PDGM Guide
PDGM Explained: How Medicare Pays Home Health Agencies
The Patient-Driven Groupings Model (PDGM) has governed Medicare home health payment since January 1, 2020. It replaced therapy-driven payment with a clinically driven model built on 30-day periods and 432 case-mix groups. Understanding exactly how PDGM assigns payment is the foundation of protecting revenue.
The 30-day payment period
PDGM pays agencies per 30-day period rather than the previous 60-day episode. Certification periods remain 60 days, but each certification contains two 30-day payment periods, each independently grouped and paid.
Every 30-day period is classified into one of 432 Home Health Resource Groups (HHRGs) based on five variables, and each HHRG carries its own payment weight and LUPA threshold.
The five case-mix variables
Each 30-day period is scored on five dimensions:
- Admission source - community or institutional (the 14 days prior determine this)
- Timing - early (first 30-day period) or late (subsequent periods)
- Clinical grouping - one of 12 groups from the principal diagnosis (e.g., wounds, neuro rehab, MMTA subgroups)
- Functional impairment level - low, medium, or high, computed from OASIS functional items
- Comorbidity adjustment - none, low, or high, from secondary diagnoses
What this means for revenue
Because payment is driven by diagnosis coding and OASIS accuracy rather than visit volume, documentation quality is now the primary revenue lever. An inaccurate functional score or an unsupported principal diagnosis changes the HHRG - and with it, the payment and the LUPA threshold.
Institutional admissions and early periods pay more, which makes fast, accurate intake processing a revenue function: the sooner a hospital-discharge referral is admitted, the sooner the higher-weighted period begins.
Common PDGM revenue leaks
Agencies lose PDGM revenue in predictable places:
- Late NOAs reducing first-period payment by 1/30th per day
- Avoidable LUPAs from missed visits near period boundaries
- Downcoded functional levels from OASIS errors
- Principal diagnoses that group to lower-weight clinical categories than the chart supports
- Missed comorbidity adjustments from incomplete secondary diagnosis capture
Frequently asked questions
What does PDGM stand for?
Patient-Driven Groupings Model - the Medicare home health payment system effective January 1, 2020, which pays per 30-day period using 432 case-mix groups.
How many payment groups does PDGM have?
432. They result from combining admission source and timing (4 combinations), 12 clinical groupings, 3 functional impairment levels, and 3 comorbidity levels.
Does therapy volume still drive payment?
No. PDGM removed therapy visit thresholds from payment. Therapy is delivered based on clinical need documented in the assessment and plan of care.
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