Getting Ready for PDGM: What HHAs Need to Know About the New Rule

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Like the majority of the participants in our kick-off webinar on the new Patient-Driven Groupings Model (PDGM) rule for home health agencies, you may be somewhat familiar with the rule, but need some help in preparing for its January 1, 2020 arrival. We’re offering you that assistance in our year-long PDGM webinar series, “PDGM: Managing the Change with Confidence”…and we’ll recap highlights of the webinars here.

Proposed changes by the Centers for Medicare and Medicaid services (CMS) are projected to increase payments to home health agencies by 2.1 percent, some $400 million, during calendar year 2019. But more than 44 percent of home health providers will experience a decrease in reimbursements under the PDGM rule next year. So what are you doing to avoid this potential hit to your bottom line?

First, let’s take a look at the primary changes U.S.-based HHAs will face under PDGM.

PDGM Will Alter Episode Payment Periods, Add Categories and Subgroups

According to our webinar speaker Mike Dordick, president of healthcare consulting firm McBee Associates, PDGM will implement 30-day periods as a basis for payment versus the 60-day periods now in use. While your Outcome and Assessment Information Set (OASIS) assessments will remain on a 60-day cycle, there will be two payment periods within that cycle rather than one.  

Each 30-day period can be categorized into one of 432 case-mix groups, and the number of therapy visits will no longer impact the case-mix weight. Non-routine supplies will be included in the payment amount, too. Mike pointed out that Low Utilization Payment Adjustments (LUPAs) will undergo a major change in the new model:

  • Each Home Health Resource Group (HHRG) will have its own LUPA visit threshold (2-6 visits)
  • The LUPAs count will reset every 30-day payment period

Under PDGM, the new 30-day periods will be placed into different subgroups for each of the following five broad categories:

  • Timing of the 30-day episode (two subgroups: early or late)
  • Admission source (two subgroups: community or institutional)
  • Clinical grouping based on principal diagnosis (12 subgroups)
  • Functional impairment level (three subgroups: low, medium or high cultivation)
  • Comorbidity adjustment based on secondary diagnoses (three subgroups: none, low or high)

Timing Changes, New Admission Source Policy Will Cut Reimbursement Amounts

Today, some 25 percent of home health care episodes are less than 30 days, with the majority (73 percent) completed in less than 60 days. Mike noted that the first two 60-day episodes of care are considered “early” in the current Prospective Payment System (PPS), but under PDGM, only the first 30-day episode will be categorized as “early.” All subsequent 30-day periods will be classified as “late,” and therefore will generate a lower reimbursement amount, nearly 20 percent less than the average.

In the admissions category, PDGM will designate patients as “community” or “institutional” depending on their healthcare setting 14 days before the home health admission. Since patients coming from the community will be assigned a lower reimbursement amount for that first payment period, rather than those coming from an institutional setting, HHAs will take a hit here as well, some 23 percent less on average.

The combination of timing and admission source could lower average reimbursement for longer term patients drastically, according to Mike. With “late” 30-day admissions always categorized as “community” (unless the patient is hospitalized within the two weeks prior to the “late” home health 30-day period), the average reimbursement for same patient’s second 30-day period could drop by more than 41 percent!

Diagnoses Important for New Clinical and Functional Groupings, Co-Morbidity Adjustment

With PDGM, physicians will need to understand that the principal diagnosis for a Home Health episode of care must be assigned to one of the 12 clinical groups in order for the Home Health agency to be paid for the patient care. Mike emphasized that 19 percent of the 30-day periods in the current PPS model would be considered Questionable Encounters (QEs) under PDGM.

Regarding the new comorbidity adjustment, CMS estimates that it has the potential to increase reimbursement payments by 20 percent. Under PDGM, CMS will pull the primary and secondary diagnoses from the claim rather than the OASIS. Claims can support as many as 24 secondary diagnoses, versus only the one primary and a maximum of five secondary diagnoses in the OASIS.

In terms of functional levels, eight OASIS responses will be combined to determine resource use by the clinical group. Responses that indicate higher functional impairment and a higher risk of hospitalization are assigned higher points. Each clinical grouping has its own set of thresholds for low, medium, and high payments.

How Are Agencies Preparing?

HHAs should be involving all segments of their business as they gear up to accommodate PDGM. In my next post, you’ll learn more from Mike Dordick, and from Recover Health CEO Greg Von Arx, on what to address first, when to begin making changes, and the importance of thorough patient assessments, collaboration, technology, and training. Also, watch for our upcoming PDGM Resource Center, another way we’ll help you navigate these payment reforms to achieve the best possible results. Stay tuned!

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