An Overview of the Patient-Driven Groupings Model (PDGM)

The modern healthcare marketplace is characterized by evolving regulations and mounting financial pressures. It is now more critical than ever for industry leaders to understand the new payment models, changes in reimbursements and how these may affect their bottom line.

For home healthcare providers, this impact can be substantial.

The Home Health Groupings Model (HHGM), introduced and even discontinued earlier in 2017, has been updated into PDGM. It slices the payments in half but also takes out therapy volume from consideration while determining payments for home health agency.

Simply put, PDGM is an alternative case-mix adjustment methodology that will evolve into a value-based payment system, decreasing the cost of home-based healthcare in the long run. Its purpose is to encourage value over volume as there won’t be any incentive to unnecessarily spend time or money on care that isn’t even needed.

PDGM and Changes In Medicare For Reimbursements

When it comes to institutional referrals, these will have a higher rate of reimbursement under PDGM as compared to community referrals because according to data taking care of institutional patients is more costly.

For now, the prospective payment system (PPS) ensures that home health agencies are reimbursed for therapy services depending on the number of visits they undertake. But PDGM will make sure that this practice doesn’t continue.

Perhaps that is why home health providers are concerned that a 0 to 100 change in therapy may result in incorrect cuts to therapy. This may significantly diminish the quality of care for patients who are in dire need of those services.

A survey done by the National Association for Home Care & Hospice (NAHC) reveals that nearly 25% of providers are planning to reduce therapy utilization by 10% or more in 2020.

National PPS vs PDGM Reimbursement Distribution by Clinical Grouping

PDGM also enacts a new Low Utilization Payment Adjustment (LUPA), making it variable by HHRG and based on 30 days for care. It is interesting to note that there is also a change in the billing cycle under PDGM; there is now a 30-day billing period within each 60-day episode.

The new reimbursement model will also dramatically increase the financing groups, taking them from 153 to 432.

Watch our New CMS Guidelines Effective January 2020 Breakdown!


Different Payment Models For Medicare

Service providers can voluntarily become a part of five primary care models. These offer two types of financial incentives, as well as a global capitation option for health systems that are already subjected to considerable financial risk.

These payment model options include:

  • Primary Care First
  • Primary Care First–High Need Populations
  • Direct Contracting – Global
  • Direct Contracting – Professional
  • Direct Contracting – Geographic

The first option, i.e. Primary Care First, promises to offer payments via a simplified monthly system, letting care providers focus on care instead of the revenue cycle.

It’s ‘High Need Populations’ variant provides payments clinicians that specialize in caring for patients with complex or chronic issues.

These are scheduled for application in January 2020 and then again in January 2021.

Next is the direct contracting payment model that will be applicable to organizations that take a financial risk, such as those working under Accountable Care, Medicare Advantage, and Medicaid managed care. This payment model aims to create a competitive delivery system.

Organizations that manage to display better quality of care get rewarded with a fixed monthly payment; this amount can be a percentage of expected primary care costs or total costs of care. This should give participants a more reliable and predictable revenue stream.

The five payment models detailed above are a test to understand whether financial risk and performance-based remuneration are effective at reducing costs and improving the quality of care delivered.

The trouble is that Patient-Driven Groupings Model (PDGM) is trying to transition from volume to perceived value in the home healthcare industry. That is bound to change the way these agencies define, report and deliver care, and are reimbursed for it all.

What This Means For Home Care

“The Patient-Driven Grouping Model (PDGM) is the most significant change to take place in home health in two decades, and some industry experts have speculated that not all providers will survive the financial impact following implementation.”

-Bill Dombi,
President National Association for Home Care & Hospice (NAHC)

It is predicted that as a result of PDGM, high-acuity clinical groupings will experience an increase in their base rate and vice versa for lower acuity groupings.

It’s also sad to see that as a result of it, the primary codes that don’t fall within any specific grouping won’t be reimbursed at all. Currently, 14.5% of all national episodes can be considered a Questionable Encounter, so this could spell disaster for the quality of healthcare provided.

Perhaps that’s why some experts have called it an over correction.

At the same time, many stakeholders are convinced that this is the right way to move forward to ensure better care at home health agencies.

If HHAs are to survive this change, it’s time to rethink their current therapy strategies, deploying a new system of care that ensures improved coordination with therapists. Telehealth and telemonitoring systems could help make this happen.

It is also essential to use comprehensive market data analysis capabilities as the focus shifts to new patient populations and referral sources that can have the greatest potential for getting reimbursements under PDGM.

Those left standing after its implementations will have a deep understanding of market data and how it can be leveraged for agency success.

Patient satisfaction is tied to outstanding customer service. This is the right time for HHAs to empower their customer service philosophies and implement them effectively.

The deadline for PDGM implementation is fast approaching, and it is will force all home health providers to change their business operations significantly. This is undoubtedly jarring, but also unavoidable. Let us hope that it really does deliver on superior, patient-powered healthcare like it intends to.