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Segmenting accounts receivable reports: How to use your reports to understand where you are

11.28.17

In a previous blog post, “Six Steps to Gain Speed on Collections”, we discussed the importance of regular reviews of long-term care facility financial performance indicators and benchmarks, and suggestions to speed up collections. We also noted that knowledge of your facility’s current payer mix is critical to understanding days in accounts receivable (A/R).

The purpose of a regular A/R review is to facilitate prompt and complete collections by identifying trends and potential system issues and then implementing an action plan. Additionally, an A/R review is used to report on certain regulatory compliance requirements, and could help management identify staff training and development needs. Here are some tips on how to make your review both effective and efficient.

  • Practice professional skepticism. Generate your own A/R reports. While your staff may be competent and trustworthy, it is a good habit to get information directly from your billing system.
     
  • Understand your revenue cycle calendar. A common approach is to generate A/R reports at the end of each month. While you can generate reports at any time, always ask your staff whether all recent cash receipts and adjustments have been posted.
     
  • Know your software. Billing software usually has a few pre-set A/R reports available, and you can customize some of them to simplify your review and analysis. Consult with your IT department or software vendor to gain a better understanding of available report types, parameters, options and limitations. Three frequently-used reports are:

    A/R Transaction Report: This report shows selected transaction details (date, payer, account, transaction type) and can help you understand changes in those parameters. Start with a “summary by type” then drill down to further detail if needed. Run and review this report monthly to identify any unexpected write-offs or adjustments in the prior period.

    A/R Aging Report: This report breaks A/R data into aging buckets (current, 30, 60, 90, etc.). It is used to fine-tune collection efforts and evaluate a bad debt allowance (as older balances are less likely to be collected). Using a higher number of buckets will provide more detailed information, and replacing “age” of accounts with a “month” label will make it easier to see trends in month-to-month changes. Your facility’s payer mix will determine a reasonable “Days in A/R” benchmark. Generally, you should see the most dramatic drop in open accounts within 30 days for Medicare, Medicaid and private payers; and within 60-90 days for other payers. Focus your staff’s attention on balances nearing 300 days, as many insurers have a claim filing limit of one year from the service date. Develop an action plan to follow up within two to three weeks.

    Unbilled Claims Report: This report shows un-submitted claims. Discuss unbilled claims with your staff, understand why they are unbilled to reduce the number of un-submitted claims, and develop an action plan for submission to responsible parties.
     
  • Understand available report formats. Billing software usually offers the option to run reports in different file formats (web, PDF, Excel, etc.). Know your options and select the one you are most comfortable with. We recommend Excel for easy data analysis and trending.
     
  • Segment, segment, segment — and look for trends! Data segmentation and filtering is the best approach to effective and efficient A/R review. At a minimum, you should be separating Medicare A, Medicare B, Medicare Advantage, Medicaid, private pay, pending/presumed Medicaid and any other payers with a particularly high volume of claims. The differences in timing of billing, complexity, compliance requirements, benchmarking and submission of claim methods warrant a separate, more-detailed review of claims. Here are some examples of what to look for.

    Medicare: An open claim will hold payments for all following claims within that stay. Instruct your billing team to ensure claim submission, and review any rejected or suspended claims. Carefully analyze any Medicare credits. Small credit and debit balances may indicate errors in the rate-setting module of your software. Review for rate changes, contractual adjustments and sequestration set up. Review any credit balances over $25 for potential overpayment. These credits have to be corrected in that quarter or listed on your quarterly credit balance report to Medicare. Balances of $160 or more may indicate incorrectly calculated co-pay days, while balances over $200 may indicate billing for an incorrect number of days. Medicare has a one-year limit on submitting claims so act promptly to resolve any balances over 300 days.

    Medicaid: Open balances may indicate eligibility gaps, changes in coverage levels, rate set-up errors or incorrect classification as primary or secondary payer. This payer also has a one-year limit on submitting claims. Again, act promptly to resolve any balances over 300 days.

    Pending/Presumed Medicaid: Medicaid application processing times vary by state. Normally eligibility is determined within a few months at the most. Open claims older than 120 days should be investigated promptly.
     
