As Home Health Providers Adapt to PDGM, PDPM Proving to be Unsustainable

Six months into the new payment model for skilled nursing providers, the Patient-Driven Payment Model (PDPM) is proving to be more costly than the Centers for Medicare & Medicare Services (CMS) initially anticipated.

PDPM claims patterns could give home health providers a glimpse of what’s in store with the Patient-Driven Groupings Model (PDGM). 

Broadly, PDPM — which launched on Oct. 1 — is PDGM’s skilled nursing counterpart. Both payment overhauls enacted sweeping changes to the way that providers are reimbursed under Medicare, including the elimination of volume-based therapy reimbursement.

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So far, the early returns for PDPM have been mostly favorable for skilled nursing facilities (SNFs), with revenue gains checking at 5% to 6%, according to reports from Home Health Care News sister site Skilled Nursing News.

The possibility that revenue gains may be even higher than early numbers suggest could eventually lead to some form of an adjustment from CMS, as the payment overhaul was intended to be budget neutral.

“It’s just not sustainable with this many winners,” Luann Gutierrez, managing director at Greystone & Co., said during a panel discussion at the National Investment Center for Seniors Housing & Care (NIC) spring investment conference in San Diego. SNN covered the event.

The gains seen in the skilled nursing world are an example of how major payment overhauls tend to be unpredictable, as experts originally projected that PDPM would result in a mix of reimbursement winners and losers.

And the same thing could play out with PDGM.

“While CMS has made their best effort to make this a revenue neutral scenario, there’s always the risk that it ends up, you know, reducing total reimbursement or possibly increasing total reimbursement,” David Kaplan, a director at S&P Global Ratings, told HHCN during a recent interview. “From a credit perspective, we always think about uncertainty as a negative.”

S&P Global Ratings — a part of S&P Global Inc. (NYSE: SPGI) — is one of the world’s largest providers of independent credit risk research.

Apart from reimbursement, home health providers have also been able to look to the skilled-nursing industry and PDPM as an early indicator of PDGM’s potential impact on therapy utilization. 

In October, HHCN reported a drastic drop in therapy utilization by skilled nursing providers, along with massive layoffs.

Overall, thousands of physical, occupational and speech therapists who worked at SNFs were reportedly let go, with one major operator, Genesis HealthCare (NYSE: GEN), laying off close to 600 rehab employees post-PDPM.

Early on, 52% of home health providers claimed that PDGM would force a decrease in therapy utilization. Since the launch of PDGM, several therapists have said they’ve been laid off from home health agencies or had to cut back on visits.

Some experts say there has been a decrease in therapy volume, but not staff.

“A number of larger companies indicate little change in terms of their volume of workers,” National Association for Home Care & Hospice (NAHC), President Bill Dombi, previously told HHCN. “The volume of visits coming from each worker may have changed. Their compensation methodologies may have changed, too, because for many years, per visit compensation was the modality of choice and incentivized productivity.”

Additional reporting by Alex Spanko

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