PDGM Billing for Home Health Agencies: Preparing for Audits and Reviews

In the ever-evolving world of healthcare reimbursement, the Patient-Driven Groupings Model (PDGM) stands as one of the most significant changes for home health agencies in recent years. The PDGM, implemented by the Centers for Medicare and Medicaid Services (CMS) in 2020, drastically restructured the way home health services are paid, aiming to improve patient outcomes, reduce unnecessary spending, and streamline billing. While the PDGM offers numerous benefits, it also brings with it a new set of challenges, particularly when it comes to audits and reviews. For home health agencies, understanding how to prepare for audits under PDGM is essential to ensure compliance and protect reimbursement.

This blog will serve as a guide on how home health agencies can prepare for PDGM audits, what auditors typically look for, and best practices for ensuring your agency remains audit-ready at all times.

Understanding PDGM and Its Impact on Billing

Before diving into audits and reviews, it’s essential to understand what the PDGM is and how it affects billing for home health services. The PDGM changed the payment methodology for home health care by replacing the previous system—the Home Health Resource Group (HHRG) system—with a new model based on patient characteristics, rather than the volume of therapy services provided.

PDGM divides patients into 432 different payment groups based on:

• Primary diagnosis: The reason for home health care.
• Comorbidity adjustments: Other health conditions affecting the patient’s care.
• Admission source: Whether the patient was admitted from an inpatient setting or through a community referral.
• Timing: Whether the patient is in their first 30-day period of care or a subsequent period.
• Clinical groupings: The type of care the patient needs, whether it’s musculoskeletal, cardiovascular, neurological, etc.

The structure of PDGM rewards more accurate coding and better documentation, while penalizing agencies for coding errors and improper billing practices. This makes understanding the nuances of PDGM more critical than ever before.

The Role of Audits in PDGM Billing

Audits and reviews are integral parts of ensuring that home health agencies comply with the complex billing requirements under PDGM. Agencies are subject to audits from both governmental bodies like Medicare and private payers. The goal of these audits is to determine whether the claims submitted for reimbursement are compliant with regulations and reflect accurate coding, documentation, and billing practices.

PDGM audits can be triggered for a variety of reasons, including:

• Coding issues: Incorrect ICD-10 codes or insufficient documentation to support the codes.
• Billing errors: Incorrect payment claims due to misclassification of a patient’s clinical group or comorbidity.
• Medical necessity: Lack of sufficient documentation to prove that the care provided was medically necessary under PDGM guidelines.

What Auditors Typically Look For

Understanding what auditors focus on during a PDGM review is the first step in preparing your agency for an audit. Although each audit may vary depending on the payer or regulatory body, auditors generally focus on the following key areas:

1. Accurate Coding

• ICD-10 Codes: Auditors will scrutinize the ICD-10 codes used to describe the patient’s condition. It’s important to ensure that the diagnosis codes used accurately reflect the patient’s condition, and that the codes align with the clinical groupings under PDGM.
• Comorbidity Coding: In PDGM, comorbid conditions can impact the payment rate, so auditors will carefully examine whether these conditions are appropriately documented and coded. Agencies should ensure that the codes are accurate and match the patient’s medical history.
• Up-to-date Coding Guidelines: Ensure your agency is following the latest coding updates from CMS. Using outdated codes or failing to follow the latest coding guidelines can lead to denials or underpayment.

2. Proper Documentation

• Clinical Documentation: Auditors will review the clinical documentation to verify that the patient’s care plan, assessments, and diagnoses match the submitted claims. Clear, concise, and comprehensive documentation is essential in defending the accuracy of the codes submitted.
• Plan of Care: The plan of care must reflect the patient’s condition and provide a roadmap for the required home health services. Any discrepancies between the plan of care and the billing can trigger a red flag during an audit.
• Skilled Services: Documentation should substantiate the need for skilled services. Auditors often look for evidence that the services provided are medically necessary and that the care was performed according to the physician’s orders.

