Home Health Agencies Aren’t ‘Upcoding’ to Maximize PDGM Reimbursement

In designing the Patient-Driven Groupings Model (PDGM), officials from the U.S. Centers for Medicare & Medicaid Services (CMS) made a handful of assumptions about how Medicare-certified home health operators would respond once the overhaul went live.

Among those assumptions, CMS believed home health agencies would automatically “upcode,” or pick the primary diagnosis code tied to the highest level of reimbursement. The agency likewise believed agencies would do everything possible to reduce their Low Utilization Payment Adjustment (LUPA) rates compared to years past.

So far, those pre-PDGM assumptions appear to be somewhat inaccurate, metrics from Dallas-based software and analytics company Homecare Homebase (HCHB) suggest.


“What CMS thought was going to happen in 2020 is not what’s happening as it relates to LUPA and upcoding behavior,” one home health executive told Home Health Care News.

Each year, HCHB releases an updated analytics tool that helps its agency customers accurately identify how any given proposed payment rule will impact them in the upcoming year. This year, HCHB did so shortly after CMS released its 2021 proposed payment rule on July 25.

Unlike previous years, however, this year’s impact tool from HCHB gave home health operators the ability to see how their “actual behavior” compared to CMS’s assumptions, which the industry has largely disagreed with since the very early days of PDGM.


In particular, CMS missed the mark on upcoding, HCHB customer data suggests. For more insight, HHCN connected with executives from two HCHB customers, granting them anonymity in exchange for transparency into their operations.

“CMS assumed that when there was a higher reimbursing code within the stack of primary and secondary codes, that providers would always choose that higher reimbursing code,” the same home health executive said. “The industry was very much against that from Day 1. We just did not believe that would occur — and that’s exactly what we’re seeing in the data.”

Generally, HCHB’s impact tool showed that the executive’s organization coded similarly to how it did in the past. Typically, reimbursement rates are not factoring into clinical decision-making.

“Our clinicians would tell you that we’re doing what’s most appropriate, selecting the appropriate code as the primary reason for a person receiving home health [services],” the executive said.

The second home health executive told HHCN that his organization’s clinical group behavior had no behavior change 78.2% of the time. In other words, the home health organization was coding how it normally would in nearly eight out of 10 instances.

When there has been a change, 10.3% of the time it’s actually been to a lower-paying code. The organization “upcoded” just 11.5% of the time, HCHB’s impact tool shows.

“We’re obviously going to code based on the clinical and diagnostic information relative to what the hospital provides us, factoring in what the physician’s opinion is and also our own clinical assessment,” the second executive said. “Where there has been a change, it’s been incidental. You’re never going to code the exact same way, year-over-year.”

Many other HCHB customers have pointed out similar trends.

CMS has also been off when it comes to LUPAs, at least for the first executive.

Broadly, LUPAs are standardized per-visit payments for episodes of care that have a low number of overall visits. Since the start of the COVID-19 emergency, many home health agencies have seen their LUPA rates increase — not decrease, as CMS expected going into 2020 — because of patients refusing visits.

In a National Association for Home Care & Hospice (NAHC) survey conducted in May and June, 47% of home health respondents said their agency saw at least a doubling of LUPAs due to the COVID-19 virus.

At his organization, the second home health executive said CMS’s assumptions around LUPAs were fairly accurate, however. CMS expected agencies to lower their LUPA rates by about 33% in 2020, and his agency was able to trim them by 34.2% compared to the previous standard.

“It seems that the industry as a whole, with regard to the COVID pandemic, saw LUPA rates increase,” he said. “We did not see that. Throughout the COVID pandemic, we saw our LUPA rates continue to come down.”

Apart from LUPAs and upcoding, CMS also assumed that home health agencies would utilize PDGM’s co-morbidity adjustment.

CMS expected 56.4% of home health cases to have no co-morbidity adjustment, 35.5% to have a “low” adjustment and 8.1% to have a “high” adjustment. In actuality, 14.1% of cases had a high adjustment in the first four months of the year, according to separate data compiled by Strategic Healthcare Programs (SHP).

In addition to comparing actual behavior to CMS’s assumptions, this year’s impact tool from HCHB gives home health operators the option of using 2019 data to plan for 2021. Many agency leaders see 2020 as an outlier due to the public health emergency.

“We’re looking more at 2019,” the first executive said. “The noise created by COVID is enormous.”

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