PDPM for the Business Office: Payments and Billing

We’ve been busy working with our skilled nursing facility partners to prepare for the Patient Driven Payment Model (PDPM), a new case-mix classification system for classifying skilled nursing facility (SNF) patients beginning October 1, 2019. Not sure what information to provide your SNF office staff about the upcoming changes? Share this information on payments and billing under PDPM to help prepare your SNF business office for a successful transition:

PDPM will classify SNF patients in a Medicare Part A covered stay into payment groups under the SNF Prospective Payment System (PPS), replacing the Resource Utilization Group, Version IV (RUG-IV). The transition between RUG-IV and PDPM will be a “hard” transition, meaning that the two systems will not run concurrently. All days of service on or prior to September 30, 2019 will be billed under RUG-IV, and all days of service beginning October 1, 2019 will be billed under PDPM.

PDPM rates will be adjusted to reflect the Value-Based Purchasing adjustment factor for your facility. A reduction in the market basket adjustment will occur if your facility fails to report data required due to the SNF Quality Reporting Program.

How PDPM Determines Payment

The PDPM classification methodology utilizes a combination of six payment components to derive payment. Five of the components are case-mix adjusted to cover utilization of SNF resources that vary according to patient characteristics. These groups include Physical Therapy, Occupational Therapy, Speech-Language Therapy, Nursing and Non-Therapy Ancillary (NTA). There is also an additional non-case-mix adjusted component to address utilization of SNF resources that do not vary by patient.

Different patient characteristics are used to determine a patient’s classification into a case-mix group within each of the five case-mix adjusted payment components. An adjustment is applied to certain components, which will vary the per diem payment over the course of the stay. This adjustment factor is called the variable per diem (VPD) adjustment. PT, OT and NTA payment components are subject to a VPD adjustment. There are two distinct VPD adjustment schedules and factors; one for both the PT and OT components and one for the NTA component.

For each component, once a patient has been classified into a group, the case-mix index for that group is multiplied by the component base rate. Next, that product is multiplied by the applicable per diem adjustment factor to determine the case-mix adjusted payment associated with each of these payment components for each utilization day under PDPM. The payment for each case-mix adjusted components are then added together along with the non-case-mix component payment rate to create a patient’s total SNF PPS per diem rate under the PDPM.

Billing for PDPM

Providers will bill for services under PDPM using the Health Insurance Prospective Payment System (HIPPS) code that is generated from assessments with an Assessment Reference Date on or after October 1, 2019. The HIPPS code under PDPM is still a five-character code, as under RUG-IV. However, under RUG-IV, the first three characters represent the patient’s RUG classification and the last two characters are an assessment indicator (AI) code, to represent the assessment used to generate the patient classification. Under PDPM, the first character of the HIPPS code represents the patient’s PT component and OT component classification. The second character represents the patient’s SLP component classification. The third character represents the patient’s nursing component classification. The fourth character represents the patient’s NTA component classification. The fifth character represents the AI code.

The default code under PDPM, which may be used in cases where an assessment is late, is ZZZZZ. The default code under PDPM represents the sum of the lowest per diem rate under each PDPM component, plus the non-case-mix component. In cases where the default code is used, the variable per diem schedule must still be followed.


PDPM is the first significant change to the SNF reimbursement model in 20 years. Our skilled nursing facility division is staying up-to-date on all things PDPM-related, helping our partners prepare for a successful transition this October. Stay tuned for our next PDPM post on assessment and coding.


For additional details on the Patient Driven Payment Model, please visit the CMS PDPM Page

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