Medicare enrollees are the “bulk” of most Home Health Agency (HHA) client pools. However, the complexity of obtaining reimbursement from the Centers for Medicare and Medicaid Services (CMS) has increased hugely due to one particular payment model change. The Patient-Driven Groupings Model (PDGM) – effective as of January 1, 2020 –not only requires a change to 30-day payment periods. It also changes the capacity to utilize clients’ diagnoses and Home Health Resource Group (HHRG) classifications to predict claims payment amounts. As described in Home Health Care News in 2019, the switch to the PDGM – for 50 percent of HHAs – is expected to tighten cash flow.

Consequently, understanding PDGM components affecting cash flow is essential for your HHA. Described below are some ways to maximize your cash flow under the PDGM.

One strategy to understand your potential cash flow is to utilize the professionals of Liberty Consulting and Management Services, which provides billing and financial services for home health (and hospice) agencies.

Timeliness of Signed Orders as a Strategy to Maximize Cash Flow under the PDGM

A National Association for Home Care and Hospice (NAHC) presentation in 2019 noted that timely receipt of signed physician orders – in conjunction with timely claims submission – is vital to decreasing Medicare claims payment denials. The timely receipt of certification of the physician’s Face-to-Fact (F2F) encounter with the patient referred for HHA services is also essential, and F2F certification receipt by the HHA needs to occur no later than 30 days after the Start of Care (SOC).

Therefore, the NAHC recommends that someone at the HHA be designated as the responsible employee to assure that signed orders exist before the Medicare claim is submitted.

LUPA Avoidance as a Strategy to Maximize Cash Flow under the PDGM

The threshold for a Low Utilization Payment Adjustment (LUPA) is significantly lowered under the PDGM, and HHAs with a large proportion of clients requiring only intermittent “once-in-awhile” home visits are more likely to incur a LUPA adjustment prior to claims payment. For example, a patient experiencing brain seizures due to a malignant brain tumor is more likely to be re-admitted to the hospital after only a few HHA visits – resulting in a LUPA adjustment by the CMS.

In contrast to the CMS’ previous LUPA determination methods, three of the four factors by which the LUPA threshold under the PDGM is determined are as follows:

  • Specified LUPA visit thresholds within each 30-day payment period.
  • HHA-assigned payment group (selected from the 432 possible case-mix adjusted groups).
  • LUPA thresholds designated as at the 10th percent value of visits in the assigned case-mix adjusted group or only at 2 – whichever is higher (at 2-6 HHA visits). 

Recognizing the proportion of your total monthly client base that is likely to halt HHA services due to a near-term hospital readmission (such as the proportion diagnosed with severe congestive heart failure) can enable you to anticipate LUPA adjustments that can negatively affect your cash flow.

Home Health Resource Groups (HHRGs) and Cash Flow

One of the key reimbursement determinants for services provided by your HHA to a given client is the Home Health Resource Group (HHRG) classification of that client. Besides the primary and secondary diagnoses, the admission source for HHA services – categorized as institution or community – impacts the Medicare (and/or Medicaid) reimbursement determination by the CMS. An institutional referral (i.e., a physician in a hospital referring a patient ready for discharge) incurs a higher reimbursement rate than a referral for a person at home. However, a patient admitted to a hospital on “observational status” is not considered an admitted patient.

Moreover, if a hospitalized patient is discharged to a Skilled Nursing Facility (SNF) – and then subsequently referred for HHA services 14 days prior to a late home health 30-day payment period – that HHA client would be categorized as a community (rather than institutional) referral unless discharged from HHA services prior to the SNF admission.

Notably, the four categorization options related to source and timing of client referral that impact the PDGM payment classification are:

  1. Community – Early;
  2. Community – Late;
  3. Institutional –Early;
  4. Institutional – Late

Conducting a weekly analysis of data on the HHRG classifications of your current clients can aid in predicting cash flow, which can enable better decision-making related to monthly dollar allotments for optional expenditures. Likewise, it can enable you to determine whether you truly need to limit the acceptance of new clients more likely to be classified in HHRGs linked to lower CMS reimbursement.

Physical, Occupational, and Speech Therapy – PDGM Impact on Cash Flow

A significant reimbursement change under the PDGM is that physical, occupational, and speech therapy visits for a HHA client will no longer be paid by therapy volume. Instead, the payment will be linked to the outcome of therapy.

NAHC survey results in 2019 revealed that 34 percent of HHAs as respondents believed that CMS therapy reimbursements would decrease by at least 10 percent annually due to the PDGM. Meanwhile, 23 percent of respondents believed that therapy reimbursements would decrease less than 10 percent, and 25 percent believed the reimbursements would remain the same. This suggests that HHAs accustomed to receiving large annual reimbursements for providing a high volume of clinical therapist hours to their Medicare-insured clients may be more likely to encounter cash-flow difficulties than other HHAs. Speech therapy is considered the most likely to be “squeezed” by the way therapy reimbursement s are calculated under the  PDGM.

Why Functional Status Matters to Predicting Cash Flow

Functional status is assessed under the PDGM, and needs to align with OASIS data entered for that client. This means that low, medium, or high functional impairment needs to be identified in each of the OASIS assessments linked to potential reimbursement (SOC, Resumption of Care [ROC], and Recertification). Since the PDGM is value-based (rather than volume-based), lack of any improvement in functional status is more likely to result in a lower reimbursement for therapy than obtained when functional status improves.

Employing large numbers of full-time clinical therapists in case of need may not be a financially-sound approach under the PDGM. Instead, a contract-based approach to hiring clinical therapists based on actual need – especially speech therapists – may be more sensible from a cash-flow perspective.

How You Can Reduce Overhead to Prepare for the PDGM

Struggling HHAs with high overhead obligations may need to lower their overhead expenditures to prevent an increased cash-flow problem after commencement of the PDGM. Reducing overhead by increasing your HHA’s utilization of telehealth and telemonitoring is recommended in an article in Home Healthcare News.

Another strategy to reduce your HHA’s overhead is by decreasing your inventory of supplies to correspond to predicted need based on client diagnoses (and/or by switching to a lower-cost vendor). Replacing clinical employees (e.g., clinical therapists) who resign with contracted clinicians can also reduce your HHA’s overhead costs.

Do You Need to Build a Cash Reserve to Prepare for the PDGM?

The transition to the PDGM may be “rocky” for your clinical and accounting staff, and require more careful checking of ICD-10 coding and documentation prior to claims submission than usual at your HHA. While not necessary for large and financially-stable HHAs, smaller (and struggling) HHAs may need a cash reserve to cope with a greater number of initially-denied claims resulting from coding and documentation errors.

Consulting with Liberty Consulting and Management Services before your HHA has to adhere to PDGM rules is an excellent idea from a cash-flow standpoint.