PDGM Series 2/5: What Changes And What Doesnt

Don’t know where to start on wrapping your head around PDGM? Do the new guidelines send you into a jargon spiral? Let’s dive into the second part of our article series designed to help you understand what PDGM means for home healthcare and how you can better incorporate the new rule settings into your day to day workflow. 

The most significant payment model change in over 20 years moved from concept to reality on January 1, 2020. PDGM (Patient-Driven Groupings Model) has been on trend as a hot topic rolling into 2020. Understanding how PDGM will affect home health agencies and clinicians alike will set the tone for the rest of a highly productive year.  Although there is a wealth of information provided across multiple industry trade publications and the official CMS website, these bits of information can be insightful — but also overwhelming.  

If you are a clinician, how often do you think about the operational aspects of home health agencies? It’s nearly impossible. You’re focused on the job at hand and improving the lives of patients. System-wide changes often get implemented without any warning and when the clinician finds out in the end it can appear as a shock. Considering mobile clinicians are the product of their company there should be a better way to keep staff informed of changes.  As the Home Health industry undergoes a paradigm shift from quantity to quality as the driver for services — it is vital to understand what changes are being made.  

 Let’s dive in by simplifying the two main changes made under the new payment model (PDGM).

 The changes implemented under PDGM are intended to accurately reimburse home health agencies for the clinical complexity of the patients they manage and reduce the incentive to over-provide therapy.  Although there are many differences in this new model, here are two major changes:

  1. The number of therapy visits is no longer used to determine payment
  2. Providers will be reimbursed for 30-day periods of care instead of 60-day episodes

Under the now defunct Prospective Payment System (PPS), there was an advantage in providing an increased number of therapy visits.  When an agency had a total of 6-20 therapy visits in a 60-day episode, there was an additional payment received which was sometimes referred to as the therapy threshold. This was capped at 20 therapy visits; after the twentieth visit, the reimbursement was the same.

Here is the breakdown:

Now let’s look a little further into why this major change took place. 

The reason CMS decided to remove the therapy threshold was to eliminate the financial incentives for over-providing therapy services. Additionally, this incentive also created an unintended side-effect: it became a deterrent to taking on difficult or complex cases that require other services because they were not as margin-rich.

Prior to the changes under PDGM from 60 to 30-day payment periods, PPS was a method of paying providers in advance for services that had not yet been rendered.  The system worked by calculating the acuity level of the patient at the beginning of treatment and setting a lump sum payment based on that acuity for a set period of time.  Medicare would then pay agencies for all the care needed for the 60-day period.  

With PDGM in effect, there is a fundamental shift in the way agencies are reimbursed. The first 30 day periods are paid at a higher reimbursement rate compared to subsequent periods. The logic here is that patients tend to require more care at the beginning of the episode, resulting in higher costs. As we move towards a new reimbursement model, and considering the immediacy of patient care at the beginning of the cycle, shorter payment periods encourage more accurate reimbursement. Over time the patient’s needs will change and PDGM helps set up a model that accurately reflects this. 

With these many changes to the reimbursement model for agencies, what doesn’t change are patients’ need for high quality and efficient care that is medically necessary.  The criteria for skilled therapy coverage remains the same as well as the use of clinical judgement in determining appropriate frequency, duration, and modality of services.  There is tremendous opportunity in this new paradigm, and it’s important for agencies as a whole to adapt.

Stay tuned for the next in our PDGM series.