Home Health Audits Expected to Spike in PDGM Aftermath

Home health providers from coast to coast are scrambling to prepare their operations ahead of the Patient-Driven Groupings Model (PDGM) — but what comes after the new model’s implementation could cause agencies an even bigger headache.

In the months after PDGM goes into effect, home health audits — much like bankruptcies — are expected to spike, experts say.

“We often see an increase in the volume of Medicare audit activity when documentation requirements or payment models change,” Matthew Wolfe, partner at the North-Carolina based health care legal firm Parker Poe, told Home Health Care News. “This is particularly problematic where the new requirements are unclear.”


In short, if providers misunderstand PDGM’s requirements or fail to change their operations appropriately, not only could it affect their reimbursements, but it could also prompt an audit into their agency.

Take, for example, a provider who significantly cuts back on therapy as a result of PDGM, which eliminates therapy-visit volume as a guaranteed revenue-driver for home health agencies.

“If they do that, it’s going to indicate one of two things to the Centers for Medicare & Medicaid (CMS),” Michael Katri, co-founder of Optima Healthcare Solutions, told HHCN.


Palm City, Florida-based Optima is a portfolio company of Alpine Investors and affiliated funds. The software company offers cloud-based solutions to providers across the post-acute care landscape.

“Either they were doing way too much therapy potentially in the past before PDGM because they were trying to drive up reimbursement or … they’re doing a lot less therapy [after] — even though their patients might need it — because they’re trying to lower their costs,” Katri said.

Whatever the case, a CMS contractor will likely come knocking.

“[CMS] could even potentially come and retroactively pull back money from pre-PDGM payments if they see you were overdelivering in the past,” Katri said.

Preventative measures

To protect themselves against audits in a post-PDGM world, agencies should have data and documentation to back up their processes, as well as justify any operational changes they make for the new model.

“One of the opportunities we see agencies have right now in preparation for PDGM is to reassess their clinical data documentation,” Brittini Vozzella, senior product owner at Optima, told HHCN. “Clinical documentation is going to be the evidence to back up the care that’s provided.”

Additionally, to ensure agencies don’t overcorrect for PDGM, they should educate themselves about how their reimbursements will change under the new model.

One way home health agencies can do that is by putting their information into CMS’s interactive grouper tool, which calculates agencies’ expected payments under the new model. While a number of industry leaders have doubted the accuracy of the tool, at the very least, it can provide agencies a starting point.

A number of consultant groups also offer agencies PDGM assessments.

One such group is BlackTree Healthcare Consulting. For example, the firm estimates that the most therapy-heavy agencies will see an average reimbursement cut of 9.6%.

But the new model doesn’t mean doom and gloom for all agencies: In another example, the firm estimates that rural agencies will see a reimbursement increase of 3.8%, among other predictions.

Another point of reimbursement difference agencies must be careful of under PDGM is admission source. Under the new model, a patient discharged to home health from the hospital yields $600 to $800 more for an agency than a community referral, according to Optima.

“Since admission source now matters in reimbursement, auditors could look at whether this is incentivizing agencies to discriminate, admitting patients from institutional versus community sources,” Vozzella said.

Meanwhile, Wolfe warns providers that under PDGM they’ll need to beef up their compliance processes, checking up on and training employees regularly.

“Every provider should have a robust compliance program — not just a compliance plan that they write and put on a shelf somewhere — but that ensures providers are proactive in conducting internal records reviews on a regular basis,” he said. “Usually, I would say quarterly.”

Audit process

In the event a CMS contractor finds an agency has been overpaid or acted fraudulently, the provider will likely want to enter into the Medicare appeals process, which has five steps. Though rare, the process can result in CMS’s overpayment or fraud assessment being overturned.

“What you tend to see … being the driving factor behind the volume and amount of these cases is well-intentioned providers not understanding that certain documents are required or that certain documents have to be done a certain way,” Wolfe said. “And then often times there’s just a good faith disagreement.”

During the first two steps of the appeals process, providers are not usually required to pay back the money CMS alleges they owe. Instead, they’re only required to submit supportive data and documentation — which will be used throughout all five stages of the appeals process to back up their claims and can make or break an agency’s case.

“At both of those stages … make sure that the record includes all of the documents that you want to rely upon on the appeal in its entirety,” Wolfe said. “There is a way for providers to submit documents at the third level of appeal … but you have to show good cause as to why those records were not provided previously.”

In the third level of the process, agencies are generally required to begin repayment as they wait for an administrative law judge to review the case. However, the case backlog is significant.

On average, the processing timeframe for the third level of Medicare appeals is roughly three-and-a-half years.

“I recently had an administrative law judge hearing for a Medicare recoupment case and it had been pending with the Office of Medicare Hearings and Appeals for a little over five years, and that’s not at all unusual,” Wolfe said.

Though a provider can request extended repayment, Wolfe recommends providers pay CMS while awaiting the ruling to avoid high interest rates, which usually hover around 10%. But many providers are forced to choose between paying CMS and staying open.

“[Repayment] has forced more than a few good providers — including home health agencies — out of business,” Wolfe said. “Of course they could ultimately be vindicated by an administrative law judge decision reversing their overpayment, but they would be out of business, so it may be too little, too late.”

Recently, a number of federal court judges have granted providers preliminary injunctive relief during the third level of the appeals process, ultimately delaying an agency’s required repayment and allowing them to continue operating. However, there’s no guarantee every provider will be that lucky.

In most circumstances, it’s rare for an appeal to reach the fourth or fifth level, Wolfe said.

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