Beyond PDGM: Medicare Advantage, Unified PAC Payment Models Are the Future of Home Health Care

As the pages on the calendar continue to turn toward January 2020, the Patient-Driven Groupings Model (PDGM) remains a top priority for home health agencies big and small. But while the payment overhaul does mark the beginning of a new era in the industry, it can’t be providers’ sole focus.

“It shouldn’t be: ‘PDGM is all-encompassing. Once we figure that out, it’s smooth sailing,’” Fred Bentley — managing director of Washington, D.C.-based health care consulting firm Avalere Health — told Home Health Care News. “Far from it.”

The two most significant non-PDGM topics home health agencies should turn their attention to are the rising Medicare Advantage (MA) enrollment levels and the looming possibility of a unified post-acute care payment model in the not-too-distant future, according to Bentley, whose firm specializes in strategy, policy and data analysis for a wide range of providers, government agencies, industry associations and other groups.


Nationally, Medicare Advantage plans have taken on a larger role in the Medicare program over the past decade.

In 1999, about 6.9 million people — or about 18% of all Medicare beneficiaries — signed up for MA plans. That total has more than tripled in 2019, with 34% now enrolled under MA, a Kaiser Family Foundation analysis of Centers for Medicare & Medicaid Services (CMS) data revealed.

“PDGM is certainly a major change and deserves the attention of home health providers and their executives, but in the grand scheme of things that payment model is shrinking,” Bentley said. “I would argue Medicare fee-for-service, broadly speaking, is shrinking in importance.”


MA has been a hot topic in the non-medical home care space ever since CMS announced it would allow plans to offer certain in-home services and supports as supplemental benefits in April 2018. At least to some degree, however, MA has been pushed to the backburner in the home health world.

By law, Medicare Advantage plans must provide all enrollees with all coverage included in Part A and Part B of traditional Medicare, including the home health benefit. Historically, though, some home health providers have been hesitant to aggressively seek out Medicare Advantage relationships, as MA rates are generally lower than those coming from fee-for-service Medicare.

Additionally, MA plans have often managed utilization of home health in a particularly tight fashion, Bentley said.

Industry leaders have somewhat criticized that practice in the past, telling HHCN that plans simply undervalue the services home health providers bring to the table. 

But that’s all starting to slowly change, according to Bentley.

“As MA plans grow and become more sophisticated, they’re realizing that — for their continued growth and future — they can’t bank on enrolling younger, healthier Medicare beneficiaries who don’t require any sort of home health or post-acute care services,” Bentley said. “They are going to have to figure out how to manage sicker, more challenging patient populations, and home health is a critical part of that.”

“If you’re running a home health business, you have to recognize that Medicare Advantage plans and managed care executives are moving up a learning curve,” he added.

Don’t write off unified PAC model

Apart from Medicare Advantage, home health providers would also be wise to start thinking about what a unified post-acute care (PAC) model would mean for their businesses, according to Bentley.

“There’s PDGM, but lurking in the background is this idea of the unified PAC payment model, … this idea that any type of post-acute service should be based on patients’ underlying needs — not the institution or care setting,” he said. “CMS is supposedly developing this, but I think they’re moving fairly slowly.” 

PAC settings currently include home health and hospice providers, skilled nursing facilities (SNFs), in-patient rehabilitation facilities (IRFs) and long-term care hospitals (LTCHs).

The Medicare Payment Advisory Commission (MedPAC) has long been pushing for a unified PAC model, doing so again in its June report to Congress.

“The think the recognition is that, with PDGM coming out and the Patient-Driven Payment Model (PDPM) hitting SNFs even earlier, now is not the time to say, ‘Hey, we’re going to introduce yet another payment model,’” Bentley said. “But if you’re looking out three to five years from now, that is something to be thinking about and preparing for.” 

The BETTER Act — introduced in the U.S. House of Representative in June — calls for MedPAC to submit a “prototype value-based payment program under a unified prospective payment system for post-acute care services” by March 15, 2021.

In general, it’s too early to guess what a real unified PAC payment model would look like, though MedPAC has suggested a stay-based approach rather than an episode-based structure.

Even so, there are already big-picture steps home health agencies can start taking to succeed under a one-size-fits-all overhaul, Bentley said.

One of those steps is to broaden the scope of services offered, both through acquisitions and partnerships.

“I think it tees up this broader discussion around breaking out of the mentality of, ‘We are a Medicare-certified, skilled home health provider,’” he said. “You have to think about what are the array of services you are providing in the home setting, such that you become an indispensable solution. … I think there’s power in being integrated, and that could mean acquiring capabilities and bringing them in-house or forming, for example, palliative or hospice care partnerships.”

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