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Clarice Grote, MS, OTR/L

Clarice Grote, MS, OTR/L

What is PDGM in Home Health?

What is PDGM?

PDGM stands for the Patient-Driven Grouping Model. This is a payment model used in home health for Medicare Part A beneficiaries to cover home health services. PDGM is part of the Home Health Prospective Payment System or HH PPS. This new model took effect on January 1, 2020. The creation of PDGM was mandated by the Balanced Budget Act of 2018 and was another move by the Centers for Medicare & Medicaid Services (CMS) towards standardizing post-acute care payment. PDGM was a drastic shift in payment for home health. It is a case-mix adjusted payment system based on client factors.

Amplify OT Podcast: PDGM in Home Health

What did we have before PDGM?

The former Home Health Prospective Payment System (HH PPS) included three main components: the patient’s clinical condition, functional limitations, and service utilization (meaning therapy visits). The therapy service utilization component incentivized agencies to use therapy services as a way to make more money. There were 3 therapy thresholds –  0-13, 14-19, and 20+. These thresholds were for all therapy disciplines. So, it wasn’t uncommon for agencies to force therapies to split the 20 visits among themselves during the 60-day episode of care. CMS paid home health agencies every 60 days in alignment with the certification period.

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So what changed?

PDGM eliminated therapy thresholds and shifted the focus to other patient characteristics. The idea was to remove incentives that would encourage agencies to over-provide therapy based on reimbursement. This practice wasn’t as prevalent as it may have been in skilled nursing facilities before PDPM. Another big change was the switch from 60-day payment periods to 30-day payment periods. Although the certification period didn’t change from 60 days, when agencies get paid did change. PDGM is a more value-based system than the former HH PPS.

How does PDGM pay for home health services?

PDGM pays for home health services in one lump sum every 30 days. How much this payment is varies depending on patient characteristics. Patient data and characteristics are then used to determine the case-mix group called the Home Health Resource Group or HHRG. There are over 432 HHRGs, so payment can vary in many ways.

The graphic from CMS is the best representation of how PDGM determines payment. It is based on 4 main categories:

  1. Admission Source and Timing
  2. Clinical Grouping
  3. Functional Impairment Level
  4. Comorbidity Adjustment

Admission Source & Timing

This section has 4 options based on where the patient was prior to starting home health (admission source) and where in their plan of care they are (admission timing).

Admission Source:

There are two options here – institutional and community. Institutional means the patient received care in some sort of inpatient facility within the 14 days prior to the start of the episode of care. Some inpatient facilities include SNF, inpatient rehab, hospital, inpatient psych, etc. So, if a patient was recently discharged from an inpatient facility, the agency would select “institution” for the admission source.

Community means the patient came from, well…. the community! This means they did not receive any inpatient care in the 14 days prior to the episode of care.

Admission Timing:

Timing also has two options – early and late. Early means the patient in the first 30 days of the episode, and late is for any subsequent 30 days (this is where the 30-day payment is important).

So, if the patient was recently discharged from the SNF, you would select “institutional + early” for the admission category at the start of care, and the second 30-day payment would be “community + late.” The only time you would have an “institutional + late” is if the patient had a hospital stay during the first 30-day episode and the home health agency decided not to discharge them. CMS pays more for institutional stays than community stays since someone who was recently in an institution would most likely need more services than someone who was admitted to home health from the community.

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Clinical Category

There are 12 clinical categories. Agencies pick a category based each 30-day period based on the patient’s primary reason for home health or principal diagnosis. Six of the clinical categories are grouped into one overarching category, Medication Management, Teaching, and Assessment (MMTA). The table below is from CMS and shows the different clinical groups and their description. Note: even though two groups specifically mention therapy, the other groups can and should still receive therapy services if clinically necessary.

PDGM Clinical Groups
PDGM Clinical Groups

Functional Impariment Level

Listen up if you’re an OT! The Functional Impairment Level category is split into three subgroups, low, medium, and high. Based on CMS data, patients with the lowest functional impairment are also associated with the lowest resource use. As a result, CMS pays less for low functional impairment levels than for medium or high.

