The Revenue Cycle for Skilled Nursing Facilities

Original story posted on: June 17, 2019

Big ICD-10 changes coming soon to the SNF world.

In July 2018, the Centers for Medicare & Medicaid Services (CMS) finalized a new case-mix classification model, the Patient-Driven Payment Model (PDPM), which, effective beginning Oct. 1, 2019, will be used under the Skilled Nursing Facility (SNF) Prospective Payment System (PPS) for classifying SNF patients in a covered Part A stay. PDPM will replace the current case-mix classification system, the Resource Utilization Group, Version IV (RUG-IV).    

The introduction of the PDPM marks arguably the biggest reimbursement system change for SNFs in 20 years! ICD-10 coding should be of high priority for all right now, as we await the rollout of the PDPM. Diagnoses are driving reimbursement in the SNF market. PDPM is designed to address concerns that a payment system based on the volume of services provided creates inappropriate financial incentives. This revised payment methodology is driven by the patient’s clinical characteristics rather than the number of therapy minutes provided. Other significant elements of the PDPM include the use of the Minimum Data Set (MDS) to track the delivery of therapy services and a limitation on the use of group and concurrent therapy, combined at 25 percent of all therapy provided to the patient, per discipline.

Under RUG-IV, most patients are classified into a therapy payment group, which primarily uses the volume of therapy services provided to the patient as the basis for payment classification. This creates an incentive for SNF providers to furnish therapy to SNF patients regardless of each patient’s unique characteristics, goals, or needs. PDPM eliminates this incentive and improves the overall accuracy and appropriateness of SNF payments by classifying patients into payment groups based on specific, data-driven patient characteristics, while simultaneously reducing the administrative burden on SNF providers.  

ICD-10 is important in that it reports data about SNF residents, and that data is used for trending and to identify cost drivers. Diagnoses also are used in value-based purchasing and the quality reporting program to identify exclusions, risk adjusters, and planned readmissions.

There are two ways in which ICD-10 codes will be used under PDPM. First, providers will be required to report on the medical decision-making (MDS) regarding the patient’s primary diagnosis for each SNF stay. Each primary diagnosis will be mapped to one of 10 PDPM clinical categories, representing groups of similar diagnosis codes, which then will be used as part of the patient’s classification under the physical therapy (PT), occupational therapy (OT), and speech-language pathology (SLP) components.    

Second, ICD-10 codes are used to capture additional diagnoses and comorbidities the patient has, which can factor into the SLP comorbidities that are part of classifying patients under the SLP component and the non-therapy ancillary (NTA) comorbidity score that is used to classify patients under the NTA component. The ICD-10 clinical category mapping that will be used under PDPM is available online at

In PDPM, each diagnosis maps to a clinical category, which assigns a case-mix group, which translates to a case-mix index, which translates to reimbursement – hence the need to create clinical documentation improvement (CDI) programs for the SNF industry.

Remember that there are five different components to reflect the individual needs or characteristics of resident care. Payment is based on the case-mix index for each component; the diagnosis affects the rate for each. Comorbidities also impact the non-therapy ancillary rate.  

Health information management (HIM) professionals advising SNFs should identify the most frequently used diagnoses at each facility and map them to the clinical categories. If they are not falling where you think they should, you need to identify why and review the codes for specificity. Coding guidelines dictate to code to the highest level of specificity. 

If an unspecified diagnosis is listed, the coder or CDI specialist needs to query the provider for clarification. Make sure that the correct seventh character is being used for injuries and poisonings, and to note when aftercare codes (Z codes) are used. All diagnoses that are coded must be supported by provider documentation. If there is a question, the provider must be queried.

This is a game-changer for SNFs, with a new focus on the importance of clinical documentation. So now you will see CDI emerging in the SNF market. There are always new and emerging opportunities for HIM, coding, and CDI professionals!

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Disclaimer: Every reasonable effort was made to ensure the accuracy of this information at the time it was published. However, due to the nature of industry changes over time we cannot guarantee its validity after the year it was published.
Bonnie S. Cassidy, MPA, RHIA, FAHIMA, FHIMSS

Bonnie Cassidy is a leading Health Information Management executive advisor, focusing her efforts on raising awareness and advancing HIM expertise in clinical documentation integrity and risk adjusted reimbursement.  As the president of Cassidy & Associates, Bonnie provides advisory services to healthcare organizations.  She is currently focusing her consulting in areas of organizational learning, leadership development and revenue integrity.

Cassidy was the 2011 President of AHIMA/Chair of the AHIMA Board of Directors, and the 2015 Chair of the Board of Directors for The Commission on Accreditation for Health Informatics and Information Management (CAHIIM).  Bonnie is a Fellow of AHIMA, an AHIMA Academy ICD-10-CM/PCS Certificate Holder, is a Fellow of HIMSS, an advanced member of HFMA and is serving on the 2019 AHIMA Nominating Committee.

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