Key Coding Changes Under PDGM: What Home Health Agencies Need to Know

The Patient-Driven Groupings Model (PDGM) revolutionized the way home health agencies (HHAs) approach patient care and billing, emphasizing a more comprehensive and accurate representation of patient conditions. Implemented by the Centers for Medicare & Medicaid Services (CMS) in January 2020, PDGM replaced the previous Prospective Payment System (PPS), shifting the focus from therapy volume to clinical characteristics and patient needs. In particular, the PDGM introduced significant coding changes that require home health agencies to be more precise than ever in their documentation and diagnosis coding.

For home health agencies, ensuring that coding practices align with the new PDGM framework is crucial, not only to comply with regulations but to ensure proper reimbursement. Accurate coding can directly impact the financial health of an agency, as it determines payment levels and ultimately the agency’s ability to continue providing high-quality care to patients. This blog will explore the key coding changes under PDGM and highlight the importance of accurate diagnoses, especially when it comes to influencing billing.

Understanding PDGM: A Quick Overview

Before diving into the coding changes themselves, it’s important to understand the basic framework of the Patient-Driven Groupings Model. PDGM alters the way home health agencies receive reimbursement for care. The model is primarily based on two key factors: the patient’s clinical characteristics and the timing of their care episode.

Under PDGM, Medicare pays home health agencies based on the patient’s clinical condition and functional status, as well as other factors like the timing of the episode (whether it is early or late in the year). The new model replaces the old therapy-based payment system with a more comprehensive, diagnosis-driven approach that requires accurate and complete coding.

Key Coding Changes Under PDGM

1. Increased Focus on Primary Diagnosis

Under PDGM, the primary diagnosis becomes more important than ever. In the past, therapy services were a significant factor in determining payment rates under PPS. Now, home health agencies must focus on providing a complete and accurate diagnosis, as this determines how the patient is grouped into one of the 432 case-mix groups (CMGs) under PDGM.

The primary diagnosis is one of the driving factors that categorize the patient’s condition into a certain CMG, which directly impacts the reimbursement rate. As such, home health agencies must ensure that they assign the most specific and appropriate ICD-10 diagnosis codes. This means avoiding vague or unspecified diagnoses and instead opting for precise codes that reflect the full scope of the patient’s condition.

Example: A home health agency may previously have used a generic diagnosis such as “stroke” for a patient. Under PDGM, it would be essential to specify whether the stroke was ischemic or hemorrhagic, as this difference influences the payment group and, consequently, the reimbursement rate.

2. Role of Co-morbidities

In addition to the primary diagnosis, co-morbidities (secondary conditions that exist alongside the primary diagnosis) play an increasingly important role in PDGM. Co-morbidities are now considered in determining a patient’s case-mix group, and accurately coding them can significantly impact the payment rate.

PDGM provides higher reimbursement rates for patients with certain co-morbidities, as these patients are considered to require more intensive care. Therefore, coding all relevant co-morbid conditions, even if they are not the primary reason for the patient’s admission, is essential to capture the full scope of the patient’s health status.

Example: If a patient is being treated for heart failure but also has diabetes, coding both conditions will more accurately reflect the complexity of their care needs and improve reimbursement.

3. Episode Timing: Early vs. Late Episodes

Under PDGM, home health payment is also influenced by whether the episode is early or late. An early episode occurs during the first 30-day period of care, while a late episode occurs after the first 30-day period.

The timing of the episode can have an impact on the reimbursement rate, with higher payment rates typically associated with early episodes. Agencies must properly code the timing of the episode and ensure that the transition between early and late episodes is handled accurately.

Accurate coding of episode timing is essential because CMS uses this information to adjust the payment amount based on the timing of the patient’s care. Late episodes may also trigger the need for additional documentation to support continued care or re-evaluation of patient progress.

4. Functional Impairment Coding

Another important coding change under PDGM is the increased emphasis on functional impairment. CMS has placed greater focus on the patient’s functional status, which is evaluated through the use of standardized functional assessments. The goal is to provide a more patient-centered approach, where reimbursement aligns with the level of care needed for a patient based on their ability to perform daily activities.

