SNF Therapy and PDPM Classification Audits: Common MDS Section GG and Primary Diagnosis Errors

Under the Patient Driven Payment Model (PDPM), Medicare no longer pays skilled nursing facilities (SNFs) based on the number of therapy minutes provided. Instead, the physical therapy (PT), occupational therapy (OT), and speech-language pathology (SLP) components are driven largely by patient characteristics recorded on the Minimum Data Set (MDS): the primary diagnosis, functional status from Section GG, and other clinical indicators.

That shift moved audit risk from therapy minutes to MDS coding accuracy. The HHS Office of Inspector General (OIG) has launched a Skilled Nursing Facility Reimbursement audit series under PDPM. Its first report, issued in November 2025, found that 99 of 100 sampled claims at a large New York SNF did not comply with Medicare requirements and estimated overpayments of at least $31.2 million. Among the problems OIG cited were medical records that did not support the HIPPS code billed.

This article explains how primary diagnosis and Section GG drive PDPM classification, the most common errors reviewers find, therapy documentation that is still required under PDPM, and how to audit your own claims. It is educational and does not replace legal or professional advice.

How PDPM Classifies Therapy

Physical and Occupational Therapy

For the PT and OT components, PDPM assigns each patient to a case-mix group based on:

• A clinical category, determined by the primary diagnosis reported on the MDS and, in some cases, a surgical procedure performed during the prior inpatient stay.

• A function score, calculated from selected Section GG self-care and mobility items.

Speech-Language Pathology

For the SLP component, classification is based on:

• Whether the clinical category is acute neurologic.

• The presence of SLP-related comorbidities.

• Cognitive impairment.

• Swallowing disorders and mechanically altered diet.

The HIPPS Code

The case-mix groups for PT, OT, SLP, nursing, and non-therapy ancillaries combine into a Health Insurance Prospective Payment System (HIPPS) code that determines payment. Errors in any of these inputs can change the HIPPS code.

Assessments

The 5-day assessment sets classification for the stay, with an optional Interim Payment Assessment when the patient's condition changes significantly. The Long-Term Care Facility Resident Assessment Instrument (RAI) User's Manual provides coding instructions.

The Primary Diagnosis

Where It Is Reported

The primary diagnosis for the SNF stay is reported on the MDS using an ICD-10-CM code. PDPM maps the code to a clinical category, such as major joint replacement or spinal surgery, acute neurologic, non-surgical orthopedic, cardiovascular and coagulations, pulmonary, medical management, and others. CMS publishes the mapping and updates it through annual SNF payment rulemaking.

Surgical Procedures

For some primary diagnoses, the clinical category also depends on whether the patient had a related surgical procedure during the prior inpatient stay, which is reported on the MDS. Incorrectly coding a surgical procedure can move a patient to a different clinical category.

Common Primary Diagnosis Errors

• Coding a condition that is not the primary reason for the SNF stay.

• Coding a diagnosis treated during the hospital stay that is no longer the focus of SNF care.

• Using a code not supported by physician documentation.

• Coding a surgical procedure that was not performed during the prior inpatient stay or is not related to the primary diagnosis.

• Using codes that CMS's mapping does not accept as a primary diagnosis, which can cause the assessment or claim to be returned.

• Failing to follow ICD-10-CM coding conventions, such as sequencing and seventh characters for injuries.

Fixes

• Obtain complete hospital records at admission, including discharge summaries and operative reports.

• Have the primary diagnosis confirmed by physician documentation.

• Choose the diagnosis that best reflects the primary reason for the SNF stay.

• Use the current CMS PDPM mapping and ICD-10-CM guidelines.

• Query physicians when documentation is unclear, using compliant, non-leading queries.

Section GG

What Section GG Measures

Section GG captures the patient's self-care and mobility performance, such as eating, oral hygiene, toileting hygiene, bed mobility, transfers, and walking. PDPM uses selected Section GG admission performance items to calculate function scores for the PT, OT, and nursing components.

The Coding Rules

Under the RAI Manual, Section GG admission performance is coded based on the patient's usual performance during the assessment period, generally the first three days of the stay, before therapy interventions take full effect. Codes range from independent to dependent, with separate codes for activities not attempted. PDPM treats certain activity not attempted codes in specific ways for function score calculation.

Common Section GG Errors

• Coding the worst performance observed rather than usual performance.

• Coding based on a single observation instead of the assessment period.

• Coding activities as not attempted when the patient could have performed them.

• Scores not supported by nursing and therapy documentation.

• Inconsistencies between Section GG, therapy evaluations, and nursing notes.

• Admission scores showing much more impairment than the record supports, followed by rapid improvement.

• Coding by one discipline without interdisciplinary input.

