On January 1, 2020, the Centers for Medicare & Medicaid Services (CMS) rolled out a new system for paying home health agencies. It’s called the Patient-Driven Groupings Model, or PDGM. This model fundamentally changed how home health services are reimbursed under Medicare.

Before PDGM, payment was largely based on the sheer volume of services provided, especially the number of therapy visits. This created an incentive to provide more care, but not necessarily better or more appropriate care. PDGM flips this idea on its head.

Instead of focusing on the quantity of services, PDGM focuses on the patient. It looks at a patient's specific situation, diagnosis, and needs to determine payment. The goal is to create a more patient-centered system where payments are better aligned with the actual care requirements of the individual.

Under PDGM, payments are based on 30-day periods of care, a change from the previous 60-day episodes. To figure out the payment for each 30-day period, the system sorts patients into different payment groups. This sorting process relies on five key pieces of information.

Let’s break down what each of these components means.

Timing This looks at whether the 30-day period is the first in a sequence of home health periods or a subsequent one. The first period is labeled "early," and all others are "late." Early periods often require more resources to set up a plan of care.

Clinical Grouping Patients are placed into one of twelve clinical groups based on their primary diagnosis. These groups include categories like Medication Management, Teaching and Assessment; Wound Care; or Musculoskeletal Rehabilitation. This ensures the payment reflects the main reason the patient needs care.

Functional Impairment Level This component assesses the patient's ability to perform daily activities, such as bathing, dressing, and walking. Based on specific questions from a standardized patient assessment, a patient is classified as having a low, medium, or high functional impairment. Higher impairment levels are associated with higher payments.

Comorbidity Adjustment A comorbidity is a secondary health condition that exists alongside the primary diagnosis. PDGM recognizes that additional conditions can make care more complex. Patients are assigned a comorbidity adjustment based on their secondary diagnoses: no adjustment, low adjustment, or high adjustment. A high adjustment means the patient has multiple, complex conditions that will likely require more resources.

By combining these five factors, PDGM creates a highly specific payment category for each 30-day period of care. This approach allows for a more tailored and accurate reimbursement that reflects the unique needs of each patient, moving home health care toward a more value-driven future.