  • Filter data for the highest and lowest balances. Focus on your five to ten highest balances and work with staff to resolve. Discuss reasons for any credit balances with staff, as regulations often require a prompt refund or claim adjustment. Credit balances could also indicate incorrectly posted payments (to the wrong patient account or service date). Instruct staff to routinely review and resolve credits to prevent collection activities on paid-off accounts. 

Ask questions, follow up and recognize good work. If you notice an improvement in your facility’s A/R report, make sure you recognize team and individual efforts. If improvements are slow to come, discuss obstacles with staff, refine your A/R reporting, and review the plan as needed.

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Cost increases and labor issues have contributed to the rise of outsourcing as an option for senior living and health care providers.  While outsourcing of all types is a growing trend — from the C-suite to food service, it is a decision that should be considered carefully, as lack of planning could result in significant long-lasting financial, public relations and personnel losses. Let’s examine the outsourcing of billing services and collections.

If you are concerned with efficiencies and focusing on your core business needs — nursing care and rehabilitation — then your facility owners and management may have or are currently considering outsourcing one or both end stages of the revenue cycle.

There are some compelling reasons to outsource.

When choosing to outsource, your facility can reduce or even eliminate the challenge of keeping up with increasing complexities of medical billing, staff development and retraining, software costs, and workforce challenges. Smaller facilities can mitigate billing office resource shortages caused by staff vacations, medical leaves and turnover via outsourcing portions of their revenue cycle processes.

Because of a variety of software options, extensive coding and evolving reimbursement policies, professional billing and collection companies may be more efficient, delivering a stronger cash flow by reducing the rate of denied or rejected claims and assuring accurate coding. As facilities normally pay either a “per claim” fee or a percentage of their patient service revenue for this service, the facility’s cost fluctuates with changes in census or payer mix. Facilities may serve their customers better by decreasing insurance denials and reducing balance transfers to patients.

Outsourcing may help organizations to focus on their core business: senior living services.

Your facility should assess your organization’s readiness, fit and contract limitations prior to outsourcing. Here are some things to consider.

1. Be accountable. It is your facility’s ultimate responsibility to comply with all applicable rules and regulations, including HIPAA. And while signing a business associate agreement is a step in right direction, it may not guarantee peace of mind.

  • Ask a potential vendor about data transmission, storage, sharing, access and destruction policies, as well as processes designed to monitor compliance. Question any recent breaches or unauthorized access incidents — how were they handled? As HIPAA non-compliance and unauthorized access to protected health information (PHI) may result in financial penalties and bad publicity, you should evaluate the need to consult with an expert.
  • Ensure the vendor knows your state’s facility licensing regulations. For example, some states prohibit charging patients or residents any collection fees. Some states or payers require refunds for any overpayments to within certain defined periods. A good vendor will meet your state’s regulations. Ask to review their standard collection forms and collection procedures and protect your organization from unexpected non-compliance tags. 

2. Communicate. Discuss what information they require, when, in what format, and how they will make corrections. In-house billing staff can normally access a resident’s medical file, whether electronic or paper, or inquire with the facility operations team regarding a particular claim. This is not the case with an external vendor. 

  • To outsource effectively, you need to designate an in-house position to respond to missing information requests promptly. Facilities operating on web-based medical records software should evaluate the risks of granting a billing vendor even limited access to residents’ electronic medical files.
  • Review contract terms for any up charges assessed by the vendor if your facility can’t respond to information requests in a timely fashion. 

3. Understand and agree upon the scope of the contract. Contract scope misunderstanding can have long-lasting financial implications for the facility, and result in increased bad debt. Your management team should compile a list of assumptions and agreement terms not stated clearly in the contract, and address them in a meeting before accepting the terms. At a minimum, get answers to these questions:

  • Is the vendor submitting bills for all types of payers, levels of care and billing forms, including private, private long-term care insurance, adult day and outpatient, or only certain electronic claims?
  • Is the vendor responsible for notifying your organization of any delays with claim processing, payer requests for supporting medical records and any other identified administrative requests and rejections? If so, how fast and in what format?
  • Is the vendor responsible for assisting with regulatory compliance reporting, such as required data for a cost report preparation, audit, etc.?
  • What minimum quality assurance steps does the vendor apply when generating and processing claims, and how do they remedy identified issues?
  • Is the vendor only submitting bills or are they also working on collections?
  • Is the facility or a vendor responding to resident requests for additional information or questions about the billing statements?

