Why PDPM Still Confuses Skilled Nursing Facilities and How to Get It Right

The Patient-Driven Payment Model launched on October 1, 2019. Skilled nursing facilities had months of advance notice. CMS published detailed guidance, released updated MDS manuals, held stakeholder calls, and provided crosswalk documentation showing how the prior RUG-IV system mapped to the new model. By the time October arrived, the industry was supposed to be ready.

Six years later, PDPM continues to confuse facilities in ways that cost them real money. Not because the model is impenetrable it is not but because the confusion that persists is specific, structural, and not addressed by the orientation materials that facilities received at launch. This post names the specific sources of PDPM confusion, explains why they persist, and describes what getting PDPM right actually requires.

Confusion 1: Thinking PDPM Is About Therapy

The single most persistent PDPM misconception is that the model is about therapy. It is understandable the prior model, RUG-IV, was almost entirely about therapy. The more therapy minutes a resident received, the higher the facility’s daily rate. When facilities transitioned to PDPM, many billing and clinical teams filtered the new model through the old framework. They learned that therapy still matters but that the payment structure had changed.

PDPM is not a therapy model. It is a clinical complexity model. Therapy is one of five components Physical Therapy, Occupational Therapy, and Speech-Language Pathology each have their own component rates, but they are calculated from diagnosis and functional status at assessment, not from therapy minutes delivered. The remaining two components, Nursing and Non-Therapy Ancillaries, have nothing to do with therapy. They are driven by nursing-intensive conditions, comorbidities, and medication costs that have no therapy equivalent.

Facilities that still think about PDPM primarily through the therapy lens tend to under-invest in Nursing and NTA component documentation because those components do not connect to the clinical workflows that therapy volume tracking did. That disconnect is the most consistent source of PDPM under coding in the SNF setting.

What this means for your facility: If your PDPM discussion at the clinical level centre’s primarily on therapy utilization, the framing is still oriented toward the prior model. PDPM performance starts with clinical complexity documentation and the components that carry the most under coding risk are the ones furthest from therapy.

Confusion 2: Treating the MDS as a Clinical Document Rather Than a Billing Document

The MDS assessment has always been a clinical tool a standardized resident assessment that captures health status, functional ability, cognitive status, and care needs. Before PDPM, it drove regulatory compliance monitoring and quality reporting. What changed in 2019 is that it also became the primary billing document for Medicare Part A reimbursement.

Every dollar of PDPM reimbursement traces back to specific items in the MDS. The primary diagnosis on the claim and in Section I of the MDS determines the PT and OT clinical category. Section C BIMS cognitive scores and swallowing disorder documentation in Section K affect the SLP component. Active diagnoses and treatments in Sections I, J, and O drive the Nursing component. Secondary diagnoses and medications in Sections I, J, and N drive the NTA component. Section GG functional scores affect multiple component rates simultaneously.

Facilities that treat MDS completion as a clinical process separate from billing miss the financial consequences of clinical documentation decisions. An MDS coordinator who is not thinking about PDPM payment drivers when completing an assessment who treats it as a clinical snapshot rather than a billing document produces assessments that are clinically adequate but financially suboptimal.

The fix is clinical-billing coordination. The billing team needs to know what MDS data is driving the HIPPS code before the assessment is locked. The MDS coordinator needs to know which sections carry the highest PDPM payment weight, what documentation in the medical record would support more precise coding, and what the financial consequence of a specific coding decision looks like on the daily rate.

What this means for your facility: The MDS is both a clinical document and a billing document. Managing it as only one of those things produces results that are adequate for the other. Facilities that have formalized a clinical billing MDS review before assessment lockout validating PDPM component coding against the clinical record consistently achieve more accurate reimbursement than those that have not.

Confusion 3: Underestimating the Nursing Component

Of the five PDPM case-mix components, the Nursing component is the most frequently under coded and the least discussed. It does not have the intuitive clarity of the therapy components there is no therapy session to count, no evaluation to complete, no clearly bounded clinical activity that generates the payment. Instead, the Nursing component is driven by a combination of conditions, treatments, and care needs that must be documented in the clinical record and coded in the MDS.

The conditions that drive the Nursing component include active infections with specific comorbidity designations, IV medications and infusions requiring clinical monitoring, tracheostomy care, ventilator or respiratory therapy dependence, depression diagnosis with active treatment, specific wound care requirements, and other nursing-intensive clinical situations. Each qualifying condition carries a Nursing component classification that adds to the daily rate. Each condition present in the clinical record but absent from the MDS produces a lower Nursing rate for every day of the stay.

Why does this happen so consistently? Because the conditions that drive Nursing component payment require nursing documentation habits that the prior model never incentivized. Under RUG-IV, nursing care intensity did not affect the payment rate therapy did. Nursing teams-built documentation practices around clinical care quality, not billing precision. PDPM changed what the billing system needs from nursing documentation, but it did not automatically change how nursing staff document.

