In October 2019, the Centers for Medicare & Medicaid Services (CMS) implemented a new reimbursement system for skilled nursing facilities (SNFs) under Medicare Part A, called Patient Driven Payment Model (PDPM). The new system replaced the prior Resource Utilization Group (RUG) system. In practice, RUGs paid SNFs higher rates if they provided more therapy services to residents. PDPM was intended to base rates, instead, on residents’ clinical and functional characteristics. PDPM was intended to be budget-neutral. A retrospective cohort study analyzing 2,065,809 Medicare beneficiaries admitted to SNFs between January 2018 and February 2020 finds that following the implementation of PDPM, SNFs reduced therapy services and increased the coding intensity (which the study found could reflect either “improved documentation or strategic coding behavior”). SNFs received higher Medicare reimbursement under PDPM, increasing, on average, by $664.47 for all resident categories. The study found no significant changes in rates of residents’ 30-day rehospitalization or mortality. For-profit SNFs “experienced a larger increase in SNF expenditures.”
An invited commentary suggests that the study’s key findings – PDPM led to increased Medicare spending of $1.2 billion but no change in residents’ rehospitalization or mortality – “underscore concerns that higher spending on postacute care in SNFs does not necessarily translate to better care quality.” For example, although direct care staffing improves care quality, the lack of resident improvement following implementation of PDPM suggests that SNFs did not actually invest in staff. In addition, increased coding intensity may not reflect residents’ actual needs in the SNF. Finally, residents may not be getting the rehabilitative services they need under PDPM. The commentary suggests that PDPM, in multiple ways, may not adequately address patients’ needs to return to pre-hospitalization baseline functional status, complete therapies, and prevent postacute complications. It proposes changes to PDPM to better address residents’ needs, including more directly tying Medicare reimbursement rates to SNFs’ staffing levels and requiring that residents be seen by physicians or advance practice clinicians withing three days of admission (and increasing reimbursement for those visits).
References:
Fangli Geng, et al, “The Patient Driven Payment Model, Skilled Nursing Facility Coding Intensity, and Medicare Expenditures,” JAMA Internal Medicine (Jul. 21, 2025)
Amy Stulick, “PDPM Linked To Increased Costs, Coding Intensity; Reforms Could Focus on Nursing Home Staffing Levels,” Skilled Nursing News (Jul. 21, 2025).
Kira L. Ryskina, et al, “Medicare’s Patient Driven Payment Model for Skilled Nursing Facilities – Getting What We Pay For,” JAMA Internal Medicine (Jul. 21, 2025) (invited commentary)
July 31, 2025 – T. Edelman