CMS Update: The Patient Driven Payment System

On April 27, 2018, the Centers for Medicare & Medicaid Services (CMS) announced that the Resident Classification System, version I (RCS-I) was not going to be implemented and proposed legislation to implement another Medicare payment classification system, the Patient Driven Payment System (PDPS), on October 1, 2019. The proposed final rule states that this change was a result of public comments about RCS-I.

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About PDPS:

PDPS uses clinical conditions to determine the resident’s therapy payment category, rather than the amount of therapy provided. Skilled nursing categories continue to be determined by the resident’s conditions and services through the RUGS IV classification system. Physical therapy (PT) and occupational therapy (OT) use the same scoring methodology. Speech and language pathology treatment has a different scoring method and skilled nursing categories use twenty-five RUGS IV nursing categories. PT, OT, SLP and nursing categories use the resident’s functional scores from MDS Section GG to adjust case mix, and nursing uses depression symptoms and restorative nursing services to further adjust the case mix index score. Non-therapy ancillary (NTA) services are used to adjust the case mix overall score as well and consist of a score for the number of comorbidities coded on the MDS. There are fifty comorbidity conditions considered for the NTA score.

The MDS 3.0 will undergo changes to support the new payment classification system. Eighteen items will be added to the Medicare PPS Discharge MDS to capture the total amount of therapy provided during the Medicare stay. The Medicare 5-Day and the Medicare PPS Discharge MDS will be the only MDS assessments required. An Interim Payment Assessment may be used to capture significant changes in resident condition during the stay. The 5-Day MDS will establish the PDPS payment category for the entire Medicare stay unless an Interim Payment Assessment is warranted.

The grouper software requires that the resident’s primary diagnosis is identified and coded on the MDS at MDS Section I1800. That diagnosis code will be used to determine the therapy category for the PDPS classification.


What can you do to prepare? Consider the following:

  1. MDS Scheduling: 5-Day MDS ARD set on the eighth day of the stay cannot use the assessment information documented on the first day of the stay for MDS items with a 7-day look-back period.
  2. Diagnosis Coding: ICD-10 CM coding must be accurate and consistent in the medical record, on the MDS and on the claim. The primary diagnosis for the SNF stay must be established upon admission and represent the reason for admission to the SNF related to the prior qualifying hospital stay.
  3. Section GG Coding: According to the MDS 3.0 manual, Section GG coding represents the resident’s “usual function” during the first three days of the Medicare stay, and before therapeutic intervention has an impact on the resident’s function. Some facilities are using data coded by therapy and imported to the MDS from therapy software. Residents typically function at a higher level during therapy treatment than during the evening and night time and in the environment of their room. If the facility accepts the Section GG data from therapy, they are likely under coding Section GG. In the PDPS this will result in a lower payment category for the entire Medicare stay. Section GG coding is to be a professional assessment of the resident’s usual function, rather than a count of dependency levels charted by nursing assistants.The MDS Coordinator relies upon all clinical disciplines to gather and document assessment information accurately to support MDS coding.

Contact us to learn how the experts at Pathway Health can help your organization reach higher to achieve success.


Karolee Alexander,
Director of Reimbursement and Clinical Counseling,
Pathway Health