By PETER MISKA, RT
The healthcare industry has witnessed a substantial transformation with the introduction of value-based payment models, aiming to enhance care quality while controlling costs. Among these, the Patient-Driven Groupings Model (PDGM) stands out as a significant development in home healthcare reimbursement under the Medicare program. Implemented on January 1, 2020, PDGM shifted the focus from the volume of therapy services to patient characteristics and care needs. This transition aligns with broader efforts to ensure patients receive appropriate, high-quality care while reducing unnecessary expenses.
Background and Development
Before PDGM, the Home Health Prospective Payment System (HH PPS) relied heavily on the number of therapy visits to determine payment rates. This structure created incentives for agencies to increase therapy visits, potentially leading to unnecessary services. Recognizing the need for a more patient-centered approach, the Centers for Medicare & Medicaid Services (CMS) developed PDGM to align payments more closely with patient needs and outcomes. By emphasizing patient characteristics, PDGM aims to improve payment accuracy and foster value-based care.
Structure of PDGM
PDGM categorizes patients into one of 432 payment groups, considering clinical and demographic factors that reflect expected resource use and care needs. The primary components determining a patient’s group under PDGM include:
- Admission Source: Patients are categorized based on whether they are admitted to home health care from the community or an institutional setting, such as a hospital or skilled nursing facility. Institutional admissions typically involve higher acuity and resource needs.
- Timing of the Episode: PDGM differentiates between early and late episodes of care. The first 30-day period of home health services is considered early, while subsequent 30-day periods are classified as late. Late episodes generally receive lower reimbursement rates as they are expected to involve less intensive services.
- Clinical Groupings: Patients are assigned to one of 12 clinical groupings based on their primary diagnosis, categorizing them by care needs such as musculoskeletal rehabilitation, wound care or complex nursing interventions.
- Functional Impairment Level: Patients are assessed and categorized into low, medium or high levels of functional impairment. This assessment considers the patient’s ability to perform activities of daily living (ADLs) and their overall functional status, impacting the level of care required.
- Comorbidities: The presence of additional diagnoses or health conditions can increase the complexity of care. PDGM adjusts payments to reflect higher resource use associated with managing multiple health issues.
Impact on Home Health Agencies
The implementation of PDGM has profoundly impacted home health agencies, shifting the focus from therapy volume to patient characteristics and care needs. This change has necessitated adjustments in clinical and administrative practices:
- Clinical Assessment and Documentation: Accurate assessment and documentation of patient conditions have become critical under PDGM. Agencies must ensure all relevant patient information is captured to determine the appropriate payment group and receive adequate reimbursement.
- Care Coordination and Management: Effective care coordination is essential, especially for patients with high functional impairment or multiple comorbidities. Agencies must implement robust care management practices to ensure timely and appropriate interventions.
- Staff Training and Development: The transition to PDGM requires ongoing staff training to ensure clinicians understand the new model and can accurately assess and document patient conditions. Agencies must develop competencies in managing complex patient populations and providing high-quality, patient-centered care.
- Financial Planning and Strategy: Reimbursement changes under PDGM require agencies to re-evaluate their financial strategies. With a greater emphasis on patient characteristics and outcomes, agencies must optimize resource use and manage costs while maintaining high standards of care.
Challenges and Opportunities
While PDGM represents a significant improvement in aligning payments with patient needs, it also presents challenges for home health agencies. The transition to the new model has required substantial changes in clinical practice, documentation and financial management. Agencies that fail to adapt effectively may face financial difficulties or struggle to meet quality standards.
However, PDGM offers opportunities for innovation and improvement in home health care. By focusing on patient characteristics and needs, the model encourages agencies to develop more personalized care plans and invest in technologies and practices that enhance patient outcomes. Agencies that successfully navigate the transition to PDGM can improve the quality of care while achieving greater operational efficiency.
Home Health Value-Based Purchasing (HHVBP) Model: A Step Toward Quality
The Home Health Value-Based Purchasing (HHVBP) model, introduced by CMS, aims to improve the quality and efficiency of home health care services. Implemented in January 2016 as a pilot program in nine states, the HHVBP model incentivizes agencies to enhance care quality by linking payment adjustments to performance on various quality measures. This initiative aligns with broader efforts to transition from volume-based to value-based care, ensuring patients receive high-quality, cost-effective services.
Key Components of the HHVBP Model
Quality Measures: Performance measures in the HHVBP model cover clinical and patient experience domains. Derived from the Outcome and Assessment Information Set (OASIS), Medicare claims data and patient satisfaction surveys, these metrics include improvements in patient functional status, reductions in hospitalizations, timely care initiation and patient satisfaction.
Performance Scoring: Agencies receive a performance score based on quality measures, calculated using improvement and achievement points. Improvement points reflect progress compared to past performance, while achievement points are based on agency performance relative to peers.
