PDPM Overview
Introduction to Patient Driven Payment Model (PDPM)
The Patient Driven Payment Model (PDPM) is Medicare's case-mix adjusted prospective payment system for skilled nursing facilities (SNFs), implemented on October 1, 2019. PDPM replaced the Resource Utilization Group Version IV (RUG-IV) system and represents a fundamental shift in how Medicare reimburses SNF care.
Core Principles
PDPM is designed to:
- Focus on Patient Characteristics rather than therapy volume
- Improve Payment Accuracy by better reflecting resource use
- Reduce Administrative Burden by eliminating therapy minute requirements
- Encourage Appropriate Care by aligning payment with patient needs
PDPM Components
PDPM adjusts payment across five distinct components, each reflecting different aspects of SNF care:
1. Physical Therapy (PT) Component
Case-Mix Weight: 1.45 Classification Factors:
- Primary diagnosis
- Functional status (Section GG scores)
- Cognitive impairment
Key Categories:
- Major Joint Replacement or Spinal Surgery
- Other Orthopedic conditions
- Medical Management
- Infections
- Other conditions
2. Occupational Therapy (OT) Component
Case-Mix Weight: 1.41 Classification Factors:
- Primary diagnosis
- Functional status (Section GG scores)
- Cognitive impairment
Alignment: OT component generally follows PT component classifications but may differ based on cognitive factors.
3. Speech-Language Pathology (SLP) Component
Case-Mix Weight: 0.64 Classification Factors:
- Acute neurologic conditions
- Speech and language disorders
- Cognitive impairment
- Swallowing disorders
Special Considerations:
- Mechanically altered diet requirements
- Acute neurologic diagnoses (stroke, traumatic brain injury)
- Communication barriers
4. Nursing Component
Case-Mix Weight: 0.89 - 1.26 (variable) Classification Factors:
- Clinical complexity
- Depression diagnosis
- Restorative nursing services
Nursing Levels:
- Low: Basic nursing care (0.89 weight)
- Medium: Moderate complexity (1.06 weight)
- High: Complex nursing needs (1.26 weight)
5. Non-Therapy Ancillary (NTA) Component
Case-Mix Weight: Variable Classification Factors:
- Extensive services (dialysis, chemotherapy, radiation)
- High-cost drugs and biologicals
- Complex medical equipment
PDPM Calculation Process
Step 1: Primary Diagnosis Classification
The patient's primary diagnosis determines the initial PT/OT classification:
Major Joint Replacement → PT/OT Category A-D (based on function)
Other Orthopedic → PT/OT Category E-H (based on function)
Medical Management → PT/OT Category I-P (based on diagnosis & function)
Step 2: Functional Assessment
Section GG functional scores determine the specific classification level:
- Score 0-5: Lowest functional level
- Score 6-9: Low-medium functional level
- Score 10-23: Medium-high functional level
- Score 24: Highest functional level
Step 3: Component-Specific Factors
PT/OT Components
- Use primary diagnosis and functional score
- Apply cognitive impairment adjustments if applicable
SLP Component
- Check for acute neurologic conditions
- Assess speech/language/swallowing disorders
- Apply mechanically altered diet considerations
Nursing Component
- Evaluate clinical complexity indicators
- Check for depression diagnosis
- Assess need for restorative nursing
NTA Component
- Identify extensive services
- Calculate high-cost drug usage
- Assess medical equipment needs
Step 4: Final Rate Calculation
Daily Rate = (PT Rate × PT Weight) + (OT Rate × OT Weight) +
(SLP Rate × SLP Weight) + (Nursing Rate × Nursing Weight) +
(NTA Rate × NTA Weight) + Non-Case-Mix Component
Implementation
Automated Classification
The system automates PDPM classification by:
- Diagnosis Analysis - ICD-10 code mapping to PDPM categories
- Functional Assessment - Section GG score calculation
- Clinical Indicators - Automated detection of relevant factors
- Component Calculation - Real-time PDPM rate computation
Data Requirements
For accurate PDPM calculation, the system requires:
- Primary Diagnosis (ICD-10 code)
- Secondary Diagnoses (relevant comorbidities)
- Functional Scores (Section GG data)
- Clinical Indicators (depression, cognitive impairment, etc.)
- Medication List (for NTA component)
- Treatment History (therapy services, nursing needs)
Validation Features
- Diagnosis Code Verification against ICD-10 standards
- Functional Score Validation for Section GG requirements
- Clinical Indicator Checking for completeness
- Rate Calculation Verification against CMS specifications
Key Differences from RUG-IV
| Aspect | RUG-IV | PDPM |
|---|---|---|
| Therapy Focus | Therapy minutes drive payment | Patient characteristics drive payment |
| Components | Single RUG category | Five separate components |
| Assessment | 5-day and 14-day assessments | Primarily 5-day assessment |
| Complexity | 66 RUG categories | Multiple component classifications |
| Gaming Prevention | Vulnerable to minute manipulation | Reduces therapy minute gaming |
Common PDPM Scenarios
High-Value Referrals
- Major joint replacement with good functional potential
- Complex medical conditions requiring extensive nursing
- Patients with multiple therapy needs
Moderate-Value Referrals
- Medical management cases with rehabilitation potential
- Patients with some functional limitations
- Standard nursing care requirements
Challenging Cases
- Very low functional patients (may not qualify for SNF)
- Patients with primarily maintenance therapy needs
- Cases with unclear diagnoses or documentation
Documentation Requirements
Essential Documentation
- Hospital Discharge Summary with primary diagnosis
- Functional Assessment data (Section GG)
- Medication Reconciliation for NTA calculation
- Clinical History including depression screening
- Therapy Evaluations if available
Quality Indicators
- Accurate ICD-10 coding
- Complete functional assessments
- Proper clinical indicator documentation
- Appropriate level of care justification
Related Documentation
- PDPM Data Dictionary - Detailed data specifications
- PDPM Component Details - Specific component calculations
- MDS 3.0 RAI Manual v1.20.1 (October 2025) - Complete MDS 3.0 Resident Assessment Instrument Manual (PDF). Source: CMS
- References - External CMS resources and documentation
For technical implementation details, see the internal documentation.