Mistakes to Avoid When Billing Under PDGM: A Comprehensive Guide

The Patient-Driven Groupings Model (PDGM) was implemented by the Centers for Medicare & Medicaid Services (CMS) on January 1, 2020, replacing the former Home Health Prospective Payment System (HH PPS). Designed to better align home health payments with patient characteristics, PDGM provides a more nuanced approach to reimbursement based on clinical, functional, and behavioral data. While PDGM aims to improve patient outcomes and provide more accurate payments, it also introduces a more complex billing process. This complexity has led to several billing mistakes that can result in costly denials, audits, or delays in payments. To ensure smooth billing under PDGM and to avoid these pitfalls, home health agencies need to be diligent in their practices.

In this blog post, we’ll explore the most common mistakes made when billing under PDGM and offer tips on how to avoid them. By addressing these mistakes, agencies can minimize errors, improve their revenue cycle management, and enhance their compliance with Medicare rules and regulations.

1. Misunderstanding the PDGM Case-Mix Adjustment Model

The PDGM payment structure relies heavily on the case-mix adjustment system, which categorizes patients into 432 potential case-mix groups. These groups are determined based on several factors, including the patient’s primary diagnosis, functional status, comorbidities, and the timing of the episode (early or late). A major mistake home health agencies often make is misunderstanding how to accurately assign the correct case-mix group for each patient.

Common Mistakes:

• Failing to accurately capture the primary diagnosis, which can lead to a misclassification of the patient into an incorrect case-mix group.
• Incorrectly identifying the functional status of the patient, particularly when coding the Functional Impairment Level (FIL) based on the OASIS (Outcome and Assessment Information Set) assessment.

How to Avoid It:

• Ensure thorough and accurate documentation of all diagnosis codes. Review the coding guidelines and ensure all comorbidities and primary diagnoses are correctly reported.
• Invest in proper training for your coding staff to ensure they understand how to assess functional status accurately and assign the correct case-mix group based on the most recent OASIS assessment.
• Use coding software or tools that integrate PDGM case-mix groups to help flag potential errors before submission.

2. Errors in Coding OASIS Assessments

The OASIS assessment plays a critical role in PDGM reimbursement by determining a patient’s clinical and functional characteristics. Errors in completing or interpreting the OASIS assessment can directly affect the case-mix classification, which impacts payment.

Common Mistakes:

• Inaccurate coding of a patient’s functional status (e.g., incorrectly reporting a patient’s ability to perform daily tasks like bathing, dressing, and eating).
• Failing to update OASIS assessments at the appropriate times (e.g., during the 30-day period or after a significant change in the patient’s condition).
• Underreporting or overreporting comorbid conditions that can impact the patient’s case-mix group.

How to Avoid It:

• Ensure that OASIS assessments are completed thoroughly, accurately, and timely by trained and certified professionals.
• Conduct regular audits of OASIS assessments to verify accuracy, consistency, and compliance with PDGM rules.
• Provide continuous education for clinicians to stay updated on any changes to OASIS coding and documentation standards.

3. Inaccurate Assessment of Functional Impairment Level (FIL)

Under PDGM, the functional impairment level (FIL) is a critical component in determining a patient’s case-mix group. This measure reflects the patient’s ability to perform activities of daily living (ADLs). A common mistake is misclassifying a patient’s FIL, which can result in significant under- or overpayments.

Common Mistakes:

• Incorrectly assessing a patient’s functional ability, especially in cases where the patient’s functional status may fluctuate during the episode of care.
• Failing to document changes in a patient’s functional ability during the care episode, which can impact the case-mix classification.

How to Avoid It:

• Regularly assess a patient’s functional status throughout the care episode, especially after significant changes in their condition or after rehabilitation interventions.
• Use standardized, evidence-based tools for assessing functional status, and ensure these assessments are properly documented in the patient’s record.

