proposal, concurrent and group therapy can only account for 25% of the overall therapy a SNF provides.  The new system will make it easier for patients and providers to figure out which nursing facilities excel at care for patients with certain conditions like heart failure. Providers and patients may choose send patients to specific facilities based on their performance under the new model, Macmillan said.

The Medicare Payment Advisory Commission, HHS’ Office of Inspector General and others have criticized current nursing home payment strategy for years because it gives nursing homes incentives to bill higher intensity rehab codes to maximize reimbursement.  Between 2002 and 2016, the share of days classified into rehabilitation classifications in SNF facilities increased from 78% to 94%, according to MedPAC. The share of days assigned to the highest rehabilitation classifications codes increased from 7% to 58%.

The proposed rule for Fiscal 2019 also updates the SNF Quality Reporting Program to add costs of current measures so that CMS can better evaluate when the price outweighs the benchmarking benefit.  But the agency does expect to begin publicly displaying the four assessment-based quality measures, as well as displaying two years worth of data connected to community discharges and Medicare spending per beneficiary.

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