Why These Errors Matter

Lower function scores generally indicate greater impairment and can increase payment. When documentation does not support the coded impairment, reviewers may recode Section GG, change the HIPPS code, and find an overpayment.

Fixes

• Train staff on usual performance and the assessment period.

• Collect observations from nursing and therapy across all shifts during the assessment period.

• Document observations that support each Section GG score.

• Hold an interdisciplinary review before finalizing Section GG.

• Compare Section GG scores with therapy evaluations and nursing notes.

• Audit Section GG coding regularly.

SLP Classification Errors

• Cognitive impairment coded without support from the Brief Interview for Mental Status or staff assessment.

• Swallowing disorders coded without documented signs and symptoms.

• Mechanically altered diet coded without an order and documentation.

• SLP-related comorbidities coded without active diagnoses.

• Acute neurologic clinical category assigned without a supported primary diagnosis.

Therapy Documentation Still Matters

PDPM changed payment, but it did not change coverage requirements. Therapy must still be reasonable and necessary, and documentation must support it.

Skilled Need

Under 42 CFR 409.31 through 409.34, SNF coverage requires daily skilled services. Skilled rehabilitation services must be needed and provided at least five days a week to meet the daily requirement when skilled nursing is not needed daily.

Therapy Documentation

• Evaluations with objective findings and goals.

• Plans of care with frequency and duration.

• Treatment notes describing skilled interventions and the patient's response.

• Progress reports showing progress toward goals or explaining maintenance needs.

• Discharge summaries.

Maintenance Therapy

Following the Jimmo v. Sebelius settlement, CMS clarified that coverage does not depend on improvement potential. Skilled maintenance therapy may be covered when the specialized skills of a therapist are needed.

Concurrent and Group Therapy

Under PDPM, CMS limits the combined amount of concurrent and group therapy to no more than 25 percent of total therapy minutes for each therapy discipline. Facilities must report therapy minutes by mode on the MDS and should track compliance.

Therapy Volume Under PDPM

After PDPM began, therapy minutes declined in many SNFs. Reviewers may look at whether patients classified in high therapy groups received therapy consistent with their needs, and whether documented skilled need supports coverage.

The Interim Payment Assessment

An Interim Payment Assessment is optional, but when a patient's condition changes significantly, completing one can make classification more accurate. Reviewers may question patterns of never completing Interim Payment Assessments, or completing them without support.

How to Audit PDPM Therapy Classification

Step 1: Analyze Data

• Compare clinical category distributions with peers.

• Compare admission Section GG scores with discharge scores and peers.

• Review PEPPER for SNFs.

• Identify outliers by clinician, unit, or referral hospital.

Step 2: Select a Sample

Use a probe sample for discovery or a statistically valid random sample for estimating overpayments, designed with a statistician when appropriate.

Step 3: Recode Independently

Have a qualified MDS coordinator or reviewer, not involved in the original coding, recode the primary diagnosis, surgical procedure items, Section GG items, and SLP indicators from the medical record using the RAI Manual in effect.

Step 4: Recalculate the HIPPS Code

Determine whether independent coding changes the PT, OT, SLP, and nursing case-mix groups and payment.

Step 5: Review Skilled Need and Therapy Documentation

Confirm that daily skilled services and therapy documentation support coverage.

Step 6: Analyze Root Causes

Look for training gaps, documentation workflows, discipline silos, or pressure to code for payment.

Step 7: Correct and Educate

Provide training, revise workflows, and add pre-submission review.

Step 8: Address Overpayments

Evaluate obligations under the 60-day overpayment rule at 42 CFR 401.305 with counsel.

Pre-Submission Review

Before each 5-day assessment is submitted, a second reviewer should:

• Confirm the primary diagnosis, clinical category, and any surgical procedure.

• Verify Section GG scores against documentation from the assessment period.

• Confirm SLP indicators and comorbidities.

• Confirm the HIPPS code.

• Document the review.

The reviewer should correct errors in both directions and never push coding toward higher payment.

A Hypothetical Example

A SNF's data shows that its admission Section GG scores indicate much more impairment than peers, and that most patients improve dramatically by discharge. A 40-chart audit finds that MDS staff were coding Section GG based on the worst performance during the first day, before therapy evaluations, and that nursing notes described patients as needing much less help. The audit also finds several primary diagnoses coded as acute neurologic conditions without physician documentation supporting that focus of care.

The SNF retrains staff on usual performance, adds interdisciplinary Section GG review, requires physician confirmation of primary diagnoses, and adds a second review before submission. With counsel, it evaluates and returns overpayments. A follow-up audit shows Section GG scores consistent with documentation and peers.