4. Failure to Capture the Correct Comorbidities

The PDGM payment system gives weight to certain comorbid conditions, meaning that the more accurately you document a patient’s comorbidities, the more likely you are to receive appropriate reimbursement. Failing to capture all relevant comorbid conditions can result in a lower payment for services rendered.

Common Mistakes:

• Overlooking comorbid conditions that are relevant to the patient’s care plan.
• Failing to use ICD-10 codes that accurately reflect the full scope of the patient’s comorbidities.
• Misunderstanding how comorbidities affect case-mix grouping and subsequent reimbursement.

How to Avoid It:

• Ensure that all relevant comorbid conditions are included in the clinical record and accurately coded with the appropriate ICD-10 codes.
• Train clinical staff to be aware of the impact that comorbidities can have on reimbursement and to document them thoroughly.

5. Incorrectly Applying the Timing of the Episode (Early vs. Late)

One of the unique elements of PDGM is the differentiation between early and late episodes. Early episodes are those in which a patient is admitted for home health care and are reimbursed at a different rate than late episodes. Misclassifying early versus late episodes can lead to payment errors.

Common Mistakes:

• Incorrectly identifying whether a patient is in an early or late episode.
• Not properly documenting the transition from an early to a late episode.

How to Avoid It:

• Accurately track the episode start and end dates to ensure that the correct episode timing is captured.
• Implement internal checks to ensure that the correct episode type is assigned at the time of billing.

6. Inaccurate Use of Therapy Visits and Utilization

Under PDGM, the number of therapy visits is one of the factors that influence payment. However, PDGM is designed to de-emphasize the number of therapy visits, focusing more on patient characteristics such as diagnosis and functional status. Some home health agencies continue to overestimate the importance of therapy visits, leading to unnecessary therapy services and billing mistakes.

Common Mistakes:

• Overproviding therapy visits to patients in an attempt to increase reimbursement.
• Failing to adjust the therapy plan based on the patient’s needs and not the payment model.

How to Avoid It:

• Focus on providing therapy based on the patient’s individual needs and functional status rather than attempting to meet specific therapy visit thresholds.
• Ensure therapy utilization is aligned with clinical guidelines and care plans.

7. Not Properly Managing Medical Review and Audits

With the implementation of PDGM, CMS has increased its scrutiny of home health claims. Medical reviews and audits are a common occurrence, and many agencies make mistakes during these processes, leading to costly errors.

Common Mistakes:

• Failing to maintain comprehensive and accurate documentation to support claims.
• Inadequate response to audits or missing documentation during audits.

How to Avoid It:

• Develop and implement robust internal audit processes to ensure that all documentation is accurate and ready for review.
• Train staff on how to respond to audits and provide the necessary documentation promptly.
• Use coding tools that integrate with PDGM rules to ensure that your billing practices align with CMS expectations.

8. Failing to Track and Correct Denied Claims

Denied claims are a natural part of the billing process, but failure to track and correct them can lead to payment delays and revenue loss. Some agencies may overlook denied claims or fail to follow up on them, resulting in missed payments.

Common Mistakes:

• Not promptly addressing denied claims or failing to resubmit corrected claims.
• Not investigating the root cause of the denial to prevent similar issues in the future.

How to Avoid It:

• Implement a comprehensive system for tracking denied claims and ensure timely follow-up on each one.
• Analyze the reasons for claim denials and take corrective actions to avoid similar mistakes in the future.

Conclusion

Billing under PDGM requires attention to detail, accurate documentation, and a clear understanding of the factors that influence payment. Common mistakes in diagnosis coding, OASIS assessments, therapy visits, and episode classifications can lead to costly errors and a reduced revenue cycle. By understanding these mistakes and implementing proactive strategies, home health agencies can ensure more accurate billing practices, improve cash flow, and enhance compliance with CMS regulations. Regular training, internal audits, and a focus on patient-centered care will help mitigate these risks and support the agency’s success under the PDGM framework.