PDGM 101: Advice for Small-Scale Home Health Agencies

The Patient-Driven Groupings Model (PDGM) is less than three full months away.

Among its biggest changes, PDGM halves the traditional 60-day billing period to 30 days and places greater emphasis on coding with a new 432-point case-mix mechanism. If those two changes weren’t enough, the overhaul also comes with a potential 8% behavioral adjustment cut and revolutionizes LUPAs by tossing out the old one-size-fits-all approach.

While the changes will surely affect all providers, small-scale home health agencies will be hit especially hard, according to Tim Ashe, chief clinical officer at WellSky and president of Fazzi Associates.

Advertisement

Home Health Care News recently caught up with Ashe to better gauge that impact and learn what smaller agencies should be doing to stay afloat come Jan. 1.

Timing wise, HHCN’s conversation with WellSky’s chief clinical officer came slightly before some non-PDGM news for the company. On Tuesday, WellSky announced an agreement to acquire the personal care technology platform ClearCare.

Highlights from HHCN’s conversation with Ashe are below, edited for length and clarity.

HHCN: We’re going to be talking about PDGM tips for smaller agencies. But let’s first define who we’re talking about exactly. What does a small agency look like in 2019?

Ashe: It varies by market, but we’re basically talking about organizations that are providing certified home health services, often to vulnerable or rural populations. From a financial standpoint, they’re described as agencies that do less than $5 million in annual revenue.

That’s just one way to define who we’re talking about, to segment the marketplace. You can narrow that down even further, though, because organizations that are under $1 million are high in number — and they certainly have significant challenges related to access to and deployment of capital.

But let’s stick to organizations that are less than $5 million for our purposes.

Before reporting on home health care, I covered the U.S. agribusiness industry. It was a big change going from an industry dominated by a handful of huge players to a highly fragmented one with so many mom-and-pop agencies.

Definitely. That’s why it’s always important for us to be thinking about the entire distribution of the market. We have customers that represent both ends of the spectrum. We have some of the largest providers in the industry as customers, but we have the smaller customers as well.

They face very different realities sometimes, including when it comes to PDGM.

What are the biggest operational challenges that small providers currently deal with?

I’ve been in home health since 2002. I was on the provider side for a number of years [and] have been an advisor and consultant to leadership teams for years now.

When we think about challenges in the market, they’re often the same whether you’re large or small. But the difference is usually smaller providers are forced to double down on having individual managers or staff members fill multiple roles. They don’t have opportunities to specialize departments or positions.

Challenges are the same: How do we provide higher-quality care at a lower cost? How do we think about patient satisfaction and take on a new payment methodology like PDGM?

But smaller agencies have to focus more on availability of capital and availability of specialized skill sets. That’s not going to change with PDGM.

Being specific, what aspects of PDGM do you think are going to be the tallest hurdles for small providers?

The significant changes in PDGM are to the actual case-mix model. Understanding those fundamentals — the four levers that factor into case-mix — is important. Having a handle on what’s driving reimbursement is always a critical core competency.

But I would also say agencies need to be committed to having consistent, accurate ICD-10 coding. When we think about those PDGM levers like co-morbidities, ICD-10 coding likely becomes even more important.

Smaller providers frequently have one or two coders. There are challenges there relative to keeping current with education and covering for absences.

The same could be said for PDGM’s revenue-cycle changes. As we think about going from the Prospective Payment System (PPS) environment where the billing period is 60 days to a 30-day billing period under PDGM, that’s going to put a lot of pressure on revenue cycle management. There will be pressure on everybody, but perhaps more intense pressure on smaller organizations that don’t have large departments or access to other resources.

So, I’d say coding and revenue cycle.

Apart from PDGM, a lot of smaller agencies are rural. They’re dealing with changes to rural add-on. Next year, they might be dealing with a phaseout of RAPs. What’s your take on all of this happening at the same time?

All of this is doubling down on revenue pressure. It exposes small organizations that may not have access to capital, that may not have cash reserves or credit that will allow them to float during the early innings of a RAP change.

If you think about the compounding effect of the RAP change and not having that cash up front with revenue pressure from PDGM, that’s going to put a significant amount of financial crunch on smaller providers.

Do you think we’re going to see the rapid shrinking of the industry that some have predicted?

I think all vectors point toward some consolidation. It certainly seems like the policy itself is pointed toward the direction of consolidation.

And we know what happened in history, going from the Interim Payment System (IPS) to PPS. During that time around 2000, we saw about a 30% reduction in terms of the number of providers in the home health space.

It appears we’re headed for some level of consolidation. But over the last few years, it’s important to remember there was already a lot of action from an M&A perspective.

Will folks struggling financially because of PDGM ramp that up? I think so. There will definitely be people out there who just can’t weather the storm, who can’t handle the key changes to coding and billing.

What can smaller agencies do to succeed? What are your top two or three tips — and why?

I think it has to start with education. At WellSky, we’re working every single day to educate our future and current customers. We’re doing that through one-on-one training, webinars, white papers and by developing a PDGM clinical-training series.

The No. 1 thing you can do is be prepared from a knowledge and core-competency perspective. That applies to not just the management team; it has to be the entire organization, including clinicians in the field.

Apart from that, you need to make sure you have access to reliable, accurate coding. ICD-10 coding is so important under PDGM. Whether an organization wants to do it internally or outsources, reliable and accurate coding is a fundamental requirement for PDGM.

Another important thing for PDGM is making sure you have a good handle on your operating and workflow practices. That includes making sure you’re maximizing the use of technology, specifically when it comes to revenue cycle.

Folks ultimately need to be able to handle that 30-day billing period, making sure days to RAP and days to collection are minimized.

If we really peel back the PDGM onion, too, … this is another step toward value-based care. It’s aligning payment with need, in theory bringing us closer to a reimbursement model that aligns with patient profiles. With that in mind, organizations need to make sure they have a handle on coordinating care management at a high level — using evidence-based care, assuring clinical standards are deployed, monitoring the appropriateness of services.

What about the changes to LUPAs? Do you see that as a problem for smaller home health agencies?

The pure number of iterations and thresholds based on clinical group and diagnosis related to LUPAs is daunting. Organizations shouldn’t worry about trying to memorize them.

The LUPA falls into managing episodic care. We want to make sure organizations are providing the right amount of care. There are certain circumstances where a LUPA is warranted.

At the end of the day, what’s going to be the great separator between the agencies that survive PDGM and those that don’t?

Interesting question. I think it’s probably going to be a package of all the things we talked about.

I think successful organizations will be those that have been ahead of the curve in care management and that started to do PDGM education months ago. The course of change can’t be a cliff — it has to be a subtle, consistent approach.

Companies featured in this article:

,