Patient-Driven Payment Model Update:

PDPM Calculation Using OBRA Assessments

Medicaid Disproportionate Share Hospital (DSH)

January 2019

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On May 15, 2020, CMS updated the minimum data set (MDS) 3.0 item sets (version 1.17.2) and related technical data specifications to support the calculation of Patient Driven Payment Model (PDPM) payment codes on Omnibus Budget Reconciliation Act (OBRA) assessments when not combined with the five-day skilled nursing facility (SNF) prospective payment system (PPS) assessment (i.e., stand-alone OBRA). The intent of this update is to support states evaluating the potential transition from a resource utilization group (i.e., RUG-III/RUG-IV) acuity-based resident classification system to one based on aspects of the PDPM for nursing facility reimbursement systems and required annual upper payment limit (UPL) demonstrations. This update was also communicated to Quality Improvement and Evaluation System (QIES) state coordinators on May 13, 2020, through QIES Technical Support Office (QTSO) memorandum number 2020-030.

What Do States Need to Know?

  • CMS will provide a PDPM Health Insurance Prospective Payment System (HIPPS) code for OBRA nursing home comprehensive (NC) and OBRA nursing home quarterly (NQ) assessment item sets. This will allow state Medicaid agencies to collect and compare RUG payment codes to PDPM codes for residents of all payer types (including Medicaid) which previously was not available. With this additional functionality, states will have the ability to evaluate the viability of PDPM as an alternative acuity calculation methodology for nursing facility reimbursement systems and required annual UPL demonstrations. States wanting to require PDPM calculation using OBRA assessments for Medicaid billing purposes (i.e., states that require a PDPM HIPPS calculation) must reply to the Centers for Medicare & Medicaid Services (CMS) at MDSTechIssues@cms.hhs.gov by June 30, 2020, with the following information:

    • State: [Name]
      PDPM on NC/NQ stand-alone OBRAs: Yes
      Effective Date: MM/DD/2020 (no earlier than 10/01/2020)
      End Date: MM/DD/YYYY (can be null)
      Contact Name and Phone number for Follow-up as Needed: [Contact]
  • CMS will implement two changes: (1) the MDS data management system (DMS) will be updated with a new feature to capture whether a state requires the PDPM to be calculated on NC and NQ stand-alone OBRA assessments; and (2) the MDS 3.0 technical data submission specifications will be updated to include a new control item for vendor software to indicate if the NC and NQ OBRA assessments should calculate the PDPM.
  • RUG-based HIPPS codes will continue to be calculated when selected in the MDS DMS as they are today, and MDS payment elements remain unchanged in the finalized MDS 3.0 Item set version 1.17.2. As such, RUG-based nursing facility reimbursement systems can continue to operate as they do today without the need for any additional Optional State Assessment (OSA) considerations. We believe RUG-based UPL calculations should continue as a viable UPL methodology option through at least the state fiscal year 2022 submission. However, states should continue working with their regional CMS representatives to determine appropriate submission methodologies.

What Actions Should States Consider if Requiring PDPM Data Elements Be Completed?

  • Collaborate with trade association representatives to engage MDS vendors to ensure required changes to software products are implemented. Technical data submission specifications to allow the calculation of PDPM along with updated and new edits are available here.
  • Evaluate any policy changes required to ensure providers complete all the necessary data elements for PDPM calculation. This process should include a state-specific review of relevant legislation that governs reimbursement, any associated administrative rules, Medicaid state plan amendments, provider manuals, etc.
  • Develop and implement provider communications and training related to appropriate MDS submission and completion. While the scope is yet to be determined, these changes will likely have administrative impact on providers. Early engagement will allow sufficient time for providers to update processes and procedures, and ensure completion of necessary data elements for PDPM calculation.
  • Evaluate current MDS processing systems and resident classification algorithms to determine the necessary system and processing changes to effectively capture the new PDPM data elements and HIPPS codes. Appropriately implementing required changes will be imperative in supporting state efforts to model the impact of PDPM on their Medicaid nursing facility reimbursement systems.