Game On: PDGM Encourages Home Health Agencies to ‘Game the System’

When the Center for Medicare & Medicaid Services (CMS) developed the Patient-Driven Groupings Model (PDGM), part of the goal was to fix problems that exist with the currently used Prospective Payment System (PPS).

One such problem, government watchdogs say, is agencies prioritizing quantity of care over quality because it often leads to more money. Thus, PDGM eliminates therapy-visit volume as a determining factor in calculating reimbursements and gives greater weight to patient characteristics.

While CMS might hope the changes will stop agencies from gaming the system — some industry leaders worry PDGM will do the exact opposite.


“[CMS officials] talk about the agencies gaming the system in the past,” Mark Sharp, partner at national accounting and advisory firm BKD, said. “Well, with this, I suggest they say, ‘Game on.’ They basically are telling us they expect us to do it [and] we should do it.”

Sharp’s comments, which targeted PDGM’s widely opposed behavioral adjustments, came Tuesday during the closing forum at the National Association for Home Care & Hospice (NAHC) Financial Management Conference in Chicago.

“I suggest, as providers, unless you can withstand a potential 6%, 7% or 8% cut in payment rates … you need to find strategies,” Sharp said.


Previously, NAHC estimated PDGM’s behavioral adjustment would mean a 6.42% reimbursement cut for home health agencies. But after CMS released its proposed rule last week, that cut increased to more than 8%.

While CMS isn’t characterizing the behavioral adjustment as “gaming,” they do acknowledge that a single patient could be reimbursed at different rates based on how an agency codes for or classifies them. In those cases, CMS expects agencies to up-code.

“They’re simply saying there will be a category of patients where you can choose diagnosis A or diagnosis B, and they anticipate that [most providers] — because of the financial impact — will choose B,” NAHC President William A. Dombi said at the event. “A or B might each be defensible because we know that coding is not 100% exact science.”

The problem is coding becomes more complex — and more important to reimbursement — under PDGM than under PPS.

Each payment period will be categorized into one of 432 case-mix groups to determine reimbursement. Five factors go into determining those groups, and two of those factors are highly dependent on coding.

Still, CMS anticipates providers will be able to navigate the changes and opt to code patients in a way that leads to higher reimbursement.

Another example of gaming the system: always providing the number of visits required to avoid a Low-Utilization Payment Adjustment (LUPA). Again, CMS assumes agencies will behave this way. 

In other words, CMS is giving agencies “a license” to automatically add visits just to boost profits under PDGM, Dombi said.

“Those are the things they’re assuming: that because [agencies] have done it in the past, [they] will do in the future,” Sharp said of attempting to maximize reimbursement. “[Now, agencies] have got to do it, or you potentially are in the position where you aren’t sustainable.”

Historically, reimbursement models have triggered behavioral changes from home health agencies. Take the therapy payment determinant, which will be going away under PDGM, for example.

Back in 1997, before therapy was a reimbursement driver, therapy visits made up only 10% of all home health visits, according to MedPAC. By 2016, that percentage jumped to 39%. And on top of that, agencies who provide more therapy are usually more profitable, the commission has found.

But that shouldn’t give CMS license to assume how agencies will behave, Dombi argued. As such, industry groups like NAHC continue to fight PDGM’s behavioral assumption and the “gaming” it encourages.

“We don’t want behavior changes to be influenced by adjustments,” Dombi said. “We’d rather have people try to … in a budget-neutral system [rebalance] their patient census if there’s a financial outcome — but not to start working the system to gain reimbursement just to survive. That’s what [CMS] has done [with] this up-front kind of adjustment.”

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