The Prospective Payment System for SNFs differs from the acute hospital PPS system in fundamental ways. The acute hospital is paid a single payment to treat a condition using a system call Diagnostic Related Groups (DRGs) which are in turn based on the principle diagnosis of the patient, with provisions for patients with unusually high cost, called outliers. There is a single payment for the episode of care, regardless of how long or short the stay. Care for outliers is reimbursed based on individual documentation. Payment levels for DRG are based on claims data.

In contrast, the PPS for SNFs is a per-diem payment (meaning daily) based on the functional capabilities of the resident, other resident characteristics, and the need for services such as rehabilitation therapy. The system adjusts for differences in residents' care needs, co-morbidities and differences in resident capacities through an analysis of the resident's Minimum Data Set assessment known as Resource Utilization Groups, version 3 (RUG-III.) There is no provision for outliers. Payment levels for RUG-III groups are based on actual staff time measurements of the care required by residents in the groups, and the other services and costs of care received by residents.

How does the Prospective Payment System Affect Nursing?

The prospective payment system has three primary impacts on nursing:

1. The MDS assessments must be completed accurately and on time.
2. The schedule of MDS assessments requires more frequent MDS assessments for PPS residents.
3. The facility receives a single case mix adjusted payment for each resident day. All costs of care must be paid by the nursing facility. As intended by the law, the costs of care must be analyzed and controlled, while giving good quality care to residents.

This translates to additional time requirements for registered nurses. More nurses will be needed to maintain the assessment schedule. The additional nursing time is included in the payment rates to facilities, but the decisions on how resources are to be allocated is up to the facility administration. Nursing administrators in each facility should evaluate their assessment function needs, and insure sufficient time is available for accurate, timely assessment.

The schedule of assessments must be followed explicitly. Late assessments can result in delayed or minimum payments. Since the MDS is primarily a clinical document, it cannot be backdated to cover a missed assessment period. Nursing, in cooperation with the business office, must establish and follow procedures to insure timely assessments.

In addition to the universal use of the MDS to direct care planning, the MDS assessment information is used to determine the RUG-III value for each resident. The RUG-III value determines the resident's eligibility for skilled care (the highest 26 RUG-III groups are "deemed" covered by Medicare) and the level of payment. The MDS is the only information used to determine the payment level during a Medicare Part A stay.

The costs of care must be paid from the single case mix adjusted payment. Nursing administration should periodically evaluate the procedures used to deliver care, and make necessary changes to minimize waste, so as to deliver care in the most cost effective way consistent with the needs of residents.

What other care providers and staff are affected by PPS?

A registered nurse is required to supervise the entire MDS process and act as the MDS coordinator. All other care givers are involved in the assessment process, from the licensed independent practitioner's certification of the need for skilled care, and medical orders, to the certified nursing assistants informing registered nurses of the level of functioning (activities of daily living - ADLs) of each resident over the observation period.

Rehabilitation therapists (occupational therapists, physical therapists, and speech/language pathologists) are key players for the rehabilitation RUG-III groups. The therapists need to be instructed in the specific MDS items for which they are responsible. For instance, section P has items requiring the days of service and actual minutes that the resident is receiving therapy in the last 7 days or since admission to the nursing facility. Section T has items to collect the days and minutes of therapy expected to be delivered in the first 14 [15] days since admission or re-admission. Therapists have previously documented only the time the therapist spent with the resident. While the time the therapist spends with the resident will still be needed for the UB-92 claim, the therapists will also need to document the actual or planned minutes of time the resident is receiving therapy. (Section T collects the days and minutes of therapy planned for the resident for the first 15 days of a stay, thus the "planned minutes" come from the therapists' plan of care.)

The business office is also vitally interested in the MDS completion. The source of all Medicare Part A claims is the MDS coordinated by the registered nurse. The business office can serve as a backup or reminder for MDS completion to insure that all Medicare MDSs are completed on time (or within the allowed grace periods.) (Grace periods are time frames beyond the stated MDS data collections periods that are still acceptable to HCFA for the Assessment Reference Date, and may be used without financial penalty.)