How PDGM Affects Home Health Quality of Care

The Patient-Driven Groupings Model (PDGM) is a reimbursement system introduced by the Centers for Medicare & Medicaid Services (CMS) for home health agencies (HHAs) in 2020. It replaced the Home Health Prospective Payment System (HHPPS) and represented a significant shift in how home health care services are reimbursed. PDGM aimed to address challenges in the home health industry, such as inadequate payment accuracy, lack of cost-efficiency, and inconsistent quality outcomes. But with these intentions, the question remains: Does PDGM incentivize better care for patients or does it risk reducing the level of services provided?

This blog will explore the potential effects of PDGM on the quality of home health care. We will discuss whether PDGM leads to improved care, whether it creates risks for reduced services, and assess the broader implications on patient outcomes, agency practices, and healthcare economics.

Understanding PDGM

PDGM is based on the clinical characteristics and the needs of the patient, rather than the volume of visits, as was the case with the prior system (HHPPS). Under PDGM, reimbursement is determined through a combination of factors:

1. Primary Diagnosis: The patient’s primary diagnosis is used to group them into one of the 432 Home Health Resource Groups (HHRGs).
2. Comorbidity: The presence of additional health conditions or comorbidities can affect payment.
3. Timing of Care: The timing and sequence of services (such as the number of episodes) plays a role in determining payment.
4. Functional Impairment: The level of disability or functional impairment also influences the grouping and reimbursement.

This structure shifts the emphasis from the number of visits, which was central to the HHPPS, to patient characteristics, aiming to align payment with patient needs.

Does PDGM Incentivize Better Care?

One of the primary goals of PDGM is to incentivize better care by aligning reimbursement with patient acuity rather than volume. By moving away from a “fee-for-service” model, where the number of visits mattered most, PDGM seeks to promote quality and efficient care delivery. Several key aspects of PDGM have the potential to encourage better patient outcomes:

1. Focus on Patient Complexity

PDGM places more importance on the clinical characteristics of patients. This shift incentivizes home health agencies (HHAs) to provide care that is tailored to individual needs rather than just increasing visit numbers to secure higher reimbursement. Agencies are now financially motivated to address complex patient needs, as these are directly reflected in the payment model.

This can lead to improved care for high-need patients, who may benefit from more customized and effective treatment plans. Agencies have to spend more time assessing patient health conditions, evaluating comorbidities, and developing appropriate care plans. As a result, care plans are more patient-centered, leading to a higher likelihood of positive health outcomes.

2. Encourages Better Coordination

Under PDGM, home health agencies are encouraged to focus on the overall patient experience rather than simply fulfilling a quota of visits. This incentivizes agencies to improve the coordination of care, working closely with physicians, specialists, and other healthcare providers to ensure all aspects of a patient’s care are managed efficiently.

Better coordination leads to better outcomes as it reduces the likelihood of unnecessary hospital readmissions, helps to address all of the patient’s needs in a holistic manner, and ensures that patients receive the right care at the right time.

3. Emphasizes Functional Impairment

PDGM places an emphasis on the level of functional impairment and how it impacts patient outcomes. The model prioritizes patients with higher needs and encourages home health agencies to focus on improving functional outcomes, such as mobility, independence, and quality of life. This can motivate agencies to engage in more proactive care, ensuring that patients not only receive medical attention but also therapeutic services designed to improve their overall well-being.

For instance, a patient who is physically impaired will need more tailored services, including physical therapy and occupational therapy, which PDGM financially supports. Thus, agencies may become more attuned to these needs, leading to better patient care.

4. Quality Reporting and Patient Outcomes

Another feature of PDGM is the use of quality metrics to measure the effectiveness of care. Agencies must submit quality data, which allows for comparisons across providers and reinforces the importance of delivering high-quality care. These metrics, including readmission rates, patient satisfaction, and functional improvement, are used to track whether patient care is improving under the new model.

By holding agencies accountable for patient outcomes, PDGM encourages a culture of continuous improvement. Agencies must focus on providing quality care to avoid penalties tied to poor performance metrics.

Potential Risks: Does PDGM Lead to Reduced Services?

While there are clear incentives for improving care under PDGM, the model also raises concerns about potential downsides, particularly related to cost-cutting, reduced services, and patient access.

1. Financial Pressure on Agencies

PDGM’s shift away from volume-based reimbursement means agencies are now paid based on patient complexity rather than the number of visits provided. While this can align payment with patient needs, there is a risk that it could lead to underutilization of services, especially for patients who may require more frequent care but don’t fit the highest acuity categories.

For example, an agency may prioritize high-acuity patients who are more profitable under the PDGM structure, while providing fewer services to patients with less severe conditions who still need consistent care. Financial pressures could cause agencies to limit the frequency of visits, potentially reducing access to vital care services, even if patients are eligible for them.

2. Risk of Skimping on Care for Lower-Acuity Patients

Because payment under PDGM is based on the patient’s clinical characteristics, including the complexity of their case, there is concern that agencies may reduce care for less complicated patients, who are financially less rewarding under the new model. A lower acuity patient may only require basic monitoring, and home health agencies could decide to provide fewer visits to maximize their profitability. This could lead to under-serving those patients, affecting their long-term health and recovery prospects.

Moreover, agencies may focus too much on optimizing for reimbursement categories, potentially overlooking patients’ actual care needs. This creates the risk that some patients may not receive adequate attention and care despite their eligibility for home health services.

3. Overemphasis on Financial Metrics Over Patient Well-Being

While PDGM is designed to focus on patient acuity and needs, the financial pressures on agencies could lead to unintended consequences, such as prioritizing profitability over patient well-being. Agencies may be incentivized to limit services or discharge patients prematurely to avoid exceeding the reimbursable amount for a particular episode of care.

This concern is particularly significant for patients with chronic conditions who require long-term care. Agencies might be tempted to discharge these patients once they no longer qualify for higher reimbursement, even if their clinical condition has not fully improved. This may undermine long-term health outcomes for certain patient populations, leading to a cycle of frequent hospital readmissions and an overall decline in patient care quality.

4. Risk of Underreporting Comorbidities

Under the PDGM model, agencies are incentivized to report comorbidities accurately, as these can increase reimbursement levels. However, there is a potential risk of over-reporting comorbidities to maximize reimbursement. At the same time, underreporting, particularly in less severe cases, might lead to the financial underpayment of agencies, disincentivizing them from treating patients with multiple conditions.

The pressure to report patients in a way that maximizes reimbursement could distort clinical realities, leading to a misalignment between reimbursement and actual patient needs. This creates a risk where the financial interests of home health agencies conflict with the clinical realities of care.

Conclusion

The transition from the HHPPS to the PDGM model represents a significant shift in how home health care services are reimbursed. In theory, PDGM is designed to incentivize better care by focusing on the complexity of patient needs rather than the volume of visits. This new system has the potential to improve patient outcomes by promoting tailored care, better coordination, and a focus on functional improvement.

However, there are also significant risks associated with the new model. The financial pressures it creates could lead to reduced services for less complex patients, as agencies focus on maximizing reimbursement from higher-acuity cases. Furthermore, there is a risk that agencies may prioritize financial considerations over patient care, potentially leading to underreporting of conditions or premature discharge of patients.

Ultimately, PDGM offers both positive and negative implications for home health care quality. It can drive improvements in patient care through better focus on patient needs and outcomes. However, without careful monitoring and safeguards, there is a real risk that the pressures of financial performance could compromise the very care that PDGM aims to enhance. As the system evolves, it will be crucial for policymakers, home health agencies, and stakeholders to ensure that quality care remains at the forefront of the home health industry.