New Rules Change Reimbursement for Physical Therapy in Skilled Nursing

April 8, 2021
April 8, 2021

Healthcare is experiencing significant change, driven by demographic trends, outdated financial structures, and technological progress, not to mention the glaring problem of COVID-19 and its ramifications throughout the care continuum. Many non-hospital organizations are struggling with how they have long operated. Not only is it becoming harder and harder to retain employees, but everyone in healthcare needs more staff to care for our aging population. At the same time, government oversight and the wide range of measures aimed at improving the quality of care may be inadvertently creating additional problems for already-burdened care providers.

The Patient-Driven Payment Model (PDPM) Has Changed Reimbursement for Physical Therapy in Skilled Nursing Facilities

CMS launched the Skilled Nursing Facility Patient-Driven Payment Model (PDPM) on October 1, 2019. This new payment methodology applying to reimbursement for rehabilitation physical therapy in the skilled nursing environment is a significant direction change for this care setting. According to CMS, “PDPM does not change the care needs of SNF patients, which should be the primary driver of care decisions, including the type, duration, and intensity of skilled therapies, made on behalf of SNF patients,” (APTA, 2019).

Unintended Consequences: Layoffs and Reduced Work Hours

Some results of the change were unintended—for example, “almost instantly after the PDPM shift on October 1, Skilled Nursing News received a flurry of e-mails from therapists who were laid off or saw their hours reduced as providers adapted to the new system—which bases reimbursements on resident acuity, and not the sheer volume of services provided” (Spanko, 2020).

Potential Negative Impact on Outcomes

One of the new requirements was for 25% of services for all residents to be provided in a group therapy setting (APTA, 2019). Though CMA clearly enacted the measure as a cost-containment measure, so that reimbursement is more closely tied to resident need and ADL Function, rather than the earlier system focused merely on the volume of services provided. Cuts to jobs may have been far deeper than intended, with a negative impact on resident outcomes (Spanko, 2020). Given that certain resident comorbidities have a higher ranking for reimbursement under the PDPM methodology, these conditions may be over emphasized compared to others. As a result, “Based on those incentives, the researchers argue, skilled nursing facilities could begin selectively admitting residents with more acute needs than other patients, while also discharging people home faster due to the gradual decline in reimbursement rates over time. Because therapy no longer generates direct payments, the group also pointed out the potential for under-provision of therapy” (Spanko, 2020). In an effort to rebalance reimbursement to value-based care over volume, the pendulum may have swung too far.


APTA, “SNF Patient-Driven Payment Model (SNF PDPM),” 12/11/2019, American Physical Therapy Website, Retrieved at https://www.apta.org/.

Spanko, A., “Confessions of a Therapist Post-PDPM: ‘You’re Not Valuable to Them Because You’re Not Making Money’,” Skilled Nursing News, January 12, 2020, Retrieved at https://skillednursingnews.com/2020/01/confessions-of-a-therapist-post-pdpm-youre-not-valuable-to-them-because-youre-not-making-money/.

Spanko, A., “Researchers Find ‘Perverse Incentives’ for Skilled Nursing Operators Under PDPM,” Skilled Nursing News, March 30, 2020, Retrieved at https://skillednursingnews.com/2020/03/researchers-find-perverse-incentives-for-skilled-nursing-operators-under-pdpm/.

This blog post begins a series based on our article, Top Issues Across the Care Continuum, which looks more closely at some of the serious concerns of healthcare organizations across the care continuum. Subsequent challenges to be examined include:

  • Short Staffing in Long-Term Care Is Having an Impact on Resident and Financial Outcomes
  • Low Rates for Medicaid Reimbursement, Coupled with Additional Recent State Funding Cuts, May Be Precipitating Skilled Nursing and Long-Term Care Facility Closures.
  • Long-Term Care Continues to Feel the Financial Impact of Civil Money Penalties and Civil Money Penalty Reimbursement Programs.
  • Efforts to Decrease Widespread Antipsychotic Drugs in Long-Term Care Facilities Require Individualized Care Plans.
  • Focused Dementia Care Surveys Are Reducing the Use of Antipsychotic Medication, with Unintended Consequences
  • Infection Control Surveys Reveal a Widespread Problem Across Long-Term Care.

There is a long list of challenges for providers across the care continuum, outside of acute care. For example, with consistent wage pressures, shifting compliance regulations, and rising acuity levels among resident populations, the skilled nursing and LTC workforce is feeling more pressure than ever before. HealthStream works with organizations throughout non-acute care to address these challenges, from keeping pace with regulatory requirements to engaging and developing competent staff who can satisfy the demands of increased patient complexity. By partnering with HealthStream, organizations are equipped to seamlessly manage the pressures of surveyor visits, while remaining focused on high-quality patient and resident care. Learn more about HealthStream solutions for non-acute care organizations.