When the Patient-Driven Groupings Model (PDGM) takes effect Jan. 1, home health care billing processes will become significantly more complicated. The new model revolutionizes the way agencies are reimbursed, cutting payment periods in half and requiring more detailed claims, among other changes.

As a result, PDGM will likely put financial strain on even the most prepared agencies in the early months of its implementation, during which cash flow is likely to dip. As such, it’s vital for agencies to establish credit lines and update their billing processes to stay afloat, financial experts caution.

“I don’t think there’s an option to not be prepared if one wants to stay in business and care for patients,” Misty Skinner, executive vice president of services for HEALTHCAREfirst, told Home Health Care News. “If everything goes perfectly as it should — and it won’t — there’s going to be financial pressure. Be ready for that.”

Springfield, Missouri-based HEALTHCAREfirst offers coding and billing solutions to more than 1,200 home health care clients, in addition to about 1,500 hospice clients. The company was acquired by connected health firm ResMed (NYSE: RMD, ASX: RMD) in 2018.

Cash flow slowdowns

Among its most notable high-level changes, PDGM cuts the currently used 60-day episode of payment in half, meaning home health agencies will need to submit twice as many claims.

In the short term, that will mean less cash for agencies, specifically in January and February 2020, Skinner said.

“The first quarter of 2020 is going to be tough financially simply because [your] cash flow is going to take a pretty significant dip through the transition months,” she said.

While brief, the cash flow disruptions may even contribute to a rise in home health bankruptcy filings, particularly among agencies that have historically had trouble with making their receivables as clean as possible.

Melinda Gaboury — co-founder and CEO of Healthcare Provider Solutions Inc., a consulting firm serving the home health and hospice industries — shared similar sentiments earlier this year at the 2019 Illinois HomeCare & Hospice Council (IHHC) leadership conference.

“All things perfect, our expectation and calculation is a 12% to 15% reduction in cash flow in January, [more than 20%] in February, and [it will be] March before you see the light of day,” Gaboury said. “So if you are a cash-strapped agency already, there should be some specific cash flow planning before Jan. 1.”

Skinner advises home health agencies to make credit part of their PDGM preparation plans.

“Agencies need to be prepared by having some sort of credit instrument in place during that 60- to 90-day transition because reimbursements are slow anyway,” she said. “Now they’re going to be slower … and we know the amount [you’re] going to be billing out is going to be less.”

Protecting reimbursement

To file twice as many claims in 2020, home health care agencies will need to increase the manpower in their billing departments, Skinner said.

“[You’re] going to have to have more bandwidth in [your] agency to not only drop claims, but then to post payments that are going to be more complex than what we see with our current Prospective Payment System (PPS) system,” she said.

While hiring new employees is a must, educating your current workforce is equally important, especially when it comes to intake personnel.

PGDM ties reimbursement more closely to a patient’s clinical and functional groupings, using a number of new factors to determine payment. As such, a less detailed or incorrect intake record could mean a smaller or improper reimbursement.

In fact, some industry insiders have discussed how PDGM is as much a patient-classification model as it is a payment overhaul.

“It’s going to be critical to protect our reimbursement in a PDGM world to gather more detailed information at referral than what we do today,” Skinner said. “That information is going to drive how we’re reimbursed.”

Finally, agencies should review their order management processes, Skinner said.

“Agencies across the board struggle with getting orders signed from physicians and you cannot submit the final claim until you have signed orders,” she said. “Now [you’re] going to have an even narrower time frame to get those orders back signed.”