The Patient-Driven Payment Model (PDPM)

PDPM is the biggest change in reimbursement to take place in decades and skilled nursing facility operators must be prepared when it takes effect October 1, 2019. Patient-Driven Payment Model is a new classification system for skilled nursing facility patients who are in a Medicare Part A covered stay into different payment groups under the SNF Prospective Payment System. This payment model will replace the Resource Utilization Group, Version IV (RUG-IV).  The RUG-IV system incentivized skilled nursing facility providers to furnish therapy to patients regardless of their unique needs; by classifying patients into a therapy payment group with a fixed per diem payment rate over the course of their stay regardless of the cost or resource utilization required to look after the patient. PDPM will eliminate the flat per diem rate and classify patients into payment groups based on specific, data-driven patient characteristics. 

What are the case-mix adjusted components of the PDPM?

There are five case-mix adjusted components, Physical Therapy (PT), occupational therapy (OT), speech-language pathology (SLP), a non-therapy ancillary (NTA) service and a nursing component.

What are the advantages of Patient-Driven Payment Model?

Among other advantages, the program establishes a separate case-mix adjusted component for non-therapy ancillary (NTA) services. NTA costs are high at the beginning of a SNF stay but they decrease and remain constant over the rest of a patient’s stay. These variable per diem adjustments improve targeting of those resources to medically complex patients and increases payment accuracy for services. Patient-Driven Payment Model also provides additional resources to facilities for treating potentially vulnerable populations, including patients with the following characteristics: high NTA utilization, extensive services, such as a ventilator, respirator, or for infection isolation, dual enrollment in Medicare and Medicaid, end-stage renal disease, longer prior inpatient stays, diabetes, wound infection, IV medication, bleeding disorders, behavioral issues, chronic neurological conditions, and bariatric care.

How is CMS transitioning from RUG-IV to PDPM?

The transition from RUG-IV to PDPM will be a “hard” transition, meaning that they will not run concurrently. Billing prior to September 30th will be billed under RUG-IV system and beginning October 1st will be billed under Patient-Driven Payment Model. All SNF residents who were admitted prior to the PDPM effective date are to receive a new Interim Payment Assessment (IPA) under the PDPM, even if they have been assessed already under the previous RUG-IV model

For more information regarding Patient-Driven Payment Model visit

Work with The JCH Group

Through our extensive network in the senior housing space, JCH not only sources buyers and sellers in the market place, we are able to help place debt, fund equity, locate and select operating partners, work through license applications and compliance issues, bring competent professionals and consultants to the table (attorneys, CPA’s, operation consultants, etc.…whatever is needed to meet your needs and facilitate a smooth and fair transaction). Because of these skillsets, JCH is one of the leading brokerages in the Senior Housing space, specifically well equipped to help new players enter the space.

If you are contemplating buying or selling assets in the senior housing industry, please make one of your first calls to the senior housing investment specialist at JCH.

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