Skilled Nursing Payment Changes Looming

CMS to launch new Patient-Driven Payment Model October 2019.

The Centers for Medicare & Medicaid Services (CMS) was tired of paying too much for care in nursing homes. They were tired of fighting with lawyers and consultants driving up payments and gaming the system. 

CMS is finally replacing the Resource Utilization Group System (or “RUGs”) with a new system: The Patient-Driven Payment Model, or “PDPM.” The new system becomes effective on Oct. 1, 2019. 

Skilled nursing homes are paid a per-diem payment by Medicare under the RUG system. The new PDPM system is also a per-diem payment method.

The RUG payment model was largely driven by the number of minutes of physical, occupational, and speech therapy provided, as well as a score for the assistance the patient required to perform activities of daily living (or “ADL.”) The highest payments were for “ultra-high” claims. To qualify the patient for such payments, the patient had to have more than 720 minutes of therapy, and it had to include a combination of physical, occupational, and speech therapy. 

The RUG levels are the following:

  • Ultra High: at least 720 minutes. Minimum two disciplines, one at least five days.
  • Very High: at least 500 minutes. Minimum one discipline, five days.
  • High: at least 325 minutes. Minimum one discipline, five days.
  • Medium: at least 150 minutes. Minimum five days.
  • Low: at least 45 minutes. Minimum three days.

So here is what frustrated CMS. There are a number of nursing homes that currently bill every patient as an ultra-high claim. In court and under appeal, they argue their patients require this care. Every patient is supposedly getting more than 720 minutes of therapy. 

A lot of those nursing homes are here in South Florida. It is an unequal spread across the country. CMS thought they were getting ripped off, and that could be true. It became a cottage industry for physical therapy providers and nursing homes to work together to increase their payments.

PDPM is called “patient-driven” because payments are now driven by the patients’ CMI, or case mix index. The CMI is based on functional scoring and not minutes of service. Nursing homes wanting to push up payments are now going to have to do something more complicated than providing minutes of service; they will have to try to push up the functional scores that drive CMI. Here is a snapshot of the new payment model:

Powell2

Under PDPM, again, therapy will be paid on a per-diem basis instead of driving a higher rate based on minutes. In addition, the payment will drop for therapy the longer the patient is in the nursing home.

Powell2

In conclusion, if this experiment by CMS works, look for more of the same in payment methodology from CMS. At the very least, it will take providers a while to find a new way to increase payments. Also, look for an uneven spread of the pain of regulatory change.

 

Comment on this article

Facebook
Twitter
LinkedIn

Timothy Powell, CPA, CHCP

Timothy Powell is a nationally recognized expert on regulatory matters, including the False Claims Act, Zone Program Integrity Contractor (ZPIC) audits, and U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) compliance. He is a member of the RACmonitor editorial board and a national correspondent for Monitor Mondays.

Related Stories

Leave a Reply

Please log in to your account to comment on this article.

Featured Webcasts

One Chart, Five Truths: How CDI Prevents the Same Diagnosis from Becoming Five Different Outcomes

What happens when everyone reviews the same chart, but reaches a different conclusion? In this case-based clinical documentation integrity (CDI) webcast, Penny Jefferson examines how documentation involving clinical support, timing, causation, linkage, and terminology can produce very different outcomes for ICD-10 coding, reimbursement, quality, risk adjustment, medical necessity, denials, and compliance. Using cases involving postoperative respiratory failure, severe malnutrition, and encephalopathy, you’ll learn the practical CLEAR framework to help attendees learn to evaluate whether a diagnosis is codeable, consistent, specific, reportable, and ultimately defensible across the different teams and systems that rely on the medical record.

September 30, 2026

Mastering Spinal Fusion Coding for Inpatient Facilities: ICD-10-PCS Precision, Documentation, and MS-DRG Impact

Spinal fusion cases are among the most complex inpatient procedures to code, where even minor ICD-10-PCS errors can affect MS-DRG assignment, reimbursement, compliance, and audit outcomes. This practical webcast provides a step-by-step framework for interpreting operative reports, assigning accurate ICD-10-PCS codes, recognizing documentation gaps, and confidently coding complex fusion procedures. You’ll leave with practical tools that improve coding accuracy, reduce denials and audit risk, and strengthen documentation-driven reimbursement decisions.

July 29, 2026

AI, Audits, and the Future of the Revenue Cycle

Artificial intelligence is rapidly transforming healthcare revenue cycle operations, from coding and auditing to compliance and denials. Join industry leaders Pam Warren (MaineHealth) and Raemarie Jimenez (AAPC) for a live fireside chat exploring how AI is changing workflows, workforce roles, payer-provider dynamics, and compliance risk—and what organizations should be doing now to prepare.

Webcast Only Available On ICD10monitor Subscription – Subscribe Below

June 17, 2026

Trending News

Featured Webcasts

Radiation Oncology Fundamentals: Coding, Billing & Compliance for Hospital Outpatient & Professional Services

Join Michael Calahan, PA, MBA for this radiation oncology coding and compliance webcast as he explains the fundamentals of coding, billing, reporting, and documentation for hospital outpatient and professional services. Learn how the 2026 radiation therapy coding changes affect current practices, how to distinguish technical and professional services, and how to address bundling, units, frequency, modifiers, and documentation requirements. Michael will also help you identify radiation oncology coding and billing vulnerabilities that could lead to denials, overpayments, repayment demands, or federal audit exposure.

October 20, 2026

CMS Compliance & Audit Readiness Bundle

Get two essential perspectives on CMS compliance for $199.

The Two-Midnight Rule helps you navigate short-stay admissions, patient status, and evolving 2026-2027 requirements, while CMS CRUSH explores the next wave of program integrity, payment oversight, and data-driven scrutiny.

Two RACmonitor webcasts. One practical approach to preparing for increased CMS oversight.

September 20, 2026

Preparing for 2027: Inpatient & Outpatient Policy Changes for Case Management and Utilization Review

The 2027 CMS policy changes will impact case management, utilization review, reimbursement, and patient status decision-making long before they officially take effect. Join nationally recognized physician advisor Dr. Ronald Hirsch as he explains the finalized and proposed inpatient and outpatient rule changes, expanding bundled payment initiatives, payment updates, and evolving payer expectations. Gain practical guidance to help your organization prepare early, strengthen compliance, reduce reimbursement risk, and confidently navigate the transition to 2027.

September 17, 2026

Trending News

Celebrate Lab Week with MedLearn! Sign up to win one year of our Laboratory All Access Pass! Click here to learn more →

Have a Medicare regulation question you’d love Dr. Hirsch to answer? Now is your chance! CLICK HERE to learn more→

Happy National Doctor’s Day! Learn how to get a complimentary webcast on ‘Decoding Social Admissions’ as a token of our heartfelt appreciation! Click here to learn more →

This Memorial Day, we honor those who gave all for our freedom. Take 20% off sitewide through May 29 with code MEMORIAL26 at checkout

CYBER WEEK IS HERE! Don’t miss your chance to get 20% off now until Dec. 1 with code CYBER25

CYBER WEEK IS HERE! Don’t miss your chance to get 20% off now until Dec. 2 with code CYBER24