How is PDGM Calculated?

by Keith Grunig

Clinician Overswhelmed with stress

How is PDGM Calculated? 

Home Health Agencies are dealing with a lot.  A lot.  With relative stability for almost 20 years, the year 2020 turned home health reimbursement on its head.  In 2019, CMS announced that the reimbursement model would change significantly.  Significantly is an understatement. 

What does PDGM mean?

CMS announced PDGM.  PDGM means, Patient Driven Grouping Model.  Previously, CMS paid home health agencies based off of data gathered from OASIS, diagnosis coding, and therapy utilization.  CMS noticed that many agencies were not gathering OASIS correctly and coding inaccurately, but using therapy utilization as a means for revenue generation.  The more therapy, the more agencies were paid.  Agencies were beginning to abuse this and started over utilizing therapy.  

PDGM became patient focused.  Therapy utilization as a component in reimbursement calculation was done away with.  Reimbursement would now based on how sick or dependent a patient is.  That's it.  And that's right.  

How does PDGM work? 

PDGM works now by taking the OASIS assessment and combines it with diagnosis coding to determine the reimbursement based on several factors such as referral source, comorbidity adjustment, and functional impairment.  In essence, CMS decided to pay based on case mix weight.  You can read about case mix here.  CMS has loads of data and knows what the reimbursement history is for patients.  CMS knew the average number of therapy visits used and could reasonably forecast the number of visits and therapy utilization based on years of data.  CMS would then build in the cost of "optimal" therapy utilization into the reimbursement and give one lump sum to agencies.  Agencies would then be tasked to effectively be good stewards of that reimbursement to provide adequate and medically necessary care for the patient to achieve an optimal outcome.  In short, CMS calculates how sick a patient is using case mix weight and then gives estimated reimbursement based on how sick or dependent the patient is.  The higher acuity, the higher the reimbursement- fairly simple right?  

What is PDGM?

One of our most popular blog posts is called PDGM for Dummies.  We give the basic premise of what PDGM is.   CMS has a lot of great resources about PDGM.  This link from CMS does a very good job explaining what PDGM is.  Read it here.

How is PDGM Calculated?

CMS takes the following into account to determine reimbursement from OASIS:  Referral Source (Community or Institution), Episode Timing (Early or Late), Risk of Hospitalization (M1033 on OASIS), Diagnosis Coding (Primary Diagnosis and 24 associated diagnosis codes), and certain ADL questions from Section G (Functional Status) in OASIS E.  You can read about OASIS E here.

If it were only that easy.   PDGM calculations are very complex.  Based on the primary diagnosis, a patient can be in 1 of 12 clinical groupings.  They are general groupings and are in the graphic below.  Notice, MMTA has several sub groups.  

12 Clinical Groupings PDGM

Once assigned a clinical grouping, OASIS is used to determine functional level, then comorbidity adjustment.  

These all interact together to determine the reimbursement calculation.  This isn't super simple math.  OASIS is essential to get correct and accurate.  Accurate Diagnosis Coding became imperative.  Diagnosis coding takes the primary diagnosis, and then uses the rest of the diagnoses based on available documentation to make sure the correct codes are used to give the most accurate picture of the patient at the time of assessment.  Comorbidity adjustments are complicated.  Every patient in home health will have multiple conditions, many very severe.  That doesn't make them comorbid conditions that get additional reimbursement.  There are three levels of comorbidity adjustment:  None, Low, or High.  There are multiple code groups that factor into this, and it can get very complicated.  A patient can have multiple comorbidities in one group and only get credit for 1 comorbid condition and have a low comorbidity adjustment.  

Home Care Answers has developed its own PDGM calculator in conjunction with CMS information.  We can tell you the reimbursement to be expected along with the LUPA Threshold so that agencies can effectively plan and forecast revenue based on real data.  

Agencies are realizing that partnering with reputable agencies like Home Care Answers is essential for continued success.  We know the process and how to make sure that things are accurate and correct, which then optimizes reimbursement and patient outcomes while minimizing compliance risk, and virtually eliminating denials.  In the history of our company, we have only 1 denial attributable to our name- a coding error 10 years ago.  

How can Home Care Answers Help Agencies with PDGM?

As previously mentioned, we have developed a PDGM calculator that can show the pre/post audit results for coding and OASIS to ensure accuracy.  Revenue, compliance, and outcomes follow accuracy.  Below, you can see how Home Care Answers helped an agency recently in a free trial to determine how their previously coded and audited work could be more accurate and create additional reimbursement because of the increased accuracy.  

Here is a snapshot of what we found and how PDGM is calculated.  Notice, we found $986.29 and the significant case mix weight increase. 

Home Care Answers PDGM Report

The next image shows a gain of $602.36.  This is off of previously coded charts, this is what the agency actually left on the table. 

HCA PDGM Report #2

In the last example, we didn't find any additional reimbursement, but did suggest several OASIS changes to help the agency show a more accurate picture of the patient for CMS.  

HCA PDGM Financial Report #3


Contact us on how we can help you achieve greatest success by partnering with an industry expert that has an impeccable quality record.  



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