4. Maintain alignment with the organization’s philosophy and vision. As with any other area of operations you consider outsourcing, outsourcing billing and collections requires careful examination of its impact on customer service and community relations. If a vendor produces co-pay and private pay invoices or statements, will you have control over the format and presentation of these mailings? If a vendor is engaged to perform collections follow up, your management team needs to understand collections procedures and methods used and ensure they are a good fit with your mission.

5. Set goals and benchmarks. Your management should analyze days in accounts receivable, accounts receivable aging trends, and cash as a percent of net revenue monthly, and then meet with the vendor promptly to understand the causes of any undesired trends and work on remedial plan. 

6. Understand your organization’s reasons for outsourcing. If your facility struggles with completing resident pre-admission screening, obtaining prior authorizations, or staying on top of Medicaid applications and recertifications — stop. Outsourcing is very unlikely to remedy these situations and could even make them worse. We recommend seeking the assistance of an experienced revenue cycle or process improvement consultant before outsourcing any portion of the billing and collections process.

The BerryDunn Senior Living team welcomes your feedback, and is always one phone call or email away, should your organization need to take a deeper look at revenue cycle and process improvement opportunities.

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Can outsourcing increase revenues and reduce cycle time? Yes, if it's the right fit

Follow these six steps to help your senior living organization improve cash flow, decrease days in accounts receivable, and reduce write offs.

From regulatory and reimbursement rule changes to new software and staff turnover, senior living facilities deal with a variety of issues that can result in eroding margins. Monitoring days in accounts receivable and creeping increases in bad debt should be part of a regular review of your facility’s financial indicators.

Here are six steps you and your organization can take to make your review more efficient and potentially improve your bottom line:

Step 1: Understand your facility’s current payer mix.

Understanding your payer mix and various billing requirements and reimbursement schedules will help you set reasonable goals and make an accurate cash flow forecast. For example, government payers often have a two-week reimbursement turn-around for a clean claim, while commercial insurance reimbursement may take up to 90 days. Discovering what actions you can take to keep the payment process as short as possible can lessen your average days in accounts receivable and improve cash flow.

Step 2: Gain clarity on your facility’s billing calendar.

Using data from Step 1, review (or develop) your team’s billing calendar. The faster you send a complete and accurate bill, the sooner you will receive payment.

Have a candid discussion with your billers and work on removing (or at least reducing) existing or perceived barriers to producing timely and accurate bills. Facilities frequently find opportunities for cash flow optimization by communicating their expectations for vendors and care partners. For example, some facilities rely on their vendors to provide billing logs for therapy and ancillary services in order to finalize Resource Utilization Groups (RUGs) and bill Medicare and advantage plans. Delayed medical supply and pharmacy invoices frequently hold up private pay billing. Working with vendors to shorten turnaround time is critical to receiving faster payments.

Interdependencies and areas outside the billers’ control can also negatively influence revenue cycle and contribute to payment delays. Nursing and therapy department schedules, documentation, and the clinical team’s understanding of the principles of reimbursement all play significant roles in timeliness and accuracy of Minimum Data Sets (MDSs) — a key component of Medicare and Medicaid billing. Review these interdependencies for internal holdups and shorten time to get claims produced.

Step 3: Review billing practices.

Observe your staff and monitor the billing logs and insurance claim acceptance reports to locate and review rejected invoices. Since rejected claims are not accepted into the insurer’s system, they will never be reflected as denied on remittance advice documents. Review of submitted claims for rejections is also important as frequently billing software marks claims as billed after a claim is generated. Instruct billers to review rejections immediately after submitting the bill, so rework, resubmission, and payment are timely.

Encourage your billers to generate pull communications (using available reporting tools on insurance portals) to review claim status and resolve any unpaid or suspended claims. This is usually a quicker process than waiting for a push communication (remittance advice) to identify unpaid claims.

Step 4: Review how your facility receives payments.

