PDGM Impact on Home Healthcare Providers


To understand how the Patient-Driven Groupings Model (PDGM) will impact home healthcare providers in terms of operations and financials for the purposes of prioritizing business plan efforts.

Early Findings

Preliminary research suggests that there is significant information on how home healthcare providers can prepare for the PDGM and ready their practices for the upcoming changes. There is less information on how the PDGM will affect home healthcare financials, but there are some estimates available


  • The Home Health Patient-Driven Groupings Model (PDGM) takes effect on January 1, 2020.
  • The Patient-Driven Payment Model (PDPM) applies to skilled nursing facilities and goes into effect on October 1, 2019.
  • The PDGM "relies more heavily on clinical characteristics and other patient information to place home health periods of care into meaningful payment categories and eliminates the use of therapy service thresholds."
  • In addition, with the PDGM, "there will be a change in the unit of home health payment from a 60-day episode to a 30-day period."
  • Payments for home healthcare will be "placed into different subgroups for each of the following broad categories:"
    • Admission Source — There are only two options for this group, which are community or institutional.
    • Timing of the 30-day Period — There are only two options for this group, which are early or late.
    • Clinical Grouping — There are 12 options for this group, which are musculoskeletal rehabilitation; neuro/stroke rehabilitation; wounds; medication management, teaching, and assessment (MMTA) — surgical aftercare; MMTA — cardiac and circulatory; MMTA — endocrine; MMTA — gastrointestinal tract and genitourinary system; MMTA — infectious disease, neoplasms, and blood-forming diseases; MMTA — respiratory; MMTA- other; behavioral health; or complex nursing interventions.
    • Functional Impairment Level — There are three options for this group, which are low, medium, or high.
    • Comorbidity Adjustment — There are three options for this group, which are none, low, or high (based on secondary diagnoses).
  • In total, there are 432 "possible case-mix adjusted payment groups."


  • Since ICD-10 codes form the basis for reimbursement for the PDPM and the PDGM, it will be crucial for home healthcare providers "to be accurate in their coding."
  • According to HPS Alliance, the transition to PDGM "will create a radical shift in operations for HHAs."
  • Financially, the Low Utilization Payment Adjustment (LUPA) will affect HHAs because rather than getting paid for five visits in a 60-day period as is the current model, they will receive "per visit payments based on the volume of visits within a 30-day payment period."
  • As such, the new model could result in "many more per visit payments than under the current HHPPS."
  • Requests for Anticipated Payments will continue to be billed by HHAs, but they will need to be submitted for each 30-day payment period, rather than every 60 days. This "will essentially double the volume of Traditional Medicare billing."
  • PDGM will "completely transform current home health payment calculation practices and present drastic changes that will require HHAs to adapt quickly."
  • The shift to PDGM is expected to increase Medicare payments to home health agencies by 2.1%, or $400 million annually.
    • For home healthcare agencies with fewer than 100 episodes in annual volume, the expected payment increase is 1.9%.
    • For nonprofit home healthcare agencies, the expected payment increase is 2.9%.
    • For facility-based home healthcare agencies, the expected payment increase is 3.9%.
    • For agencies with more than 1,000 episodes in annual volume, payment is expected to decrease by 0.2%.
    • For freestanding agencies, payment is expected to decrease by 1.2%.
    • For for-profit home healthcare agencies, payment is expected to decrease by 2.2%.
  • Institutional admissions will be paid at a higher rate than community admissions, and the difference is expected to be between $600 and $800 for a 30-day period.
  • CMS expects payments to increase for 30-day periods by 20% as long as coding and documentation are accurate.


  • To be prepared for the transition to PDGM, home healthcare providers need to do the following:
    • Ensure that the person or company that finalizes the ICD-10 coding "fully understands that the primary diagnosis needs to be specific enough to meet the code list requirements that group patients into Clinical Groupings."
    • Ensure that the person or company that finalizes the ICD-10 coding "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."
    • Examine the current practice of providing therapy to "determine how to provide therapy effectively for patient care and outcomes while containing costs."
    • HHAs should consider telehealth, remote monitoring, and utilizing therapy assistants to provide the balance of effective patient care and cost containment.
    • Examine the current revenue cycle process to determine if there will be a need to add more staff to handle the increased billing volume.
    • Review current clinical operations to "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."
  • It is imperative that home healthcare providers "modify their coding practices under PDGM to ensure that the highest paying diagnosis code is listed as the principal diagnosis."
  • Clinicians and billers will need to "know the LUPA threshold for each patient" so that they can "add one to two extras visits per billing period for patients close to the LUPA threshold, in order to avoid LUPA and receive full payment."
  • Since LUPA reimbursements are expected to be just "15% of standard episode reimbursement," it will be critical for HHAs to "thoroughly document a patient’s assessment and ongoing reassessments."
  • The PDGM is supposed to be a "budget-neutral" change, but in order for it to actually be budget neutral, the Centers for Medicare & Medicaid Services (CMS) makes the following assumptions:
    • "HHAs will effectively change their documentation and diagnosis coding practices to always indicate the highest-paying diagnosis code as the principal diagnosis."
    • "HHAs will take advantage of the comorbidity adjustment by documenting up to 24 secondary diagnoses."
    • "HHAs will add one to two visits to the POC for patients who are one to two visits away from the new LUPA thresholds."
  • A checklist of preparation tasks for home healthcare agencies can be found here.

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