The result is a systematic gap: clinically complex residents whose nursing conditions are present and active are documented adequately for care purposes but not with the specificity that correctly triggers every available Nursing component payment driver.

What this means for your facility: Nursing component optimization is not about documenting more. It is about documenting differently capturing the specific clinical elements that PDPM identifies as Nursing payment drivers with the precision the MDS coding criteria require. This is a targeted education effort for nursing documentation staff, not a general documentation improvement initiative.

Confusion 4: Misunderstanding Section GG

Section GG of the MDS captures functional ability in specific self-care and mobility activities using a seven-point rating scale. The functional score derived from Section GG affects the PT, OT, and SLP component rates. Residents with greater functional impairment receive higher functional score payments. This is one of the clearest examples in PDPM of where clinical assessment decisions directly determine reimbursement.

The confusion around Section GG comes from how it should be completed. CMS requires that Section GG reflect the resident’s actual functional ability as directly observed during the assessment period not an average, not an optimistic estimate, not what the resident can do on a good day. It should reflect what the resident does when performing the assessed activities, including the level of assistance required and any limitations observed.

In practice, Section GG is frequently completed based on clinical judgment rather than direct observation, using optimistic scoring that reflects the resident’s best performance rather than typical performance. The result is functional scores that understate impairment placing residents in lower functional tiers and generating lower component rates than their actual functional status would support.

This is not an intentional billing decision. It is a clinical assessment habit the same tendency toward optimistic functional assessment that shows up in discharge planning documentation. The difference is that in PDPM, Section GG scoring has a direct and immediate financial consequence that discharge documentation does not.

What this means for your facility: Section GG scoring should be based on direct observation during the assessment reference period, not clinical estimation. A targeted training session for the clinical staff completing Section GG focused specifically on the seven-point rating scale and the difference between capacity and performance is a high-value intervention that typically produces measurable PDPM rate improvement without changing a single aspect of care delivery.

Confusion 5: Assuming PDPM Takes Care of Itself

The most expensive PDPM confusion is passive the assumption that because the billing system generates a HIPPS code from MDS data automatically, the resulting rate is correct. This assumption treats PDPM as a technical function when it is fundamentally a clinical-billing coordination function.

The billing system does exactly what it is designed to do. It generates the HIPPS code correctly from whatever MDS data it receives. If the MDS data understates the resident’s clinical complexity because the Nursing component is under coded, because Section GG is optimistically scored, because a qualifying NTA comorbidity is not in the MDS the HIPPS code reflects that understatement. The claim is accepted and paid. The rate is lower than it should be. Nothing in the billing workflow signals a problem.

Identifying PDPM under coding requires a deliberate audit comparing HIPPS code distributions against clinical complexity, reviewing specific high-value components against the clinical record, and identifying the documentation gaps that are producing lower rates than the resident population supports. This audit will not happen unless someone knows to conduct it and has the PDPM expertise to interpret what the data shows.

What Getting PDPM Right Actually Requires

Facilities that achieve strong PDPM reimbursement accuracy share three practices that facilities with systematic under coding do not consistently have.

First, they have a structured pre-lockout MDS review a documented process in which a billing specialist or PDPM-trained MDS coordinator reviews the component coding against the clinical record before each assessment is locked. This review focuses specifically on the Nursing and NTA components, where under coding is most prevalent, and on Section GG, where scoring habits most commonly diverge from observed function.

Second, they have current ICD-10-CM coding knowledge applied to primary diagnosis selection. The primary diagnosis code on the five-day assessment determines which PT and OT clinical category the resident falls into under PDPM. A code that maps to a lower clinical category than the clinical record supports reduce the therapy component rates for the entire stay. Selecting the most specific, clinically accurate primary diagnosis code that maps correctly to the appropriate PDPM category is a billing decision made at the assessment, not at the claim.

Third, they conduct regular PDPM case-mix audits reviewing the HIPPS code distribution across their Part A resident population, identifying whether the distribution reflects the clinical complexity of the residents served, and using audit findings to drive targeted documentation improvement rather than waiting for a billing problem to surface in denial reports.

Getting PDPM Right with MCA Medical Billing Solutions L.L.C

MCA Medical Billing Solutions, L.L.C. validates PDPM component coding against the clinical record before every MDS assessment is locked specifically reviewing the Nursing and NTA components, confirming Section GG functional scoring accuracy, and verifying that primary diagnosis codes map correctly to the appropriate PDPM clinical categories.

We work exclusively with skilled nursing facilities, and PDPM coding accuracy is one of the primary functions we manage for every client.

If your facility has not conducted a PDPM case-mix audit since the model launched, that audit may be the most valuable billing review you have not done. Contact MCA Medical Billing Solutions L.L.C. for a free billing assessment.