The functional impairment level is a key area where OT can have a massive impact on reimbursement. Eight key areas on the OASIS determine the functional impairment level. OTs are well poised to score this section due to our expertise in function and task analysis. Additionally, OTs are more likely to observe the task and then score vs. developing a score based on subjective interview and thus can record the most accurate score.

This is a key area where inaccurate scoring can negatively impact reimbursement in a huge way. Data in the other sections are far less subjective since they are selected based on patient data. What clinician scores the functional items on the OASIS could make the difference between the agency receiving accurate reimbursement or not. The difference between each functional level can make a $200-400 difference, and that adds up!

The OASIS items used to score the PDGM functional impairment level are:

  • M1800 Grooming
  • M1810 Current ability to dress upper body safely
  • M1820 Current ability to dress lower body safely
  • M1830 Bathing
  • M1840 Toilet transferring
  • M1850 Transferring
  • M1860 Ambulation and locomotion
  • M1033 Risk for hospitalization

For the most accurate scores on these items, make sure you review the most recent OASIS Manual from CMS – it’s a free resource and defines very clearly how to score each item.

If your agency says they aren’t receiving enough reimbursement to pay for services and therapy, the first place I encourage them to look is at how these items are being scored.

Comorbidity Adjustment

The last category in PDGM is the comorbidity adjustment based on a patient’s secondary diagnosis. There are three options: none, low, and high. These comorbidities must be associated with higher resource use and impact their plan of care.

None is selected if there are not any contributing comorbidities. Low is selected if there is one, and high is if there are two or more contributing comorbidities.

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Does PDGM have therapy limits?

PDGM does not have therapy limits. And again, for the people in the back, PDGM DOES NOT HAVE THERAPY LIMITS OR DICTATE HOW MANY THERAPY VISITS SHOULD BE PROVIDED. CMS is very clear that it is up to the therapist to establish the plan of care and that agencies are required to provide medically necessary services.

Additionally, PDGM does not have any rules about only one discipline at a time. PDGM does not say that another discipline should screen for the need for another therapist, etc. CMS knows there are issues about therapy visits in home health and wrote a specific announcement on the role of therapy under PDGM that you can read here.

CMS acknowledged in their CY 2023 proposed rule that therapy visits and overall average visits have decreased in recent years. With the switch to value-based care, this isn’t entirely surprising, but stories coming from therapists working in home health agencies are concerning. Overall, as therapists, we must think about how to provide the same outcomes with fewer visits to support our patients and our agencies. At the same time, we must also pick when to advocate for our patients and our profession. This may involve innovative ways of providing care and follow-ups to still achieve high-quality outcomes but reduce expenses.

Home Heath visit frequency for CY 2023 proposed rule
Chart from CMS proposed rule for CY 2023 – CMS-1766-P

Do other insurance plans use PDGM?

Other insurance plans, including Medicare Advantage plans, do not use PDGM. They may use the OASIS or other similar features, but only Medicare Part A uses PDGM to pay for home health.

PDGM and Occupational Therapy

Occupational therapy has an important role to play in ensuring accurate documentation and supporting other clinicians who score the OASIS. Accurate scoring is even more important with the start of HH Value-Based Purchasing next year. If home health quality outcomes don’t reflect the actual care provided, this is an issue for the agency for public perception and reimbursement.

Know you have value, and be prepared to speak up and speak often to advocate for your unique role! If you need some help with advocacy or if this article was a bit overwhelming, then you would benefit from using the courses on home health and reimbursement in the Amplify OT Membership – join our community of OT Amplifiers today!

Become an OT Amplifier! you should feel good about what you do. Emerge a confident clinician who knows their value. Join the Amplify OT Membership Today. Image shows 5 screens with previews of the Amplify OT membership courses and groups.


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hi there,

I’m  Clarice

Occupational therapist & medicare specialist helping practitioners understand policy, engage in advocacy, and own their value!

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