Understanding PDGM: A Beginner’s Guide to Billing for Home Health Agencies

The Patient-Driven Groupings Model (PDGM) was implemented by the Centers for Medicare & Medicaid Services (CMS) to replace the previous Home Health Prospective Payment System (HHPPS). PDGM brought a major shift in the way home health agencies (HHAs) are reimbursed for services provided to Medicare beneficiaries. The shift aimed at improving payment accuracy, aligning reimbursements with patient needs, and ensuring that services were cost-effective and appropriate for patients’ clinical conditions.

For home health agencies, understanding PDGM is crucial not only for billing purposes but also to ensure they are maximizing reimbursements while adhering to the new regulations. In this guide, we will break down PDGM and its impact on billing, providing a comprehensive overview of how this model works and what home health agencies need to know to stay compliant and optimize their billing practices.

What is PDGM?

The Patient-Driven Groupings Model (PDGM) was designed to replace the Home Health Prospective Payment System (HHPPS), which previously relied heavily on the volume of services delivered to determine reimbursement. Under PDGM, the focus shifts from the volume of services to the patient’s clinical characteristics and care needs. PDGM is based on a classification system that groups patients into clinically meaningful categories, using a combination of clinical and demographic data to determine payment.

PDGM is a case-mix payment model that uses 30-day periods of care as the basis for payment rather than the traditional 60-day episode of care. The idea is to increase the focus on the patient’s clinical conditions, functional status, and the resource intensity of the care provided, ensuring a more individualized and appropriate payment structure.

Key Components of PDGM

1. Clinical Grouping PDGM assigns each patient to one of 12 clinical groupings based on their primary diagnosis. These groupings are designed to reflect the clinical conditions that are the primary focus of the patient’s care and treatment. Examples of clinical groupings include musculoskeletal rehabilitation, neurological conditions, cardiovascular disease, and infections.

   The clinical groupings are as follows:

   • Musculoskeletal Rehabilitation
   • Neurorehabilitation
   • Cardiovascular and Circulatory Conditions
   • Respiratory Conditions
   • Gastrointestinal and Hepatic Conditions
   • Genitourinary Conditions
   • Infectious Disease
   • Cancer
   • Endocrine and Metabolic Conditions
   • Hematologic Conditions
   • Skin and Subcutaneous Tissue Conditions
   • Other

   Each clinical group reflects a range of diagnoses and conditions that are generally treated by home health services. A comprehensive understanding of these groups helps home health agencies accurately code patient diagnoses for proper billing.

2. Comorbidity Adjustment In addition to the clinical grouping, the patient’s comorbidities are also considered under PDGM. Comorbidities are additional conditions that affect the patient’s health status and may influence the intensity of care required. The presence of comorbidities can increase the reimbursement level for a case.

   PDGM classifies comorbidities into three categories:

   • No comorbidity: No significant comorbidities affecting the patient’s care.
   • Low comorbidity: Minor comorbidities that do not significantly alter the care provided.
   • High comorbidity: Serious comorbidities that increase the complexity of care and require additional resources.

3. Functional Impairment Level Another key factor in PDGM is the level of functional impairment. This is determined by the patient’s ability to perform activities of daily living (ADLs), such as bathing, dressing, grooming, and mobility. A higher level of functional impairment indicates a higher level of care needed, which can affect the payment amount.

4. Admission Source Under PDGM, the admission source also plays a role in determining reimbursement rates. Patients are classified based on whether they were admitted from a hospital (institutional) or from the community (non-institutional). Patients admitted from hospitals are considered to have higher care needs, and their reimbursement rates reflect this.

5. Timing of the Admission The timing of the admission plays an important role under PDGM. There are two key timeframes:

   • Early timing: The first 30-day period of care.
   • Late timing: Any subsequent 30-day periods of care after the first.

   The timing of the admission impacts the payment amount, with the first 30-day period generally having a higher payment than later periods, reflecting the intensity of care required at the beginning of the care episode.

PDGM and Billing

PDGM directly affects how home health agencies handle billing. The transition from the HHPPS to PDGM requires agencies to adjust their billing practices to align with the new case-mix classification system.