3. Payment Grouping

• Payment Grouping Accuracy: PDGM payment groups are based on several factors, including diagnosis, comorbidities, admission source, and more. Auditors will verify that the payment group assigned is correct based on the provided documentation.
• Reimbursement Rates: Under PDGM, certain groups receive higher reimbursement based on the complexity of care. However, auditors will examine whether the payment group was assigned appropriately and if the agency is receiving the correct reimbursement.

4. Medical Necessity

• Auditors review whether the care provided meets the standards of medical necessity. This includes ensuring that the patient’s condition requires home health care, that the treatment provided aligns with the patient’s needs, and that the care was delivered in a timely and effective manner.
• If an agency cannot justify the medical necessity of the services provided, it may face denials, repayment requests, or even further scrutiny.

5. Billing and Claims Submissions

• Auditors often evaluate the accuracy and timeliness of claims submissions. Incorrect dates, inappropriate modifiers, or duplicate claims can lead to payment delays or denials.
• Ensuring that billing records match the clinical documentation is crucial for successful audits. Discrepancies between these records are one of the most common triggers for audits.

Best Practices for Preparing for PDGM Audits

Preparation is key to minimizing audit risk and ensuring that your agency is ready for PDGM billing reviews. By implementing a few key best practices, agencies can improve their compliance and reduce the chances of negative audit outcomes.

1. Invest in Training and Education

• Ensure that your coding and billing staff are well-versed in the PDGM model and its requirements. This includes staying current with any updates to CMS guidelines and understanding how to assign the correct ICD-10 codes.
• Ongoing training for clinicians and administrative staff is essential for keeping everyone aligned with the new processes and maintaining consistency across the agency.

2. Implement Robust Quality Control Processes

• Develop a comprehensive process for reviewing patient charts, coding accuracy, and documentation before submitting claims. Having an internal review process in place can catch errors early and minimize the risk of audits.
• Regular audits of internal records, even outside of formal government audits, will ensure that issues are identified and corrected in real-time. This proactive approach can prevent discrepancies and denials before they become a larger issue.

3. Prioritize Accurate and Complete Documentation

• Ensure that clinical documentation supports the billing codes submitted and accurately reflects the patient’s condition and care needs. Documentation should be clear, concise, and consistent, leaving no room for ambiguity.
• When submitting claims, ensure that the plan of care, physician orders, and progress notes align with the codes and services billed. Missing or inadequate documentation is a common audit issue that can be avoided with meticulous record-keeping.

4. Utilize Technology Solutions

• Consider using advanced coding and billing software to minimize human errors and ensure consistency. Many electronic health record (EHR) systems now include PDGM-specific features to help agencies stay compliant with the billing requirements.
• Implement systems that offer real-time error detection and flag discrepancies before claims are submitted. This proactive approach can reduce the risk of submitting incorrect claims and prevent audits.

5. Stay Informed About Regulatory Changes

• CMS frequently updates its policies, coding rules, and reimbursement guidelines. Agencies must stay informed about these changes to ensure ongoing compliance.
• Participate in webinars, conferences, and other professional development opportunities to stay up-to-date with the latest industry trends and regulatory updates.

6. Prepare for External Reviews

• When a home health agency is selected for an audit, it’s critical to respond promptly and thoroughly. Prepare for these reviews by maintaining organized records and developing a standard operating procedure (SOP) for handling audits.
• If an audit reveals any errors or issues with your billing, respond promptly and transparently, offering clear explanations and corrections where necessary. A cooperative and proactive approach can help mitigate any potential penalties.

Conclusion

The transition to PDGM has made billing for home health services more complex, but with careful preparation and attention to detail, home health agencies can avoid the pitfalls of audits and billing reviews. By understanding what auditors are looking for and implementing best practices such as accurate coding, thorough documentation, and continuous staff training, agencies can remain audit-ready and ensure that they receive the appropriate reimbursement for the valuable care they provide.

Remaining compliant with PDGM is not just about avoiding audits; it’s about improving patient care, ensuring proper reimbursement, and establishing a foundation for long-term success. By making audit preparation a priority, home health agencies can navigate the PDGM landscape with confidence.