What is PDGM?

The Patient-Driven Grouping Model (PDGM) took effect on January 1, 2020, from the Centres for Medicare and Medicaid Services (CMS). The new Medicare payment methodology for home health agencies would significantly impact Home Health’s operations and billing processes. This new payment system has quickly replaced the Home Health Prospective Payment System (HH PPS), which was adopted by caregivers for over 20 years and has become a requirement in no time. The nurses and health care providers would now be paid in 30-day payment periods rather than 60-day payment periods. “Redesigning the home health payment system encourages value over volume and removes incentives to provide unnecessary care,” says CMS Administrator Seema Verma. “This home health final rule mainly focuses on patient needs and not on the volume of care.”

The main objective for CMS to introduce this model was to focus on value-driven therapy rather than time-driven therapy and to reduce unnecessary therapy given to the patients. This would be achieved by monitoring the patient’s characteristics rather than the number of times the patient attended therapy. In simple terms, through PDGM, the recovery of the patients will be monitored, and the billing process will take place accordingly.

There could be an increase in payments for:

  • Non-profit agencies by 2.9%
  • Agencies with less than 100 episodes in annual volume by 1.9% and
  • Facility-based agencies by 3.9%.

There would be a decrease in payments for:

  • For-profit agencies by 2.2%
  • Freestanding agencies by 1.2% and
  • Agencies with more than 1000 episodes in annual volume by 0.2%.

Is PDGM advantageous for Health Care Agencies’?

According to Centres for Medicare and Medicaid Services (CMS),

  • Heath care agencies with less than 100 episodes of care in annual volume,
  • Non-profit agencies, and
  • Facility-based agencies

Are hugely benefited through the implementation of PDGM.

  • Agencies with more than 1,000 episodes of care in annual volume,
  • Freestanding agencies, and
  • For-profit agencies

Are expected to have strong losses under PDGM. While CMS suspected the above, other sources believe that home care agencies with less than an annual revenue of $2 Million would be the losers in the long run.

PDGM’s impact on Revenue and Cash Flows in Health Care Agencies

One of the most extensive changes under PDGM is its 30-day payment period, this change needs to be implemented in almost every part of the agency.
The claim submission has become double due to this new payment method, in addition to this, agencies need to also be prepared for an increase in:

  • Pre-bill edit reporting,
  • Payment verification,
  • Cash posting,
  • Posting Low Utilization Payment Adjustment (LUPA),
  • Unpaid claim tracking and follow-up, and
  • Denied claims and/or additional documentation requests (ADRs).

How to redeem your agency from PDGM losses?

The following are the top 5 things your agency should focus on to avoid significant losses under PDGM

1. Intake / Admission Deficiencies

Many of the issues related to losing money on the backend are related to issues that took place in the frontend. Here is a list of absolutes that must be gathered during the intake/admission process:

  • Referral Order and confirmation of the physician that is assigned to the patient in home health.
  • Face to Face acknowledgement that a face-to-face encounter took place.
  • Make sure the history, physical and discharge information are collected.
  • Medicare eligibility verification – making sure that the patient has encountered with previous home health episode to determine if the admission is early or late.

2. Untimely signed orders

Agencies should make sure that they are getting signed orders returned so that they can efficiently get the billing process done, as cash flow is one of the major issues agencies face under PDGM

3. Impact on OASIS-D1 on PDGM

There is a huge impact of OASIS on PDGM, HIPPS code calculation in functional impairment scoring which derives from activities of daily living of OASIS. This includes only capital items from OASIS which are used in PDGM scoring. This is the only score used by agencies to impact scoring from OASIS as it implies an increase in reimbursement.

4. Institutional and community Mishaps

There is a significant difference between a patient who receives institutional credit and community credit. For a patient to receive institutional credit the patient should be admitted and discharged from a care hospital or qualifying post-acute facility. Where the discharge rate is 14 days prior to home health and the 30-day payment period begins. Hence, the claims for these periods should have a proper occurrence code, if the patient does not have one, the claim will not be valid.

5. Lack of Monetary LUPAs and PEPs

Low Utilization Payment Adjustment (LUPA) and Partial Episode Payment (PEP) are the most common payment adjustments that agencies receive. LUPA occurs when its threshold is not met in the given 30-day payment period. PEP adjustments occur when the patient is being discharged, readmitted, or transferred between agencies during the same 30-day payment period.