1. 30-Day Payment Periods

One of the most significant changes under PDGM is the shift from 60-day episodes to 30-day periods. This change means that home health agencies will receive payment for care every 30 days instead of every 60 days. Billing for a 30-day period requires agencies to be more precise in tracking the patient’s progress, the services provided, and the resources used during the 30-day period.

PDGM’s 30-day payment periods require more frequent assessments, which can impact how agencies manage their caseloads. Accurate data collection and coding are crucial to ensure correct billing and reimbursement.

2. Primary Diagnosis Coding

Accurate coding of the patient’s primary diagnosis is one of the most critical aspects of PDGM billing. The primary diagnosis determines the clinical grouping under which the patient will fall. The diagnosis should be specific and match the patient’s condition and care needs. Incorrect or vague diagnosis codes can lead to inaccurate payment classification and delays in reimbursement.

Home health agencies must ensure that their clinical staff and coders are trained to identify the correct primary diagnosis. This requires a deep understanding of ICD-10 codes and their implications under PDGM. Since primary diagnosis codes have a direct impact on reimbursement rates, mistakes in coding can significantly affect an agency’s financial health.

3. Functional Impairment and Comorbidity Documentation

The level of functional impairment and the presence of comorbidities must be documented accurately in the patient’s records. The functional impairment level is assessed using the OASIS (Outcome and Assessment Information Set) assessment tool. This tool is essential for determining the patient’s ability to perform ADLs and the intensity of care they require.

Similarly, comorbidities should be documented thoroughly. If a patient has high comorbidities, their care needs will likely be more complex, and they may qualify for higher reimbursement. Failing to document or misclassifying the severity of a patient’s comorbidities can result in underpayment or delayed reimbursement.

4. Timeliness and Submission of Claims

Under PDGM, timely submission of claims is essential. Claims must be submitted accurately and within the required timeframes to ensure prompt payment. Agencies should ensure that all necessary documentation, including assessments and care plans, is submitted in a timely manner.

Additionally, agencies must be aware of the two payment adjustments: early vs. late timing, as mentioned earlier. Claims submitted for the first 30-day period will be evaluated for early timing, while subsequent claims will be classified as late. These distinctions impact the reimbursement rates, and agencies must track the timing of each patient’s care period accurately.

5. Adjustments for Therapy Services

Under PDGM, therapy services are no longer the primary determinant of payment, as they were under the old system. The amount of therapy provided is no longer directly tied to reimbursement. However, therapy services still play a role in the overall care plan and must be documented to reflect the patient’s needs.

For home health agencies, this means that therapy services must be carefully documented as part of the overall care plan to justify the level of reimbursement. Home health agencies should ensure they are providing the appropriate amount of therapy based on the patient’s functional needs and not just to meet a reimbursement target.

Tips for Successful PDGM Billing

1. Train Your Team: Make sure your billing and coding staff are well-versed in PDGM. Since the model relies on accurate coding of clinical conditions and functional impairment, it is essential that your team is trained on proper diagnosis coding, OASIS assessments, and the impact of comorbidities on payment.

2. Improve Documentation Practices: PDGM places a strong emphasis on accurate documentation. Make sure that your clinical staff are thorough in documenting patient conditions, comorbidities, and functional status. Proper documentation can help you avoid claim denials and ensure appropriate reimbursements.

3. Review and Monitor Billing Practices: Regularly review billing practices to ensure compliance with PDGM requirements. Monitoring claims data and tracking payments can help identify any issues early, allowing you to make corrections before they affect your reimbursement.

4. Focus on Quality Care: Since PDGM is centered around patient characteristics and care needs, ensuring high-quality care is essential. High-quality care leads to better patient outcomes, which can help improve reimbursement and reduce the need for re-admissions.

Conclusion

The Patient-Driven Groupings Model (PDGM) represents a significant change in the way home health agencies handle billing and reimbursement. By focusing on patient characteristics and care needs rather than volume of services, PDGM encourages home health agencies to provide more tailored, efficient, and cost-effective care. For agencies, understanding the components of PDGM and adjusting billing practices accordingly is essential for maintaining financial sustainability and compliance.

Accurate coding, proper documentation, timely claim submissions, and ongoing staff training are key to navigating the complexities of PDGM. By embracing these practices, home health agencies can thrive under the new system, ensuring that they continue to provide high-quality care while optimizing their reimbursement potential.