RUGS: State Medicaid RUGS Options Change to PDPM
Kris Mastrangelo OTR/L, LNHA, MBA, President and CEO
Are the RUGS Being Pulled from Under You?
MDS Removes RUGS (RUG-III and RUG-IV) Case Mix Methodology October 1, 2023
State Medicaid RUGS Options Change to PDPM
Today, there are approximately 36 states that use the MDS as a tool to determine Medicaid State Payment levels. In these states, the MDS uses a RUG-III or RUG-IV Case Mix methodology to calculate the reimbursement for state specific Medicaid payment rates. Each state has flexibility to modify payment levels and RUG classification criterion in consideration of state specific nuances, i.e., customization of rates for Ventilator, BMI, TBI, etc. on the reimbursement payment levels.
On October 1, 2019, the Federal Payment system (not to be confused with state Medicaid levels) for Medicare Part A reimbursement levels, replaced the RUGS-IV 66 Case Mix methodology with a new Case Mix methodology, Patient Driven Payment Model (PDPM). The PDPM system has 5 components, PT/OT, SLP, Nursing, NTA and CMI, of which the Nursing component mimics the RUGS-IV 66 model sans rehab levels (RU, RV, RH, RM, RL). So, in essence, the RUGS model is still present but baked into the nursing component of the PDPM model. Do not be fooled into thinking that the RUGs system is gone because it is technically alive and well calculating the nurse component under the veil of PDPM.
Because CMS will be removing several MDS data elements used in RUG-III and RUG-IV Case Mix methodology, these elements will no longer be required for Federal purposes and the RUG-III and RUG-IV will technically no longer be functional.
One of the intentions of converting to a PDPM system for the Federal Medicare Part A payment levels is to utilize a streamlined assessment schedule versus a paper intense RUG-III and RUG-IV Case Mix methodology by eliminating the tedious 14-day, 30-day, 60-day, 90-day and OMRA assessments while keeping the 5-day assessments.
Seeing that the MDS is used for both State Medicaid Case Mix payment system and the Federal Medicare Part A payment system, the removal of the RUG-III and RUG-IV Case Mix methodology forces State Medicaid Case Mix payment system to transition to a Medicaid PDPM payment system. This transition was originally scheduled for October 1, 2020 but delayed (due the COVID-19) until October 1, 2023 when CMS will no longer support RUG-III and RUG-IV Case Mix methodologies via the Minimum Data Set (MDS). CMS is allowing a 2 year grace period for Medicaid state providers to transition to PDPM versus RUG-III and RUG-IV Case Mix methodology until no later than October 1, 2025.
For States that want to continue to use RUG-III or RUG-IV assessments for calculating their State Medicaid Case Mix payment Case Mix groups from October 1, 2023 to October 1, 2025, CMS created an “Optional State Assessments” or OSAs so that Medicaid payments will not be adversely impacted. States can continue to use RUG-III or RUG-IV up until October 1, 2025. At this time, these states will need to convert their respective Medicaid State Case Mix methodologies via the Minimum Data Set (MDS) to the PDPM model.
If you are a state that is not one of the current Medicaid Case Mix States (i.e., Massachusetts), HHI strongly recommends implementing a PDPM system RUGS-IV 66 model sans rehab levels. This will save time and improve efficiencies on October 1, 2025 when all Medicaid state providers will be forced to transition to PDPM versus RUG-III and RUG-IV Case Mix methodology.
Conversion MDS Collection OBRA Assessments