Challenge any delays in depositing money. Many insurance companies offer payment via ACH transfer. Discuss remote check deposit solutions with your financial institution to eliminate delays. If the facility acts as a representative payee for residents, make sure social security checks are directly deposited to the appropriate account. If you use a separate non-operating account to receive residents’ pensions, consider same day bill pay transfer to the operating account.

Step 5: Review industry benchmarks.

This is critical to understanding where your facility stands and seeing where you can make improvements. BerryDunn’s database of SNF cost reports filed for FY2016 shows:

Maine New Hampshire Massachusetts
Avg. days in AR 50.27 69.09 52.97
Median days in AR 44.70 44.70 48.23


Clearly some facilities are doing it very well, while some need to take corrective action. This information can also help you set reasonable goals overall (see Step 1) as well as payer-specific reimbursement goals that make sense for your facility. Review them with the revenue cycle team and question any significant variances; challenge staff to both identify reasons for variances and propose remedial action. Helping your staff see the big picture and understanding how they play a role in achieving department and company goals are critical to sustaining lasting change AND constant improvement.

Step 6: Celebrate successes!

Change, even if it brings intrinsic rewards (like decreased days in accounts receivable, increased margin to facilitate growth), can be difficult. Acknowledge that changing processes can be tough and people may have to do things differently or learn new skills to meet the facility’s goal. By celebrating the improvements — even little ones — like putting new processes in place, you encourage and engage people to take ownership of the process. Celebrating the wins helps create advocates and lets your team know you appreciate their work. 

To learn more about revenue cycle optimization at BerryDunn, go here

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Six steps to gain speed on collections

Proposed House bill brings state income tax standards to the digital age

On June 3, 2019, the US House of Representatives introduced H.R. 3063, also known as the Business Activity Tax Simplification Act of 2019, which seeks to modernize tax laws for the sale of personal property, and clarify physical presence standards for state income tax nexus as it applies to services and intangible goods. But before we can catch up on today, we need to go back in time—great Scott!

Fly your DeLorean back 60 years (you’ve got one, right?) and you’ll arrive at the signing of Public Law 86-272: the Interstate Income Act of 1959. Established in response to the Supreme Court’s ruling on Northwestern States Portland Cement Co. v. Minnesota, P.L. 86-272 allows a business to enter a state, or send representatives, for the purposes of soliciting orders for the sale of tangible personal property without being subject to a net income tax.

But now, in 2019, personal property is increasingly intangible—eBooks, computer software, electronic data and research, digital music, movies, and games, and the list goes on. To catch up, H.R. 3063 seeks to expand on 86-272’s protection and adds “all other forms of property, services, and other transactions” to that exemption. It also redefines business activities of independent contractors to include transactions for all forms of property, as well as events and gathering of information.

Under the proposed bill, taxpayers meet the standards for physical presence in a taxing jurisdiction, if they:

  1.  Are an individual physically located in or have employees located in a given state; 
  2. Use the services of an agent to establish or maintain a market in a given state, provided such agent does not perform the same services in the same state for any other person or taxpayer during the taxable year; or
  3. Lease or own tangible personal property or real property in a given state.

The proposed bill excludes a taxpayer from the above criteria who have presence in a state for less than 15 days, or whose presence is established in order to conduct “limited or transient business activity.”

In addition, H.R. 3063 also expands the definition of “net income tax” to include “other business activity taxes”. This would provide protection from tax in states such as Texas, Ohio and others that impose an alternate method of taxing the profits of businesses.

H.R. 3063, a measure that would only apply to state income and business activity tax, is in direct contrast to the recent overturn of Quill Corp. v. North Dakota, a sales and use tax standard. Quill required a physical presence but was overturned by the decision in South Dakota v. Wayfair, Inc. Since the Wayfair decision, dozens of states have passed legislation to impose their sales tax regime on out of state taxpayers without a physical presence in the state.

If enacted, the changes made via H.R. 3063 would apply to taxable periods beginning on or after January 1, 2020. For more information: https://www.congress.gov/bill/116th-congress/house-bill/3063/text?q=%7B%22search%22%3A%5B%22hr3063%22%5D%7D&r=1&s=2
 

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Back to the future: Business activity taxes!

