The home health industry is bracing for impact as one of the most significant changes to home health agency operations since the late 1990s is set to go into effect on or about January 1, 2020. On October 31, 2019, the Centers for Medicare and Medicaid Services (“CMS”) issued its Final Rule, which addresses the new home health reimbursement model under Medicare known as the Patient-Driven Groupings Model (“PDGM”). This revised case-mix adjustment methodology is intended to better align reimbursement with patient needs.

Currently, Medicare reimburses home health services under the Home Health Prospective Payment System (“HH PPS”) on the basis of a national, standardized 60-day episode payment rate, adjusted to account for the patient’s clinical and functional characteristics and the number of therapy visits provided during that 60-day episode. If the patient requires additional intermittent skilled care at the end of the initial 60-day episode, another episode commences and Medicare reimburses the home health agency based on the standard episodic rate, adjusted as described above. Critics point to the inefficiency inherent in this method of reimbursement. For example, the Medicare Payment Advisory Commission (“MedPAC”) found that reimbursement for home health care has substantially exceeded provider costs since Medicare established the HH PPS.

CMS developed the PDGM as a patient-driven value-based system that focuses more on clinical characteristics. Once PDGM is implemented in the new year, the operative episode of care will be reduced to 30 days as required by the Balanced Budget Act of 2018. That Act also required CMS to eliminate the number of therapy visits as a factor in determining the home episodic reimbursement rate. Therefore, the shorter 30-day episodes of care will be reimbursed at a standardized amount adjusted under the PDGM case-mix system, which categorizes episodes into 432 payment groups based on episode timing, referral source, presence of comorbidities, cognitive and physical function levels, and clinical category.

As the home health industry transitions to a more value-based reimbursement model, there are sure to be growing pains. Home health agencies will need to adjust to meet the significant administrative burdens posed under PDGM. Industry players should analyze current billing practices and implement new workflow strategies to smooth the transition to PDGM in 2020.