PDPM: We’ve Talked about SNFs – What about Hospitals?

In the past, changes to the payment system for Skilled Nursing Facilities (SNFs) impacted other health care sectors. When the Balanced Budget Act of 1997 (BBA) went into effect, many hospital dialysis patients had a hard time getting places in SNFs. Under Consolidated Billing at the time, the SNF was responsible for transportation to the dialysis center and the high cost of Epoetin Alfa (EPO), if administered in the SNF. It took some time before providers determined that the medication could be administered at the dialysis center and not have to be billed by the SNF on the Part A claim, and it took legislation to unbundle the costs of transport to the dialysis center for the SNF.

In October 2019, the Patient-Driven Payment Model (PDPM) will go into effect for SNF providers and it means a significant change for reimbursement in this sector. Currently, Medicare A payments are driven in large part by volume of services. In the SNF, volume is primarily the number of days and minutes of therapy provided to a resident; under PDPM, the focus shifts to resident need. Therapy, after October 1, 2019, will not impact the reimbursement for the SNF. Rather, verifiable, resident-specific characteristics, treatments, and diagnoses will combine for a daily payment rate. Additionally, there are payment changes (reductions) that automatically kick in over the course of a SNF stay.

What will PDPM mean for hospitals?

We don’t know exactly; that is the trouble with unintended consequences, you don’t know that they are going to happen, until they do. However, we can make some assumptions of changes that are likely to occur once PDPM becomes reality.


SNF payment will be based on patient characteristics and complexity. So, expect that residents with more comorbidities and moderate ADL scores to move up in referral preference over those residents with high rehab needs and fewer comorbidities.

ICD 10 Codes

Capturing ICD-10 codes will be essential for SNF providers. With only one required, early in the stay, assessment to determine Medicare A payment, SNFs will have a greater sense of urgency around receiving solid documentation describing the reason for hospitalization.  Be prepared for requests for quicker access to discharge summaries and clear documentation of any surgery performed during the hospital stay.


Don’t be surprised if diabetics with complications become a referral of choice. Under the new payment model, there are several diagnoses that add to the SNF per diem payments like diabetes, diabetic retinopathy, diabetic foot ulcer, wound infections, and morbid obesity.

Care Transitions

SNF care transitions might improve. Currently, there are many assessments that must be completed within defined timeframes or the SNF misses the opportunity to be paid for services rendered. Under PDPM, there are fewer required assessments. Once the learning curve levels off, SNF resources will likely be reallocated. If you have a collaborative or quality improvement initiative that crosses the care continuum, and that has languished, reach out again to your provider network. There may be more of an opportunity to collaborate on important shared improvement projects.


Be prepared for potential issues with readmissions. Although hospitals and SNFs share the goal of reducing rehospitalizations, PDPM will institute automatic payment reductions over the course of a Part A stay. One adjustment is for Non-Therapy Ancillaries (NTA); for three days post admit to SNF, the NTA component is multiplied by 3, after day 3, the multiplier ends. This increase actually is an improvement over the current payment model, but some providers might interpret the adjustment as an incentive to reduce length of stay.

PT and OT Components

Also, there is an 2% downward adjustment made to the PT and OT components for the daily rate starting on day 21 of a resident’s stay in a SNF. Again, SNFs may look to work towards a decreased length of stay.  Using the PPS Urban unadjusted rate as a guide, the decrease at day 21 equates to a $2.29 reduction. That reduction is for that resident for the next week or up to day 27 which is probably close to their traditional length of stay.  Hopefully, SNF teams will remember that Value Based Purchasing is still in effect and increased rehospitalization rates may impact their entire Medicare population negatively for the year.

Pam Kaiser
Pam Kaiser, MSN, RN
Vice President, Provider Services
PointRight Inc.


What can Hospitals do today?

Likely, there will be other consequences as the new SNF reimbursement program matures and we will have a much better understanding of what they are in early 2020. Until that happens, hospitals will need to anticipate increased outreach and communication from the SNFs and be ready to collaborate as the anticipated changes unfold.  A solid partnership with open communication lines goes a long way to ensuring success when managing through change that is predicted and change that is not.

About Pam Kaiser

Senior Healthcare Specialist Pam has enjoyed 27 years in the healthcare field. A second career for her, she worked her way from a certified nursing assistant through the long term care ranks to become a leader in clinical reimbursement and compliance for several large long term care providers. Pam has a B.A in Advertising from Michigan State University and an MSN in Community Health Nursing from the University of Southern Maine.