The federal government’s second-year Medicare payment system for nursing homes continues to be a boon for them, especially under pandemic conditions, but more than half are missing rightful reimbursements.

Such conditions may make 2021 a particularly good time for investors to go into acquisition mode. 

Those are some of the most recent observations from Vincent Fedele, partner and director of analytics at Zimmet Healthcare Services Group, and COO of its CORE Analytics offshoot.

Vincent Fedele

“In more than half of the charts we pick up, there are mistakes that were made that are impacting [Patient Driven Payment Model] revenue,” said Fedele, who oversaw the doubling of CORE’s client reach to more than 2,000 facilities in 2020.

“In 2021, there’s going to be a lot of buying opportunities, because of the challenges of COVID. And I think there’s a general lack of understanding of some of the value that can be created in looking at revenue line items and identifying poor performers,” he added in an interview with McKnight’s Long-Term Care News. “Not in acuity or patients, just in capture, straight capture.”

He explained that two facilities, figuratively or literally right next to each other, might have collected the same average pay rate under the previous RUGs-IV payment system. But one is better at coding and filling out patient assessments under the PDPM system, so it could make $100 or more per patient day.

“The presents opportunities for a buyer, and you also think about the bundled payment initiatives,” Fedele said. “If you’re in a market with a hospital that cares about your episodic spend and your rate went up $100 a day in October of 2019, explaining that is really important in specific markets.”

Providers are making a wide variety of mistakes in their coding, he said, basing observations on buildings spread across 44 states.

Assessors might document a condition but miss the proper coding, either by not checking the right box or by not putting the proper code in the right place. Or they might have a certain condition or acuity present that they don’t document properly, snuffing any chance for proper payment. The third major error source is of a “strategic” nature. Perhaps a different reference date should have been chosen, an administrative error that doesn’t indicate the appropriate level of care.

“We do a lot of work with medical records and probably one out of every two has something that falls into one of those three buckets. And if you look at the impact on the bottom line, extrapolated over 12 months, it’s often significant. It really is the margin for these facilities that operate on thin margins.”

‘Saving grace’

Providers that care for patients with greater needs have fared better under PDPM compared to the old system. The pandemic has presented a mixed bag and skewed reimbursement rates. For example, numerous waivers have taken away technical requirements for admission or care, and more patients have needed isolated care in private rooms during the pandemic, Fedele pointed out.

“PDPM came just in time to handle COVID,” he said “We ran the numbers and estimate that the [average] RUG rate probably would have been about $420 per day throughout the pandemic but with PDPM, it’s closer to $620 per day. That’s another $90,000 per month in bottom line revenue for an average daily census of 15 [qualifying Medicare patients]. That’s really significant.”

He called PDPM “almost a saving grace” because payments are no longer predicated on therapy levels.

As with any new payment system, providers have become better at coding as time has worn on. Zimmet Healthcare’s initial estimate showed an average $609 daily pay rate for October 2019. With few exceptions, that rate has risen monthly, increasing from $615 to $629 between June and October of 2020. That’s using the latest Zimmet figures, which precede federal data by about six months, Fedele explained. 

The average pay is expected to continue upward, at least for a while. Due to the general upheaval the pandemic has caused, it is believed that the Centers for Medicare & Medicaid Services may not have enough clear data to make payment recalibrations to the system until October 2022. Originally, providers were preparing to accept a downward adjustment in October 2020.

Stakeholders will get a better idea from CMS in April when the agency issues its new pay rule proposal. It went essentially unaltered last year.

While PDPM has benefited many providers, especially those with medically complex patients, or a lot of short-stay clientele, adjustments are still needed, Fedele said.

Currently when examining patient records, he is tempted to “skip over the PT/OT” part of the equation because “there’s very little opportunity there,” he said. “The system pays everybody more toward the mean. That’s one thing [regulators] will address once they get more data. I would expect more options in there and create a bigger spread.”

Managed care, SALT and I-SNPs

One of Fedele’s goals this year is to “level the playing field” in 2021 for providers that need more negotiating power when contending with the huge growth of Medicare Advantage plans. 

“I can’t tell you how many times we’ve looked at a building that is billing less than what a (managed care) plan says they could. They don’t fight case management and miss excluded items that are carve-outs in the contract. It’s really the Wild West. They’re leaving money on the table. Medicare Advantage isn’t discussed often and there’s a lack of information out there. It’s a challenge and in many ways a threat to nursing homes.”

Many operators are at a disadvantage because they don’t have the bandwidth to have a case-management expert in their building, Fedele explained. “I equate it to buying a diamond for the first time. The guy selling it knows a lot more than you do and you can be taken for a ride if you don’t know what you’re doing.”

At the end of March, he expects to issue a first-of-its-kind dissection of Medicare Advantage claims. This will help eliminate the “black hole” that exists due to a dearth of good claims data on the topic, he said.

He also is working on a new project, something he calls SALT reports. “They’re statistical analysis of likely targets [to be audited] — they’re not intended to replace PEPPER reports,” he quipped. 

PEPPER (Program for Evaluating Payment Patterns Electronic Report) is an electronic report from the government that regularly gives each provider specific Medicare data statistics for its discharges/services vulnerable to improper payments.

An application that will analyze I-SNP claims so that providers can better gauge how they’re faring within those newly popular programs, and a claims-based initiative centered on value-based purchasing efforts, also are in the works.