On October 1, 2019, the Medicare Skilled Nursing Facility (SNF) payment system will transition from RUGS-IV to the Patient Driven Payment Model. This payment model is a major change from the way SNFs are currently reimbursed. Under PDPM, International Classification of Disease, Tenth Edition (ICD-10) diagnosis codes and other patient clinical characteristics, such as the patient’s activities of daily living (ADL) and recent surgeries, will be used as the basis for patient classification and reimbursement.

Resident days up to September 30 will be paid under RUGS–IV and resident days from October 1 forward will be paid under PDPM. This includes patients admitted prior to September 30. There will be no transition period. The change to PDPM represents the most significant change to Medicare A SNF PPS reimbursement since its implementation in 1998. To ensure a smooth transition, prevent denials, and avoid resulting cash flow disruptions, your revenue cycle team needs to be prepared for PDPM. This article outlines steps your facility can take to prepare for PDPM.

Know your current revenue cycle performance

In order to know how you are performing under PDPM, you need to know your current revenue cycle performance. Are there current processes delaying the completion of the Minimum Data Set (MDS)? What is your current case mix? How long does it take the facility to close the month and generate bills? If you have inefficiencies in your workflow and processes, now is the time to fix them. Are there open lines of communication between financial and clinical operations? Financial and clinical must work together to make PDPM work for the facility’s long-term sustainability.

Facilities should be benchmarking their key revenue cycle indicators including, but not limited to, accounts receivable aging comparisons, days in accounts receivables, and collections as a percentage of revenues. Benchmarking can help a facility detect issues early on and resolve them before they become a bigger problem.

Providers will need to communicate with IT providers to be sure they configure electronic health record systems and financial systems for compliance with PDPM. MDS software must be robust enough to help MDS coordinators manage the new process or else facility reimbursement will be affected.

Understand how ICD-10 coding impacts reimbursement under PDPM

Do you know how diagnoses are currently captured on your facility’s MDS? Most facilities are not tracking or monitoring ICD-10 diagnosis codes, as the majority of diagnoses don’t impact quality measures or reimbursement. The implementation of PDPM will require the use of ICD-10 diagnosis codes, which are more detailed and call for accurate documentation. For SNF providers, this means the old ways of documenting resident assessments on the MDS won’t work under the new model.

One of the most important changes under PDPM is that ICD-10 diagnoses will be the key drivers for reimbursement. ICD-10 diagnosis codes will be used to place a resident into one of 10 PDPM clinical categories, that will determine the payment components for physical therapy (PT), occupational therapy (OT), speech (SLP), and skilled nursing services, as well as non-therapy ancillaries (NTA).

How can your facility prepare for ICD-10 diagnosis coding?

  • Determine the diagnoses codes your facility uses most frequently.
  • Compare the codes you most frequently use to the CMS PDPM Clinical Category Mapping
  • If codes map to “Return to Provider” you need to review the patient record to find a more specific primary diagnosis
  • Make sure you capture the resident’s comorbidities on I8000 to ensure appropriate payment for Non-Therapy Ancillaries (NTA).
  • Aftercare codes will be the primary diagnosis if that is the primary reason for the admission.

Preparing for ICD-10 coding requires a coordinated care team. Communicate with anyone who contributes to the diagnosis documentation, including the physician, medical director, PT/OT/SLP, and other specialty care professionals such as wound specialists or dietitians to understand why the resident is there. Identifying the reason the resident is there and assigning the correct diagnosis code will help a facility to be successful with PDPM.

Review the changes being made to the Minimum Data Set (MDS)

In early January, CMS issued a draft version of the MDS 3.0. The draft indicates that there are more than 80 items will be added, deleted, or changed for PDPM implementation. There are 40 new items that will impact reimbursement rates. These changes fall into three categories:

  1. Streamlined assessment policies 
  2. New PDPM assessment item sets
  3.  Additions to MDS items

The MDS assessments will be more streamlined under PDPM. There are only two required assessments: the five-day assessment and the discharge assessment. The five-day assessment must be completed between days one and eight and will be effective for the entire length of stay unless an optional assessment is performed. The 14-day, 30-day, 60-day and 90-day assessments have been discontinued. The discharge assessment will not impact reimbursement―however, this is where therapy will be reported. Facilities also have the option to perform an interim payment assessment if the patient’s clinical characteristics change. This assessment must be completed within 14 days of the change in characteristics and can affect reimbursement.

