What are “Base Rates”?
A PDPM rate consists of 6 parts:
Each of the six items have a rate. Except for the Non-Case-Mix part, all rates are multiplied by a corresponding case-mix, which is reflective of the conditions recorded for the patient. The abbreviation for case-mix is CMI.
The CMI should indicate acuity. So, higher CMI means higher acuity and higher pay. Finally, each part of the rate is calculated as follows: (Note that we’re greatly simplifying the rate here. Each rate is also split into labor and non-labor portions.)
Note the application of wage index. Wage indices vary throughout the country and reflect the cost of labor. So in Santa Clara county California, the wage index is 1.9024. Meanwhile the wage index in Palm Beach county Florida is 0.8996.
You can see that comparing rates with wage indexing is difficult. The solution to this is to set the wage index equal to 1. This is what “Base Rates” are. Additionally, we ignore things like Value-Based Purchasing.
“Base Rates” make it possible compare two facilities in different parts of the country based solely on CMI and not the operational costs associated with labor.
This takes a little getting used to. Because, if you know your facility is typically paid $710 per patient per day for PDPM, it’s strange that your “base rate” is only $675. Wage indexing plays an important role in rate.
When to use caution
While base rates are great for comparison purposes, use caution when doing “what if” scenarios: Wage indexing and value-based purchasing will effect the final rate.
For example, say you want to evaluate a software product or a therapy company <wink>. You look at the difference in average base rate between two groups of facilities and try to extrapolate the performance difference. That difference WILL change based on wage indexing and value based purchasing and other factors.
That doesn’t mean the general direction of the change will be different. It just means the absolute value of the difference may not be exactly what you expect.
The important thing to remember: IF a tool or system helps you to more accurately capture what is true about a resident under PDPM, compliance and pay increase.
Compliance is ALWAYS goal #1.