New Patient Driving Pricing Model Will Lead to Less Fraud

Medicare’s transition to a new pricing model will reduce the risk of fraud, but likely lower the quality of care for some patients. A report by Skilled Nursing News begins by detailing the new payment scheme implemented by Medicare named Patient-Driven Payment Model, or PDPM. Under PDPM’s new pricing structure, Medicare sets reimbursement rates according to a patient’s healthcare needs. Previously, healthcare providers billed Medicare individually for every service, procedure, or medication. To provide a practical example, if an elderly woman sustained a mild fracture at her nursing home then Medicare would reimburse her nursing home a predetermined amount for similarly-healthy patients who suffer minor fractures. Previously, Medicare would reimburse the nursing home for each itemized healthcare service provided to the injured woman – physical therapy sessions, x-rays, medication, etc. The federal healthcare agency says the reimbursement amount depends on numerous factors including the patient’s health, diagnosis, and care plan.

According to the federal government, the former “pay-for-service” model led to widespread fraud, where healthcare providers provided medically unnecessary services and procedures to their patients just to increase their Medicare billing. Artificially inflated therapy services appear to the most common for the fraudsters. Last year, Signature HealthCARE, the owner of 115 nursing homes across the country, agreed to pay a $30 million fine for defrauding Medicare. In Alabama, SNF Management agreed to a $10 million fine the next month.

No longer able to profit off these services and procedures, PDPM will undoubtedly reduce some of the fraud endemic to Medicare. However, healthcare experts say the new payment model may lower the quality of care for patients. As each medical service or procedure becomes an “expense” draining a limited reimbursement amount, healthcare providers may be more likely to skimp on something medically necessary to protect their profit margins. If nursing homes deliver poor care and injure their residents, industry analysts at Skilled Nursing News also warned that litigation in the healthcare industry would also increase as a result of PDPM. According to these experts, Medicare’s attempt to solve a problem with fraudulent overbilling by incentivizing poor care for patients shows a government agency with the wrong priorities.

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