Set to go into effect January 1, 2020, the Patient Driven Groupings Model (PDGM) is the largest swooping change to the home health reimbursement system since October 2000.

Due to the significant efforts of many, the PDGM final rules in 2018 are quite different from the 2017 proposed rules which initially included the Home Health Groupings Model (HHGM). The most significant model change requires PDGM to be a budget-neutral transition, this is paramount to the survival of home health agencies.

The intent of PDGM is to better align reimbursement with patient needs.

There are varying opinions on whether or not the new model will achieve that objective. Regardless, transitioning to PDGM will create a radical shift in operations for HHAs. PDGM relies heavily on diagnosis coding, OASIS data, and additional patient data to categorize payment periods into relevant payment categories. Most importantly, PDGM eliminates therapy service thresholds.

PDGM preparation isn’t just an option for HHAs—it’s a requirement. The difference between thriving and surviving under PDGM will depend solely on the readiness of agencies and their staff. It’s crucial for agencies to get ahead of the curve for success.

Payment Period Changes

Though PDGM will reimburse agencies based on 30-day payment periods, the 60-day certification/episode model will not change. Agencies are expected to complete OASIS assessments at all the current applicable time intervals. Additionally, the Plan of Care (POC) will remain the point of reference for 60-day episode orders. The new 30-day payment periods require patients to be grouped into one of 432 case-mix groups based on the following criteria:


1. Timing: The first 30-day payment period is considered early if the patient has not been in a home health episode for greater than 60-days when admitted for this episode. The second and all subsequent 30-day payment periods are considered late payment periods.

2. Admission Source:

  • Institutional: If the patient enters a 30-day payment period, where they’ve previously been discharged from an acute or post-acute care facility within 14 days prior to the start of the 30-day payment period, the admission source is considered “Institutional.”
    • Acute or post-acute facilities include: skilled nursing facilities, long term care hospitals, inpatient rehabs, acute care hospitals, or psychiatric facilities.
    • Observation stays and Emergency Room visits do not constitute credit for an Institutional referral.
    • If the patient is admitted to a post-acute facility while being serviced by an HHA, they will require discharge from home health. In order to consider the next 30-day payment period “Institutional”, the patient will require a new admission/Start of Care upon their return.
  • Community: If the patient has not been discharged from an acute or post-acute facility prior to the start of the 30-day payment period, the admission source is considered “Community.”

3. Clinical Group: Clinical groups are intended to reflect the primary reason for a patient receiving home health services. The groups are defined by the principal diagnosis reported on the HH claim. ICD-10-CM coding will be the ONLY source of determining clinical grouping. There are 12 groups used in PDGM:


4. Functional Impairment: The patient’s functional impairment level is based on responses to 8 OASIS items for activities of daily living. The 8 OASIS items include: M1800, M1810, M1820, M1830, M1840, M1850, M1860 & M1033.


The responses to these items will be used in determining whether a patient’s functional impairment is low, medium, or high. It’s important to note that under PDGM, agencies will not receive additional or increased reimbursement based on the number of therapy visits provided to the patient.


5. Comorbidity Adjustment: The Comorbidity Adjustment is based on the comorbid conditions (secondary diagnoses) as reported on the home health claim.

ICD-10-CM coding will be the only source of establishing this level of grouping.

The 30-day payment period may receive:

  • no comorbidity adjustment
  • low comorbidity adjustment
  • or a high comorbidity adjustment

Low Utilization Payment Adjustment (LUPA)

A significant PDGM change to the home health reimbursement model is the massive change to the Low Utilization Payment Adjustment (LUPA).

The current Home Health Prospective Payment System (HHPPS) has a threshold of 5 visits for a 60-day episode. If a patient receives 5 covered visits within a 60-day episode, the HHA receives a full 60-day episodic payment. However, if the claim reflects fewer than 5 patient visits, the agency is only paid per visit.

Under PDGM the agency will receive per visit payments based on the volume of visits within a 30-day payment period. Additionally, each of the individual 432 case-mix groups has its own LUPA level that ranges from 2 to 6 visits. It’s imperative that agencies understand that this could translate into many more per visit payments than under the current HHPPS.

Requests for Anticipated Payments (RAPs)

For billing purposes, agencies will continue to bill Requests for Anticipated Payments (RAPs) and Final Claims, but for each 30-day payment period (which will essentially double the volume of Traditional Medicare billing). Similar to HHPPS, agencies will continue to receive split percentage payments.

For split percentage payments to be made, home health agencies with Medicare certification dates prior to January 1, 2019, will have to submit a RAP at the beginning of each 30-day period of care. For the first 30-day period of care, the split percentage payment will be 60/40 and all subsequent 30-day periods of care will be a split percentage payment of 50/50.

It’s important to note that a final claim must be submitted at the end of each 30-day payment period. Home health agencies that are certified for participation in Medicare on or after January 1, 2019, effective with PDGM implementation, will no longer receive split-percentage payments. These agencies will still be required to submit a “no pay” RAP at the beginning of every 30-day payment period.

There is a high probability that RAP payments will cease for all agencies in the near future. Transition to a Notice of Admission (NOA) format has been discussed. This means that HHAs could file an NOA upon admitting a patient to home health and only final claims for each 30-day payment period.

Proactive PDGM Preparation is Key

For a successful transition to PDGM, HHAs must develop a thorough understanding of how PDGM changes will affect reimbursement and clinical operations. Agencies should take the following actions to begin preparation for PDGM:

        1. Ensure that whomever is finalizing your agency’s ICD-10-CM coding fully understands that the primary diagnosis needs to be specific enough to meet the code list requirements that group patients into Clinical Groupings.
        2. Ensure that whomever finalizes your agency’s ICD-10-CM understands the significance of coding all comorbidities/secondary diagnoses that are pertinent to the patient’s care plan and will impact patient care and the Comorbidity adjustment when calculating a case mix grouping for PDGM.
        3. Evaluate your current practice of providing therapy services. Determine how to provide therapy effectively for patient care and outcomes while containing costs. Consider utilizing therapy assistants, telehealth/remote monitoring, etc.
        4. Evaluate your HHA’s current revenue cycle process. This will allow you to establish whether or not the agency will need to add staff or outsource billing to manage the increased billing volume.
        5. Calculate the impact of the PDGM model on the agency’s reimbursement overall.
        6. Calculate the cash flow impact for the first months of 2020 to establish if your agency will need to consider building cash reserves prior to implementation of PDGM.
        7. Review the agency’s Clinical Operations. Establish patient care plans, determine the frequency and duration of visits, and decide how to best reinforce the expectations of continued excellent patient care and outcomes under PDGM.
        8. Evaluate the current level of LUPA episodes and how that will vary under PDGM.
        9. PDGM will completely transform current home health payment calculation practices and present drastic changes that will require HHAs to adapt quickly.

PDGM is reality and not going anywhere. Healthcare Provider Solutions is dedicated to assisting agencies in reviewing processes in regard to PDGM implementation, outsourced billing solutions, and continued PDGM education. Our seasoned industry professionals are currently guiding agencies nationwide to a smooth PDGM transition.


PDGM Success