# Too Sick to be True? Evaluating Potentially Problematic Diagnosis Coding Practices in Medicare's Patient‐Driven Payment Model

## TL;DR

This study finds that Medicare's new payment model for nursing homes led to increased diagnosis coding, especially in for-profit facilities, raising concerns about potential false reporting.

## Contribution

The study provides empirical evidence of increased diagnosis coding intensity in skilled nursing facilities after the introduction of Medicare's PDPM, with significant variation by facility profit status.

## Key findings

- PDPM was associated with a 7.1% relative increase in diagnosis count and 13.6% in Elixhauser scores in skilled nursing facilities.
- For-profit SNFs showed a 2.8% higher relative increase in diagnoses and 4% in Elixhauser scores compared to non-profits.
- The probability of documenting five documentation-sensitive conditions increased significantly after PDPM implementation.

## Abstract

To use a quasi‐experimental design to quantify changes in skilled nursing facility (SNF) diagnosis documentation associated with Medicare's Patient‐Driven Payment Model (PDPM). PDPM aims to promote patient‐centered care in skilled nursing facilities (SNFs) by matching reimbursement to patient characteristics, including clinical complexity, which is captured in part through documentation of diagnoses.

We used a difference‐in‐differences design to estimate PDPM's effects on SNF diagnosis documentation, including the number of diagnoses and clinical complexity scores via the Elixhauser comorbidity index. Hospital claims served as a non‐equivalent dependent variable control. Triple interaction terms in fixed effect linear models assessed variation by SNF profit status. Changes in the probability of recording five documentation‐sensitive conditions were estimated via marginal effects from generalized linear models.

Secondary analysis of 100% Traditional Medicare claims (2018–2021), comprising over 4.8 million hospital‐to‐SNF episodes.

Compared against hospital claims from hospital‐SNF episodes, PDPM announcement was associated with 0.83 additional diagnoses on SNF claims, representing a relative increase of 7.1%. Similarly, Elixhauser scores increased by 0.88 points (relative 13.6%). We observed significant variation by profit status; when accounting for anticipatory behavior, profit status was associated with an additional relative 2.8% in diagnoses and 4% in Elixhauser points. PDPM was also associated with increased probability of documenting all five documentation‐sensitive conditions: 3.9 percentage points (pp) for chronic pulmonary disease, 5.0 pp for complicated diabetes, 2.8 pp for heart failure, 7.3 pp for obesity, and 9.8 pp for weight loss (all reported p < 0.001).

PDPM was associated with increased coding intensity across multiple measures—and more so in for‐profit SNFs—highlighting the need to further evaluate whether SNFs are accurately documenting or falsely inflating clinical complexity. Sustaining Medicare's payment accuracy will require continued monitoring of diagnosis coding behavior and its alignment with actual clinical complexity.

What is known about this topic
○Historically, certain SNFs (e.g., profit‐motivated SNFs) have changed behaviors in response to Medicare payment policy, but precise estimation of such behavioral changes remains limited.○The Patient‐Driven Payment Model (PDPM) fundamentally changed the way Skilled Nursing Facilities (SNF) were paid under Medicare to promote patient‐centricity while remaining budget‐neutral.○PDPM aims to reimburse SNFs appropriately for the work required to care for clinically complex patients, where reimbursement rates are determined partly based on diagnoses rather than therapy volume provided.
What this study adds
○For all Traditional Medicare hospital‐SNF episodes between 2018–2021, coding intensity increased more than was expected after PDPM announcement (relative 7.1% and 13.6% increase in diagnosis count and Elixhauser score, respectively).○For‐profit SNFs documented diagnoses significantly more than not‐for‐profits, and among all SNFs, the probability of recording five documentation‐sensitive conditions increased significantly after PDPM announcement.○Changes in documentation may reflect both false inflation of complexity (upcoding) and new efforts to code existing patient complexity.

What is known about this topic
○Historically, certain SNFs (e.g., profit‐motivated SNFs) have changed behaviors in response to Medicare payment policy, but precise estimation of such behavioral changes remains limited.○The Patient‐Driven Payment Model (PDPM) fundamentally changed the way Skilled Nursing Facilities (SNF) were paid under Medicare to promote patient‐centricity while remaining budget‐neutral.○PDPM aims to reimburse SNFs appropriately for the work required to care for clinically complex patients, where reimbursement rates are determined partly based on diagnoses rather than therapy volume provided.

Historically, certain SNFs (e.g., profit‐motivated SNFs) have changed behaviors in response to Medicare payment policy, but precise estimation of such behavioral changes remains limited.

The Patient‐Driven Payment Model (PDPM) fundamentally changed the way Skilled Nursing Facilities (SNF) were paid under Medicare to promote patient‐centricity while remaining budget‐neutral.

PDPM aims to reimburse SNFs appropriately for the work required to care for clinically complex patients, where reimbursement rates are determined partly based on diagnoses rather than therapy volume provided.

What this study adds
○For all Traditional Medicare hospital‐SNF episodes between 2018–2021, coding intensity increased more than was expected after PDPM announcement (relative 7.1% and 13.6% increase in diagnosis count and Elixhauser score, respectively).○For‐profit SNFs documented diagnoses significantly more than not‐for‐profits, and among all SNFs, the probability of recording five documentation‐sensitive conditions increased significantly after PDPM announcement.○Changes in documentation may reflect both false inflation of complexity (upcoding) and new efforts to code existing patient complexity.

For all Traditional Medicare hospital‐SNF episodes between 2018–2021, coding intensity increased more than was expected after PDPM announcement (relative 7.1% and 13.6% increase in diagnosis count and Elixhauser score, respectively).

For‐profit SNFs documented diagnoses significantly more than not‐for‐profits, and among all SNFs, the probability of recording five documentation‐sensitive conditions increased significantly after PDPM announcement.

Changes in documentation may reflect both false inflation of complexity (upcoding) and new efforts to code existing patient complexity.