Beyond the Basics: 3 Things Home Health Providers Should Know About PDGM

There are a variety of technical changes and nuances home health providers need to be aware of before the new Patient-Driven Groupings Model (PDGM) goes into effect in 2020.

The Centers for Medicare & Medicaid Services (CMS) released details of its home health payment reform plan in its July 2 proposed rule. In its initial announcement, CMS broadly highlighted how PDGM is meant to better align reimbursement with patient needs and address payment incentives found within the current system. Since then, industry experts have been able to break down some of the most notable proposed changes—which together will be far-reaching.

“This will revolutionize how home care operates,” William Dombi, president of the National Association of Home Care & Hospice (NAHC), said during the association’s 2018 Financial Management Conference. “If I had to give you one piece of advice for if this model comes into play, it’s have a balance of patients … [because] any time you have a balance, you’re going to be safer from changes.”


Budget neutral home health payment reform was mandated under the Bipartisan Budget Act of 2018.

Home Health Care News already covered how PDGM seeks to eliminate therapy volume as a payment rate determinate.

Here are three additional aspects of PDGM that policy experts say agencies need to start thinking about—and preparing for—now.


PDGM halves 60-day unit to 30, but that won’t change certification, OASIS

If implemented, PDGM would change the unit of payment for home health agencies from a 60-day episode of care to 30-day periods of care within a larger episode.

The change from a 60-payment unit to a 30-day unit was also included in the Home Health Groupings Model (HHGM), and it’s something that has become a must-have for Congress, Dombi said.

“This was one of those simplistic things where people heard that 28% of patients were off service in 30 days or less,” he said. “People then concluded that meant they were paying you double if they were paying for a 60-day episode, twice as much as they needed to. The reality is they were paying you for the resources that were used over 60 days, whether they were front-loaded or not.”

Although the proposed payment reform halves the usual unit of payment, the normal 60-day certification period would remain unchanged, as would OASIS time points.

The patient plan of care would still correspond with that 60-day certification as well.

Big changes aimed at LUPAs

Currently, home health providers are hit with a Low Utilization Payment Adjustment (LUPA) claim if they provide four or fewer visits during a 60-day care episode to any category of patient. Instead of getting the full-episode payment, providers only receive a standardized per-visit payment, regardless of reason.

PDGM takes that universal four-or-fewer rule and breaks it down into 216 different scenarios.

“In this model, they didn’t get rid of the concept of LUPAs, but the way that thresholds are developed is very different,” Gina Mazza, a partner and director of regulatory and compliance services at Fazzi Associates, Inc., told HHCN. “Right now, there’s one threshold—four visits—for every patient in your organization, but in PDGM there’s a threshold that varies for every patient group.”

LUPA thresholds in CMS’ proposed payment model vary from two to six visits for every 30-day payment period. What that means is agencies used to a four-visit threshold over 60 days may have to start thinking about a 12-visit threshold over that same amount of time.

Patient groups are determined by a combination of clinical group, functional level, admission timing and source, along with any comorbidity adjustments. Timing—“early” or “late”—looks at whether patients are in their first 30-day period or a later, subsequent period.

For example, a “late” wound-care patient with a high functional level and no comorbidity adjustments who was admitted into home health services from the community would have a LUPA threshold of three. Meanwhile, an “early” patient with one comorbidity adjustment recovering from a stroke who was admitted into home health services from an institutional setting would have a LUPA threshold of six.

CMS’ PDGM weights and all LUPA thresholds are available here.

The average LUPA rate is about 8%, according to CMS. That is projected to decrease to about 7.1% under PDGM, though some analysts believe that rate is more likely to go up than down as agencies navigate policy changes.

Home health providers with high LUPA rates need to focus on bringing them down and correcting possible operational causes before PDGM’s changes are implemented, Mazza said. Technology providers and electronic medical record vendors can be assets in doing that, she said.

“This is a big deal,” Mazza said. “We’ve been working with a four-visit LUPA threshold from the beginning.”

In general, CMS assumes that agencies will add one to two extra visits per billing period to receive the full payment rate and avoid a LUPA.

PDGM is budget neutral—with a twist

Congress mandated that PDGM be budget neutral. CMS’ proposal, however, assumes that providers will change their behavior to best take advantage and operate under the new model.

That makes PDGM budget neutral in theory only, critics argue.

“In calculating the budget-neutral 30-day payment amount, we propose to make three assumptions about behavior change that could occur in CY 2020 as a result of the implementation of the 30-day unit of payment and the implementation of the PDGM,” CMS wrote in its 600-page proposal.

There are at least three major assumptions.

The first: A key component of determining payment under PDGM is clinical group assignment. CMS assumes home health agencies will change their documentation and coding practices to always put the highest-paying diagnosis code as the principal diagnosis code, allowing them to be placed into a higher-paying clinical group without fail.

The second: PDGM further adjusts payments based on patients’ secondary diagnoses as reported by providers in home health claims, which allows agencies to designate one principal diagnoses and 24 secondary diagnoses. OASIS, in contrast, allows agencies to designate one primary diagnosis and only five secondary diagnoses. CMS assumes that, with the change, more 30-day periods of care will receive a comorbidity adjustment than if only OASIS diagnoses codes were used for payment.

The comorbidity adjustment in PDGM can increase payment by up to 20%, according to CMS.

The third assumption is that agencies will actively look to avoid LUPAs by adding visits.

“This behavioral adjustment aspect of [PDGM], in particular, is very fungible,” Dombi said. “Assumptions are assumptions and maybe only intelligent guesses, so that’s something we have to be concerned about.”

The LUPA assumption is “a lightning rod” and especially concerning to NAHC, he said.

If no behavioral assumptions were made, CMS estimates that the 30-day payment amount needed to achieve budget neutrality would be $1,863.91. With all three assumptions—upcoding, comorbidity and LUPA avoidance—that drops 6.42% to $1,753.68.

Written by Robert Holly

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