The Patient-Driven Groupings Model (PDGM) is the current framework used by Medicare to determine payment for home health services in the United States, effective since January 1, 2020. This model fundamentally changed how Home Health Agencies (HHAs) receive reimbursement, shifting the focus away from the volume of services delivered, such as the number of therapy visits. Instead, the PDGM bases payment primarily on specific patient characteristics and clinical needs, aiming to better align reimbursement with the actual resources required for care. This system replaced the previous Home Health Prospective Payment System (HH PPS), which had been in place for nearly two decades.
The Shift to 30-Day Payment Periods
A key change introduced by the PDGM was shortening the payment unit from a 60-day episode of care to a 30-day payment period. This recognizes that most intense, resource-heavy care often occurs early in a patient’s home health admission. A patient’s course of care can now consist of multiple consecutive 30-day periods, allowing payment to adjust as needs change.
The timing of these 30-day periods directly influences the reimbursement rate, as they are categorized as either “early” or “later.” The first 30-day period in a sequence is classified as “early” and receives a higher payment due to the assumption of higher initial resource use. Subsequent 30-day periods are designated as “later” periods, which are reimbursed at a lower rate because the patient is expected to be more stable. To qualify for another “early” period, there must be a gap of more than 60 days between the end of one period and the start of the next.
The Four Variables That Determine Reimbursement
The PDGM is a case-mix model that combines four distinct patient and episode characteristics to classify each 30-day period into one of 432 possible payment groups. This structure predicts the resource intensity needed for the patient during that 30-day window. The four determining variables are the Admission Source, the Timing of the period, the Functional Impairment Level, and the Clinical Grouping.
The Admission Source accounts for whether the patient was referred from a healthcare facility (Institutional) or from the community (Community). Institutional admissions mean the patient was discharged from an acute care hospital, skilled nursing facility, or other post-acute setting within 14 days prior to the home health admission. The Timing variable distinguishes between “Early” and “Later” periods, creating two distinct payment categories.
The Functional Impairment Level is determined by specific questions within the Outcome and Assessment Information Set (OASIS) assessment, which measure the patient’s ability to perform daily living activities. Responses are scored to place the patient into one of three functional categories: Low, Medium, or High impairment. The combination of these four factors, along with a comorbidity adjustment, results in the 432 unique Home Health Resource Groups (HHRGs) used for payment.
Defining Patient Clinical Groupings
The Clinical Grouping variable is a key component of the PDGM, determined by the patient’s primary diagnosis. This diagnosis must be a specific ICD-10 code that justifies the need for home health services. The model organizes these primary diagnoses into twelve distinct clinical groups, capturing the underlying reason the patient requires skilled home care.
These twelve groups cover a wide range of conditions and care needs. Categories include Musculoskeletal Rehabilitation, Neuro/Stroke Rehabilitation, Complex Nursing Interventions (covering high-acuity care like IV therapy or ventilator management), and Behavioral Health Care.
The remaining clinical groupings fall under the umbrella of Medication Management, Teaching, and Assessment (MMTA), which is subdivided into six specific categories based on the body system or condition requiring skilled nursing oversight. Examples of these MMTA subgroups include:
- MMTA-Cardiac/Circulatory
- MMTA-Endocrine
- MMTA-Respiratory
- MMTA-Surgical Aftercare
Accurate and specific diagnostic coding is necessary because vague diagnoses, such as those reporting only symptoms, are often deemed unacceptable and will not yield a valid payment group.
How PDGM Changed Home Health Services
The implementation of the PDGM resulted in significant changes to how home health agencies operate and deliver care. The most important shift was eliminating therapy service thresholds as a determinant for payment adjustment. Under the previous system, reaching minimum therapy visits often triggered higher reimbursement, incentivizing agencies to maximize visits.
The new model removed this volume-based incentive. Agencies are encouraged to shift toward a value-based approach, focusing on delivering the necessary and appropriate level of care to achieve patient outcomes. While therapy remains important, the decision to use it is now driven purely by the patient’s documented need.
Accurate and timely documentation is now critical under the PDGM. Agencies must ensure that patient assessments and diagnosis coding are highly specific and accurate, as errors can directly lead to a misclassified payment group and incorrect reimbursement. This focus ensures the patient’s true clinical and functional status is properly captured.