The MDS has two new item sets: 1) Interim Payment Assessment (IPA), used for optional assessment if a patient’s characteristics change; and 2) Optional State Assessment (OSA), which will be used by states where RUGS-IV is the basis for Medicaid payments. The IPA should only be used if a patient’s clinical characteristics are not expected to change in the short term.

Significant changes to MDS items are in the following sections:

  1. Section I: SNF Primary Diagnosis – Item I0020B will allow providers to report, using an ICD-10 diagnosis code, the patient's primary SNF diagnosis. This item will ask, “What is the primary reason the patient is being admitted into the SNF?”
  2. Section J: Patient Surgical History – To capture information that may be relevant to classifying a resident in a PDPM clinical category, J1000 – J5000 identifies major surgeries from the most recent hospital stay.
  3. Section O: Discharge Therapy Items – Items 0425A1-O0425C5 will be added to Section O to document therapy delivery information. Therapy delivery will only be reported on the discharge MDS and must include information by each discipline, mode of therapy, and minutes received by the patient. Group and concurrent therapy cannot exceed 25% of total therapy.
  4. Section GG: Interim Performance – This section is the basis for the resident’s functional analysis. Section GG is more standardized and has more comprehensive measures of functional status. Providers need to be sure to complete Section GG in its entirety as missing responses will receive zero points for the functional score calculation. Section GG is taking on an increased importance under PDPM, as CMS’s goal for this section is to standardize assessment items across payment settings.

Over the years, the MDS has primarily been utilized as an assessment tool to drive the plan of care with little impact to reimbursement. With implementation of PDPM, and the shift from therapy-driven reimbursement to clinical characteristics as the basis for reimbursement, the MDS will be vital to obtaining proper reimbursement. You may need to revise the systems you currently have in place to make sure that the information critical to reimbursement is recorded accurately on the five-day assessment. Missing an item on the five-day MDS will impact reimbursement for the entire resident stay.

Skilled Nursing Facilities will need internal processes, workflows, and staff training in place well before October 1, 2019, in order to be successful under PDPM. Preparation for PDPM is key and it will take teamwork from the entire facility. Focusing on each of the areas outlined above—even if it is just to confirm that you’ve addressed the issue—will put you in good shape to meet the looming deadline. Without a doubt, there will be things that arise at the last minute or processes that don’t work as planned. Don’t panic. We can help you address issues and problems or work with you to create a new workflow process. Just give us a call.

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Is your revenue cycle team ready for Medicare's Patient Driven Payment Model (PDPM)?

Effective October 1, 2019, Skilled Nursing Facilities (SNF)s will be reimbursed under a new payment system.

The existing case mix classification group, Resource Utilization Group IV (RUG- IV) will be replaced with a new case mix model, the Patient Driven Payment Model (PDPM). CMS has indicated factors leading to the change in the payment system include over utilization of therapy and incentives for longer lengths of stay.

Background and overview

PDPM is one of the initiatives resulting from the Improving Medicare Post-Acute Care Transformation Act of 2014 (the IMPACT Act). The IMPACT Act requires standardized patient assessment data across post-acute care (PAC) settings to enable:

Comparisons of quality and information exchange across post-acute settings
Improvement of Medicare beneficiary outcomes through shared-decision making, care coordination, and enhanced discharge planning
Non-therapy ancillaries (NTA) payment is determined by a base rate and separate CMI. NTA is a variable payment, paid at 300% for the first three days, and then reduced to 100% after day four.
Payments based on patient characteristics

PDPM will be a significant shift in how SNFs are paid, and facilities need to start preparing for the change. PDPM:

Removes therapy minutes as a determinant of payment and creates a new model where payment is linked to differences in clinical characteristics
Creates a separate payment component for non-therapy ancillaries (NTA), using resident characteristics to predict utilization of these services
Focuses on clinically relevant factors and ICD-10 diagnosis codes to determine payment


Value Base Purchasing (VBP), SNF Quality Reporting Program and PDPM are all initiatives advancing the IMPACT act and moving payment from fee for service to value. SNFs have been reporting quality measures since May 2017, and are subject to a 2% (VBP) payment adjustment if they don’t submit the quality measures.