What OIG's First PDPM Report Signals

The Pinnacle report is the first completed audit in OIG's Skilled Nursing Facility Reimbursement series, which OIG lists among its active work. The series includes several additional audits of individual SNFs. The design of these audits matters for every facility. OIG selects a statistical sample of claims, has medical reviewers examine the records, and then extrapolates the error rate to the facility's full population of claims for the audit period. A small number of coding errors in a sample can therefore translate into a large estimated overpayment.

In the Pinnacle audit, OIG found that nearly every sampled claim had at least one problem, and the findings included both coverage problems, such as services that were not skilled or not reasonable and necessary, and payment problems, such as HIPPS codes the medical record did not support. Facilities should read the report closely, compare its findings with their own processes, and assume that later reports in the series will use a similar approach.

Why MDS Accuracy Is a Payment Issue

Under PDPM, the MDS is not only a clinical and quality tool. It is the payment document. Every item that feeds the PT, OT, SLP, nursing, or non-therapy ancillary components affects reimbursement. Reviewers will compare MDS items with the medical record, and items that cannot be supported will be recoded. For this reason, MDS coordinators, therapists, nurses, and physicians all share responsibility for payment accuracy.

Documentation That Supports Section GG Scores

Section GG scores are only as strong as the documentation behind them. Reviewers want to see evidence that the coded level of assistance reflects what staff actually observed during the assessment period. Useful documentation includes:

• Therapy evaluation findings describing the patient's performance on transfers, bed mobility, walking, and self-care activities, including the amount of assistance needed.

• Nursing notes across all shifts describing assistance with toileting, eating, oral hygiene, and mobility.

• Certified nursing assistant documentation of activities of daily living.

• Notes explaining why an activity was not attempted, such as a medical condition or safety concern.

• Interdisciplinary meeting notes describing how the team reached the coded score.

When documentation from different disciplines conflicts, the facility should resolve the conflict before coding and record how it was resolved. A record in which therapy describes minimal assistance while the MDS codes substantial assistance invites recoding.

Avoiding the Appearance of Upcoding

Patterns can matter as much as individual records. A facility whose admission scores consistently show more impairment than its peers, followed by unusually large improvement, may draw attention even when each record looks reasonable. Facilities should monitor these patterns and investigate outliers. The goal is not to change coding to match peers, but to confirm that coding reflects patients' actual performance.

Common Myths About PDPM Coding

Myth: Therapy Minutes No Longer Matter

Therapy minutes no longer drive payment, but they are still reported on the MDS, they still demonstrate that skilled services were delivered, and the concurrent and group therapy limit still applies. A patient classified in a high-paying therapy group who receives little therapy may raise questions about whether skilled services were needed.

Myth: The Hospital's Diagnosis Is Always the Right Primary Diagnosis

The hospital's principal diagnosis is a starting point, but the SNF primary diagnosis should reflect the primary reason for the SNF stay. Those are sometimes the same and sometimes different. The SNF must make its own determination based on documentation.

Myth: Lower Section GG Scores Are Safer Because They Reflect Patients Who Need Help

Section GG scores must reflect usual performance. Coding more impairment than the record supports is an error, regardless of intent, and can create overpayments.

Myth: Only the MDS Coordinator Is Responsible

Accurate coding depends on documentation from therapy, nursing, and physicians. Everyone who documents in the record affects the MDS.

Questions Leadership Should Ask

• How do our clinical category distribution and admission Section GG scores compare with peers?

• Who confirms the primary diagnosis, and is physician documentation always in the record?

• Do we hold interdisciplinary Section GG reviews before every 5-day assessment is submitted?

• When did we last audit MDS coding independently?

• Do we track concurrent and group therapy percentages by discipline?

• Are therapy notes clear about skilled interventions and patient response?

• Have we reviewed the Pinnacle report findings against our own processes?

• Do we have a process for evaluating and returning overpayments?

Key Takeaways

• Primary diagnosis and Section GG drive PT and OT classification under PDPM.

• Section GG admission performance is coded on usual performance during the assessment period, not worst performance.

• Primary diagnoses must reflect the reason for the SNF stay and be supported by physician documentation.

• SLP indicators require documentation of cognitive impairment, swallowing disorders, diets, and comorbidities.

• Coverage still requires daily skilled services, and therapy documentation still matters.

• Independent recoding, pre-submission review, and data monitoring reduce risk.

Responding to a PDPM Audit

If a contractor or OIG requests records for PDPM claims, the facility should respond carefully and on time. Additional documentation requests from MACs generally allow 45 days, and requests from Unified Program Integrity Contractors generally allow 30 days. A strong response includes:

• The complete MDS assessment and the HIPPS code billed.

• Hospital records supporting the primary diagnosis and any surgical procedure.

