Inpatient Rehabilitation Facility
The payment rates for IRFs are federally mandated by the IRF Prospective Payment System (IRF PPS). Medicare pays IRFs a predetermined per discharge rates. This rate is based primarily on the patient’s condition (diagnoses, functional and cognitive statuses, and age) and market area wages. Under the IRF PPS, these Medicare payments are allocated to overhead costs (associated with operating the facility and the capital expenditures) of services provided.[i]
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Skilled Nursing Facility
The payment rates for SNFs are federally mandated by the SNF Prospective Payment System (SNF PPS). Medicare pays the facility a pre-determined daily rate for each day a beneficiary is in care for skilled nursing, rehabilitation, and select other services. These Medicare payments are allocated to overhead costs (associated with operating the facility and the capital expenditures) of services provided. Certain ancillary services, characterized by being high-cost and low-probability, that are paid separately.[ii]
The Patient Driven Payment Model (PDPM) is replacing the Resource Utilization Groups, version IV as of October 1, 2019. The PDPM is a more specific analysis of patient condition and needs for different therapies, which will indicate payment level. The patient payment to the facility can change over time. The PDPM is tied to how much is spent on a patient each day. Read more.
Under the PDPM, CMS finalized revisions to the PPS assessment schedule to reflect elimination of all scheduled assessments after the initial 5-day, Medicare-required assessment and to instead state that the assessment schedule must include performance of an initial patient assessment no later than the 8th day of post-hospital SNF care. The 8th day reflects a 5-day assessment window plus a longstanding 3-day grace period. This is consistent with PDPM policies finalized last year.
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Long-Term Care Hospital
The payment rates for LTCHs are federally mandated by the LTCH Prospective Payment System (LTCH PPS). Under the LTCH PPS, Medicare pays for overhead costs incurred by the facility in services provided.[iii]
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Table 2: This table summarizes the facility payment regulations of each PAC facility at a high level.
4 PAC and 4 PPS
||60 Day Episode
Under the Home Health Prospective Payment System (HH PPS), Medicare pays home health agencies a predetermined base rate that is adjusted for health condition, beneficiary care needs, and the regional wage. The adjustments based on the health condition and care needs is called the “case-mix adjustment.” The HH PPS provides payment in 60-day episode increments. There are no limits to the number of episodes paid for by Medicare.[iv] As of January 1, 2020, payment will be provided in 30-day increments.[v]
The HH PPS 2020 final rule implemented the Patient-Driven Groupings Model (PDGM), effective January 1, 2020. The PDGM, a revised case-mix adjusment methodology. The PDGM relies more heavily on patient information, such as clincial characteristics, with the intent to place patients into payment categories and elimate the use of therpay service thresholds.[vi]
[iv] U.S. Department of Health and Human Services, Centers for Medicare & Medicaid Services. Home Health PPS. https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/index.html. Updated March 8, 2019. Accessed May 29, 2019.
[v] Medicare and Medicaid Programs; CY 2020 Home Health Prospective Payment System Rate Update; Home Health Value-Based Purchasing Model; Home Health Quality Reporting Requirements; and Home Infusion Therapy Requirements. 84 Fed. Reg. 217 (November 8, 2019).
[vi] Medicare and Medicaid Programs; CY 2020 Home Health Prospective Payment System Rate Update; Home Health Value-Based Purchasing Model; Home Health Quality Reporting Requirements; and Home Infusion Therapy Requirements. 84 Fed. Reg. 217 (November 8, 2019).