Medicare and SNFs: Times are changing

At present, Medicare pays skilled nursing facilities (SNFs) a per diem rate and covers charges for medications, supplies, and therapies. Under the new payment system, however, Medicare will pay based on the acuity of the patient, and the way the various diagnoses are coded will be crucial. With the new prospective payment system (PPS), the Minimum Data Set-II (MDS-II), a patient acuity measurement tool that SNFs have used since 1990, becomes more directly linked to reimbursement. The MDS-II is the assessment tool that provides the medical data on which Resource Utilization Groups (RUGs) are based.

SNFs will key the MDS-II into the computer to find out where the patient falls in the RUGs III classification. That will determine how much the facility will be paid for the first 14 days, and if care is needed after that, the process must be repeated. Formerly just classification systems, MDS and RUGs have evolved into a one-stop shopping tool for assessing, care planning, quality indicators, and payment. The reason for the interim payment system (IPS) is to give Medicare time to build a database for the PPS, which will be phased in depending on when SNFs begin their fiscal year.