Understanding the Financial Forces Shaping MDS Decisions
The Patient-Driven Payment Model (PDPM) was implemented to correct long-standing issues in skilled nursing facility (SNF) reimbursement. In theory, PDPM shifts payment away from therapy volume and toward resident clinical complexity. In practice, however, PDPM has introduced a new set of financial pressures and incentives that directly influence MDS coding, clinical documentation, and facility behavior.
This post explains how PDPM incentives work, where reimbursement pressure comes from, and why this matters for compliance, quality measures, and long-term sustainability.
What PDPM Was Designed to Do
PDPM replaced the RUG-IV system in October 2019 with three stated goals:
- Align payment with patient characteristics
- Reduce incentives for unnecessary therapy
- Improve care for medically complex residents
Payment under PDPM is determined by five case-mix adjusted components:
- Physical Therapy (PT)
- Occupational Therapy (OT)
- Speech-Language Pathology (SLP)
- Nursing
- Non-Therapy Ancillary (NTA)
Each component is driven by MDS data, diagnoses, functional scores, and clinical conditions captured during the assessment window.
This is where incentives—and pressure—begin.
Where PDPM Incentives Really Exist
PDPM does not pay more for “better care.”
It pays more for higher documented complexity.
Facilities are financially rewarded when documentation reflects:
- Extensive comorbidities
- Higher nursing acuity
- Cognitive impairment
- Swallowing disorders
- Extensive services (IVs, dialysis, trachs, etc.)
- Higher NTA point totals
The incentive is not to fabricate—but to maximize every legitimate data point that impacts classification.
The Problem
When reimbursement margins are thin, the line between accurate capture and aggressive interpretation becomes blurred.
Reimbursement Pressure Inside Skilled Nursing Facilities
1. Declining Margins
SNFs are facing:
- Rising labor costs
- Staffing shortages
- Increased regulatory oversight
- Flat or inadequate Medicaid rates
PDPM revenue often becomes the primary lever leadership can pull to stay financially solvent.
2. Administrative Expectations
MDS coordinators may hear phrases like:
- “Make sure we’re capturing everything”
- “We can’t miss NTA points”
- “This resident should be higher”
- “Review the diagnosis list again”
While not always explicit, the pressure is clear: reimbursement must be optimized.
How Pressure Impacts MDS Coding
Diagnosis Selection
- Diagnoses with higher PDPM impact may be prioritized
- Vague hospital documentation may be “interpreted generously”
- Historical conditions may be treated as active without sufficient evidence
Functional Scoring
- Section GG scores may trend lower
- Self-care and mobility dependence may be emphasized
- Interdisciplinary scoring disagreements may default toward higher acuity
NTA Maximization
- Every qualifying condition is scrutinized
- Timing of services may align closely with assessment windows
- Borderline criteria may be counted “just in case”
The Risk: When Incentives Override Accuracy
PDPM itself is not fraudulent.
Misrepresentation of MDS data is.
Unchecked reimbursement pressure can lead to:
- Inflated case-mix indexes
- Increased audit exposure
- False quality measure reporting
- Potential FCA (False Claims Act) liability
- Ethical distress among nursing and MDS staff
Most concerning: clinical decisions may begin to serve payment models instead of residents.
PDPM and Quality Measures: A Hidden Conflict
PDPM operates separately from Quality Measures (QMs), but the same MDS data feeds both systems.
This creates a dangerous paradox:
- Higher acuity = higher reimbursement
- Higher acuity = worse QMs
Facilities may unintentionally distort public quality data while attempting to remain financially viable.
The MDS Coordinator at the Center of the Storm
No role feels PDPM pressure more acutely than the MDS coordinator.
They are expected to:
- Ensure compliance
- Protect reimbursement
- Support clinical accuracy
- Navigate leadership expectations
- Withstand audit scrutiny
All while working within ambiguous guidance and incomplete hospital documentation.
This is not a system failure caused by individuals—it is a structural incentive problem.
What Ethical PDPM Optimization Looks Like
Ethical optimization is possible and necessary:
- Thorough chart review
- Accurate, defensible diagnoses
- Interdisciplinary collaboration
- Clear documentation support
- Conservative interpretation of ambiguous data
- Willingness to accept lower reimbursement when warranted
Accuracy is the strongest audit defense.
Why This Conversation Matters
PDPM incentives and reimbursement pressure are rarely discussed openly—yet they shape daily decision-making across the SNF industry.
Ignoring these forces does not eliminate risk.
Understanding them is the first step toward ethical, compliant, sustainable practice.
Final Thought
PDPM didn’t eliminate financial incentives—it changed them.
The question is no longer “How many therapy minutes?”
It is now “How much complexity can we justify?”
And that question deserves honest, transparent discussion.
Leave a Reply