Understanding PDGM And How It Will Affect Your Physical Therapy Practice

Author: Paul Singh

There has been a lot of concern about understanding PDGM (Patient-Driven Groupings Model) and how it affects your billing procedures.  While PDGM is the most significant regulatory and reimbursement reform for home health agencies (HHA) in 20 years, it doesn’t mean therapy practices need to fear it.  It does however, require some understanding about what it is and how it will affect your practice going forward.

PDGM was developed to improve reimbursement for all types of patients eligible for home health benefits and remove perceived incentives to over-provide therapy services, according to Home Health Care News.  CMS said its intention with PDGM is “to reduce volume-based reimbursements that doesn’t necessarily align with a patient’s condition and for home health agencies to develop closer, more collaborative relationships with hospitals and skilled nursing facilities.” 

In other words, PDGM will drive HHAs to modernize and better align their operating model with a U.S. healthcare industry that is rapidly evolving toward value-based, rather than volume-based, care initiatives.

According to CMS, the effect of PDGM will vary by HHA size and organizational design.

Payments are projected to increase for agencies with less than 100 episodes in annual volume by 1.9% and facility-based agencies by 3.9%.

Payments are projected to decrease for agencies with more than 1,000 episodes per year by 0.2%, freestanding agencies by 1.2% and for-profit agencies by 2.2%.

Here is what has changed with PDGM:

New Payment Episode Timings

PDGM will break up the standard 60-day episode of care into one of two 30-day periods. That means 30-day periods will be implemented as a basis for payment vs. the 60-day periods used now. Each 30-day period is grouped into one of 12 clinical categories based on the patient’s main diagnosis.  This means that agencies must plan, deliver, document and bill for care twice as often.  The first 24-48 hours from start of care (SOC) will be crucial to optimize reimbursements.  So assessing a patient’s needs and document a plan of care (POC) as quickly as possible becomes a priority.

Payment Groupings

PDGM will increase the number of payment groupings and unique case-mix potential from 153 to 432. PPS allowed for 153 combinations, but with PDGM each 30-day period can be categorized into one of 432 case-mix groups.

Elimination of Therapy Thresholds

PDGM will eliminate therapy thresholds as a primary determinant of reimbursement, so therapy visits will no longer determine reimbursement. The number of therapy visits will no longer impact the case-mix weight.  The elimination of therapy thresholds does not mean that therapy services will no longer be paid for, but it ties therapy payments to patient clinical characteristics and patient needs, particularly through the new Functional Impairment group.

Increased Claims

The number of claims and the Requests for Anticipated Payments (RAPs) submissions are expected to nearly double under PDGM, so you may need additional staff to process the influx.

Low Utilization Payment Adjustments (LUPAs)

LUPAs will undergo a major change, as each Home Health Resource Group (HHRG) will have its own LUPA visit threshold (2-6 visits) and the LUPA count will reset every 30-day payment period. 

This is a rather significant change.  HHAs are used to a four-visit LUPA threshold over 60 days for each patient.  Under PDGM, that will be the minimum threshold.  Now, practices are facing thresholds of up to 12 visits over 60 days for some HHRGs.  In order to avoid LUPA and receive full payment, CMS assumes that HHAs will add one to two extra visits per billing period for patients close to the LUPA threshold.  So, knowing the LUPA threshold becomes important, and completing a POC immediately after the OASIS assessment is also critical.


About 40% of the diagnoses allowed for under PPS will not be accepted as primary diagnoses under PDGM. Also, if providers don’t get new diagnosis codes right, they will be denied immediately.

What does all this mean to your therapy practice?

PDGM requires complete, accurate and timely documentation.  To be PDGM compliant, it will be necessary for ongoing assessments, reassessments and POC updating for every patient in an abbreviated time frame.  Communication among all involved clinicians is now more critical than ever before.  Assess the care you provide and evaluate your discharge plan.  Understand your OASIS requirements and collect your patients’ complete health histories, including a complete history of comorbidities.  It is also important to understand the use of ICD-10 codes for diagnoses.

Practices will be held accountable for their compliance with PDGM. 

These changes will have a significant impact on the amount of therapy visits patients will be receiving under the new PDGM model.  As a result, patients may be able to benefit from ongoing therapy (once discharged from Part-A) under their Part-B outpatient therapy benefits.

If you’re looking to add Part-B services to your existing model, StrataPT is here to help make sense of these new changes and assist you with making that happen. Please schedule a demo today and we’ll show you how StrataPT can deliver solutions to and knowledge to help get you started with your outpatient Part-B business.

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