Functional impairment is assessed through tools like the Outcome and Assessment Information Set (OASIS), which requires detailed documentation about the patient’s abilities and limitations. Proper coding of functional impairment can help determine the appropriate case-mix group and ensure that agencies are reimbursed appropriately for the care they provide.

Example: If a patient with chronic obstructive pulmonary disease (COPD) has significant difficulty with ambulation or requires assistance with basic daily activities, these functional limitations should be accurately coded using the OASIS tool.

5. Oasis Items and Diagnosis Codes

The OASIS assessment is a key component of PDGM and plays a pivotal role in the coding process. The assessment includes a wide range of items that evaluate the patient’s functional status, clinical needs, and other factors influencing their care. For example, the OASIS tool asks about activities of daily living (ADLs), mobility, and cognitive function, all of which can influence the case-mix group under PDGM.

It’s critical that OASIS items are completed accurately and thoroughly, as the information provided in these assessments directly influences the coding of the patient’s diagnoses and functional status. Incomplete or incorrect OASIS responses can result in incorrect coding, which could lead to underpayment or overpayment.

Example: If a patient is unable to perform activities such as bathing or dressing, the OASIS assessment must reflect this functional limitation. It’s also important that the corresponding ICD-10 codes reflect the patient’s actual condition, so the case-mix group reflects their true needs.

6. Impact of Accurate Coding on Reimbursement and Compliance

As mentioned, accurate coding under PDGM directly impacts reimbursement. With a payment system that heavily relies on clinical and functional data, agencies must ensure that their coding practices are both accurate and compliant with CMS guidelines. Incorrect coding can lead to improper payments, either through underpayment or overpayment, both of which can trigger audits or penalties.

Moreover, accurate coding and documentation help demonstrate medical necessity and support the agency’s claims for payment. Properly coded diagnosis information ensures that the agency is paid for the actual care provided, which helps maintain financial stability and supports high-quality patient care.

Example: A home health agency that consistently codes and documents diagnoses thoroughly and correctly is more likely to avoid audits, billing disputes, and compliance issues. Additionally, the agency will be reimbursed more fairly for the complexity of care required by its patients.

Best Practices for Home Health Agencies

To successfully navigate the coding changes under PDGM, home health agencies should adopt the following best practices:

1. Invest in Training and Education: Ensure that staff, particularly coders and clinicians, are thoroughly trained on the requirements of PDGM and the importance of accurate coding.
2. Regularly Review Coding Practices: Continuously monitor and review coding practices to ensure compliance with CMS guidelines. Implement regular audits to catch potential coding errors early.
3. Leverage Technology: Use electronic health record (EHR) systems that support PDGM coding requirements and facilitate accurate documentation. Many EHR systems now include built-in coding tools and reminders to help ensure compliance.
4. Collaborate Across Teams: Foster collaboration between clinicians, coders, and administrative staff. Clear communication can prevent mistakes and ensure that all relevant conditions are captured in the patient’s medical record.
5. Stay Informed: Keep up-to-date with changes in coding guidelines and PDGM requirements by attending industry webinars, reading CMS updates, and participating in professional organizations.

Conclusion

The transition to the Patient-Driven Groupings Model (PDGM) has brought about significant changes to the way home health agencies code and bill for services. With a focus on clinical characteristics, functional status, and accurate diagnosis coding, agencies must ensure that their coding practices reflect the true complexity of each patient’s condition.

Accurate diagnosis coding not only ensures compliance with CMS guidelines but also has a direct impact on reimbursement. By understanding the key coding changes under PDGM and implementing best practices, home health agencies can avoid costly mistakes, improve financial outcomes, and continue to provide the highest standard of care to their patients. The emphasis on precise, detailed, and accurate documentation under PDGM represents a new era in home health care—one that places the patient at the center and values quality, patient-driven care above all else.