• Physician certification and recertification statements required under 42 CFR 424.20.

• Therapy evaluations, plans of care, treatment notes, and progress reports.

• Nursing documentation from the Section GG assessment period.

• A cover letter that guides the reviewer to the documentation supporting each MDS item.

If the reviewer recodes the MDS and identifies an overpayment, the facility can appeal. Redetermination must be requested within 120 days, but filing within 30 days prevents recoupment during that level under 42 CFR 405.379. Because new evidence is generally limited after the reconsideration level, facilities should submit all supporting documentation early.

Training Priorities for MDS and Therapy Teams

Training is most effective when it uses the facility's own records. Facilities can pull deidentified examples from internal audits and walk staff through how each Section GG item and primary diagnosis should have been coded. Annual training should also cover changes in the RAI Manual and the CMS PDPM mapping, which CMS updates through annual rulemaking.

Frequently Asked Questions

What drives PT and OT classification under PDPM?

The clinical category from the primary diagnosis, sometimes adjusted for surgical procedures, and the function score from Section GG.

How should Section GG admission performance be coded?

Based on the patient's usual performance during the assessment period, following the RAI Manual.

Do therapy minutes matter under PDPM?

Minutes no longer drive payment, but therapy must still be reasonable and necessary, documented, and reported, and concurrent and group therapy are limited to 25 percent per discipline.

What is the most common primary diagnosis error?

Coding a condition that is not the primary reason for the SNF stay or is not supported by physician documentation.

How can SNFs reduce risk?

Train staff, use interdisciplinary input, verify documentation, add pre-submission review, and audit regularly.

Conclusion

Under PDPM, therapy payment depends on the accuracy of the primary diagnosis and Section GG. Common errors, such as unsupported primary diagnoses, worst-performance Section GG coding, and SLP indicators without documentation, can change HIPPS codes and create overpayments. SNFs that verify diagnoses with physician documentation, code Section GG based on usual performance supported by interdisciplinary documentation, maintain strong therapy records, review assessments before submission, and audit regularly will be well prepared for OIG and contractor review.

How HealthBridge Can Help

HealthBridge is a healthcare management consulting firm that helps SNFs audit PDPM classification through independent MDS recoding, Section GG and primary diagnosis reviews, therapy documentation audits, pre-submission review processes, and staff training. If you want to strengthen your PDPM coding, please get in touch with us. We will be happy to help you with this topic.

References

• Centers for Medicare & Medicaid Services. Patient Driven Payment Model. https://www.cms.gov/medicare/payment/prospective-payment-systems/skilled-nursing-facility-snf/patient-driven-payment-model

• Centers for Medicare & Medicaid Services. Minimum Data Set 3.0 Resident Assessment Instrument Manual. https://www.cms.gov/medicare/quality/nursing-home-improvement/resident-assessment-instrument-manual

• Centers for Medicare & Medicaid Services. Medicare Benefit Policy Manual, Chapter 8, Coverage of Extended Care (SNF) Services Under Hospital Insurance. https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/bp102c08.pdf

• Centers for Medicare & Medicaid Services. Jimmo Settlement. https://www.cms.gov/medicare/coverage/jimmo-settlement

• Electronic Code of Federal Regulations. 42 CFR Part 409, Subpart D, Requirements for Coverage of Posthospital SNF Care. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-409/subpart-D

• Electronic Code of Federal Regulations. 42 CFR Part 413, Subpart J, Prospective Payment for Skilled Nursing Facilities. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-413/subpart-J

• Electronic Code of Federal Regulations. 42 CFR 401.305, Requirements for Reporting and Returning of Overpayments. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-A/part-401/subpart-D/section-401.305

• Electronic Code of Federal Regulations. 42 CFR 405.379, Limitation on Recoupment of Provider and Supplier Overpayments. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-405/subpart-C/section-405.379

• U.S. Department of Health and Human Services, Office of Inspector General. Skilled Nursing Facility Reimbursement Series (SRS-A-25-010). https://oig.hhs.gov/reports/work-plan/browse-work-plan-projects/srs-a-25-010/

• U.S. Department of Health and Human Services, Office of Inspector General. Nearly All Skilled Nursing Services Provided by Pinnacle Multicare Nursing and Rehabilitation Center Did Not Meet Medicare Payment Requirements (A-02-22-01017). https://oig.hhs.gov/reports/all/2025/nearly-all-skilled-nursing-services-provided-by-pinnacle-multicare-nursing-and-rehabilitation-center-did-not-meet-medicare-payment-requirements

• Centers for Disease Control and Prevention, National Center for Health Statistics. ICD-10-CM. https://www.cdc.gov/nchs/icd/icd-10-cm/index.html