Payment Adjustments: Payment adjustments are based on performance scores, with maximum adjustments starting at 3% and increasing to 8% over time. Agencies performing well receive positive adjustments, while lower performers may face reimbursement reductions.
Impact and Outcomes
The HHVBP model has demonstrated promising results in pilot states, with improvements in quality measures, cost savings, and patient satisfaction. By focusing on preventive care and chronic condition management, agencies can avoid costly emergency interventions, contributing to cost savings for the Medicare program.
Home Health Proposed Rule 2025: Key Changes and Implications
The proposed rule for the Calendar Year (CY) 2025 Home Health Prospective Payment System (HH PPS) Rate Update includes significant changes impacting home health agencies:
Medicare Reimbursement Decrease
CMS proposes a 1.7% decrease in Medicare reimbursement rates for 2025, aligning with efforts to ensure Medicare program sustainability while maintaining care quality. This reduction requires agencies to optimize resource allocation and efficiency to maintain service levels.
Recalibration of PDGM Case Mix Weights
The proposed rule includes recalibration of PDGM groupings case mix weights, adjusting weights based on the latest data to reflect resource utilization accurately. This recalibration impacts how agencies manage patient populations and resources.
HHQRP Updates
The Home Health Quality Reporting Program (HHQRP) updates focus on collecting social determinants of health (SDOH) data starting in 2027. New SDOH items, including living situation, food security, utility access and transportation, provide a comprehensive understanding of social factors affecting health outcomes.
New CoP Standard for Patient Acceptance to Service Policy
The proposed rule introduces a new Condition of Participation (CoP) standard requiring agencies to develop and maintain a patient “acceptance to service” policy. This policy ensures agencies can meet patient needs, considering anticipated patient needs, caseload complexity, staffing levels and staff competencies.
Future Directions and Conclusion
As the healthcare landscape evolves, PDGM and HHVBP models will undergo further refinements. CMS will continue monitoring these models’ impacts on care quality and cost, making necessary adjustments to achieve intended goals. Potential future directions include nationwide expansion of the HHVBP model, enhanced risk adjustment for patient complexity, and integration with other value-based initiatives.
The Patient-Driven Groupings Model represents a transformative change in home health reimbursement, shifting focus from service volume to patient characteristics and care needs. By promoting accurate, patient-centered payments, PDGM has the potential to improve care quality while controlling costs. Home health agencies must adapt by enhancing clinical, administrative, and financial practices to succeed in the evolving healthcare environment. The HHVBP model further supports this shift by incentivizing high-quality, patient-centered care, ultimately leading to improved outcomes and efficiency in home health services.
References
- Centers for Medicare & Medicaid Services. (2020). Patient-Driven Groupings Model. Retrieved from Centers for Medicare & Medicaid Services – PDGM
- Medicare Payment Advisory Commission (MedPAC). (2020). Home Health Care Services Payment System. Retrieved from Medicare Payment Advisory Commission
- National Association for Home Care & Hospice (NAHC). (2020). Understanding PDGM. Retrieved from NAHC – PDGM
- Centers for Medicare & Medicaid Services. (2016). Home Health Value-Based Purchasing Model. Retrieved from CMS – HHVBP
- Medicare Payment Advisory Commission (MedPAC). (2018). Report to the Congress: Medicare and the Health Care Delivery System. Retrieved from MedPAC – Reports
- National Association for Home Care & Hospice (NAHC). (2020). Home Health Value-Based Purchasing Overview. Retrieved from NAHC – HHVBP
- Centers for Medicare & Medicaid Services. (2024). Medicare Program; Calendar Year (CY) 2025 Home Health Prospective Payment System Rate Update. Federal Register. Retrieved from Federal Register – CY 2025 Update
- Centers for Medicare & Medicaid Services. (2024). Home Health Quality Reporting Program (HHQRP) Updates. Federal Register. Retrieved from Federal Register – HHQRP Updates
- Centers for Medicare & Medicaid Services. (2024). Patient-Driven Groupings Model (PDGM) Recalibration. Federal Register. Retrieved from Federal Register – PDGM Recalibration
Peter Miska, RT, is a seasoned clinician in the home health, home care, and hospice industry. He is currently the regional director of program development for Elite Care Management and Elite Care at Home. Elite Care Management is an Independently owned and operated home nursing /home care agency that has been taking care of patients who require up to 24/7 nursing and/or aide services in the home for over 25 years. He also serves as the president of the Illinois Continuity of Care Organization, a board member of the CMSA Chicago, All Florida Case Management Network, Illinois Home Care And Hospice Counsel, Illinois Hospital Social Work Leadership Society, and is a member of a variety of other organizations in the healthcare industry.
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