In October of 2018, SNFs began receiving a payment adjustment based on hospital readmissions under the SNF Quality Reporting Program. The implementation of PDPM will be one more step towards moving reimbursement for care from volume to value.

PDPM shifts payment to residents with complex clinical needs, and targets the resources towards beneficiaries with diverse care needs. Its goal is to aim care at the more medically complex patients. There are six components in the daily rate:

Physical therapy
Occupational therapy
Speech therapy
Nursing
Non-therapy ancillary services
Non-case mix


The components are all taken from the five-day minimum data set (MDS), and assigned a daily rate based on that components case mix index (CMI). Therapy is broken out into the three disciplines (physical, speech and occupational), with each having its own base rate and case mix index:

Therapy payment is a variable payment paid at 100% for the first 20 days, and then reduced by 2% every seven days. 
Nursing services payment is a base rate with a separate case mix, with no variable payment.
Non-therapy ancillaries (NTA) payment is determined by a base rate and separate CMI. NTA is a variable payment, paid at 300% for the first three days, and then reduced to 100% after day four.


Under PDPM, payment is based on each aspect of the resident’s care. Payment is still a per diem payment?however, it is adjusted to reflect varying costs throughout the resident’s stay.

The admissions process is going to be critical to ensure appropriate payment. Accurate coding of patient conditions must occur at the time of admission, and while the information coming from the hospital will be helpful, facilities cannot rely on hospital information when coding the MDS. Diagnosis and accurate coding are critical to assigning the appropriate case mix group to make certain there is adequate payment for the stay.

Patients over Paperwork

PDPM emphasizes patients over paperwork, as it eliminates the current (MDS) schedule. The new model only requires an assessment at five days and a final discharge assessment.

Facilities can perform an optional interim payment assessment within 14 days of a change in the resident’s characteristics. An interim payment assessment will not reset the NTA and therapy payments to day one. CMS is still working on guidance as to how you will need to report this.

If a patient leaves the facility and is away from the facility for less than three days, then the stay is considered the same admission. If the resident is away for more than three days, the admission is considered a new admission, and the NTAs and therapy payments are returned to day one payment.

The MDS has been an important tool in driving resident care over that last 30 years, and is relied upon for reimbursement and quality data. With the implementation of PDPM, the MDS will become even more important to reimbursement. As payment shifts from therapy focus to clinical characteristics focus, there will need to be more detailed documentation to support the medical condition. Under RUGs, there are approximately 20 items on the MDS which impact reimbursement?under PDPM, there will be approximately 160 items which impact reimbursement.

The implementation of PDPM will increase the importance of the role of the MDS coordinator. Facilities need to invest in a strong MDS coordinator to ensure appropriate assessment and documentation that support medical conditions?which drive payment.

While therapy minutes will no longer drive payment under PDPM, you still have to monitor them. Therapy will be reported on the final discharge MDS, separately by discipline. MDS will report therapy minutes by one-to-one sessions, concurrent, and group therapy. Total therapy delivered concurrently and/or in group sessions cannot be more than 25% of total therapy time.

Given the depth and breadth of the changes to the payment system, facilities need to begin preparing for the change now. What can you do in prepare for PDPM?

Educate yourself so you can plan for the transition to PDPM:

Know what is driving your current payments
Assess the skills of your staff and know your gaps
Attend education sessions

Train or retrain MDS nurse and billers on ICD-10 and the MDS
If you don’t already have care teams, form care teams
Determine who with in the facility should be on care teams


Align resources to be sure you are ready to bill on October 1, 2019:

Determine your hiring and training needs
Look at therapy contracts, how do they align with new payment model
Talk to software vendors to be sure they will be ready for the new MDS and ICD-10


For more information or assistance on Patient Driven Payment model contact Lisa Trundy-Whitten. Look for additional BerryDunn articles on the Patient Drive Payment Model releasing in the coming months

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New patient driven payment model from CMS―What to expect and what to do

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