The Patient Driven Payment Model, Skilled Nursing Facility Coding Intensity, and Medicare Expenditures

The Patient Driven Payment Model (PDPM), implemented in October 2019, fundamentally changed how Medicare reimburses skilled nursing facilities (SNFs) for postacute care, shifting from therapy volume-based payment to reimbursement based on patient clinical and functional characteristics. Understanding the relationship of the PDPM to SNF coding practices, Medicare expenditures, and clinical outcomes is essential for evaluating its policy and clinical implications.

To evaluate changes in SNF diagnostic coding intensity, Medicare expenditures, and patient outcomes before and after PDPM implementation.

This retrospective cohort study used regression discontinuity analysis of traditional Medicare beneficiaries aged 65 and older who were admitted to SNFs for postacute care after hospitalization between January 2018 and February 2020. All analysis was completed between August 2024 and April 2025.

PDPM implementation on October 1, 2019.

Primary outcomes included SNF relative coding intensity measured as the difference between SNF and hospital Elixhauser Comorbidity index scores, 30-day rehospitalization, 30-day mortality, SNF episode expenditures, SNF length of stay, and mean daily therapy minutes.

The study included 2 065 809 Medicare beneficiaries (mean [SD] age, 81.2 [8.6] years; 61% female individuals; 8.8% Black, 1.3% Hispanic, and 86.8% White). PDPM implementation was associated with a significant increase in SNF relative coding intensity (0.54 points; 95% CI, 0.40-0.68; P < .001) and a $665 increase (95% CI, $437-$892; P < .001) in SNF episode expenditures. No significant changes were observed in 30-day rehospitalization or mortality rates. Increases in spending were concentrated among beneficiaries with higher clinical complexity and in for-profit SNFs.

This study found that PDPM implementation was associated with increased coding intensity and Medicare expenditures in SNFs, without changes in patient mortality and readmissions. These findings suggest that SNFs responded to PDPM incentives through changes in coding practices, underscoring the importance of continued monitoring to ensure that the financial incentives of PDPM promote support accurate coding, equitable reimbursement, and high-quality care.