There’s a very real chance the answer is yes. Here’s what we know about the Patient-Driven Groupings Model (PDGM) and how it could impact both the home health industry and the private duty home care industry.
This Halloween, home health providers are checking under their bed for a new monster: the Patient-Driven Groupings Model.
If you’re a home health provider, you’re likely all-too-familiar with the looming changes known as the Patient-Driven-Groupings Model (PDGM). This new system, which takes effect January 1st, represents a seismic shift in the billing format and reimbursement rates of home health agencies, and some experts have estimated that as many as 30% of home health agencies will go out of business shortly after PDGM takes effect due to the inability to adapt to the changes in cash flow.
Our purpose in this article isn’t to get into the weeds of how to tackle PDGM. There’s an abundance of resources out there to help them understand this change better and react to it, and if you’re a home health provider looking for information and solutions, we’ve attached a list of good resources at the end.
PDGM was even the subject of a 57,000 page (yes, you heard that right: 57,000 page) document by the government that explains the specifics. Reading it is roughly equivalent to reading the King James Bible 50 times.
Instead, we’re focusing on educating others who are adjacent to the space (non-medical home care providers or other professionals/vendors in the home care space) who might have missed some of the early discussion on the topic and are looking for a Cliffnotes-style rundown, as well as how PDGM could affect their own agencies.
In 30 Seconds, What is PDGM and What Does it Change?
PDGM originated under the Bipartisan Budget Act of 2018. It’s intended to better align reimbursement with patient needs. It will likely do so; however, the change won’t come without side effects along the way, many of which will be absorbed by the home health agencies themselves.
PDGM primarily affects the ways that home health agencies bill and are reimbursed. This includes:
There are other changes as well, but these four are frequently cited as the most impactful changes under PDGM.
Are 30% of Home Health Providers Really Going Out of Business?
This is the number that’s been thrown around a lot—at industry conferences, in discussions online, and in articles from various sources. It appears to have originated from a series of Home Health Care News articles about PDGM that draw from a variety of experts from various healthcare conglomerates, private equity groups specializing in home healthcare, and other organizations at the front lines of the change.
No single individual is cited by name regarding the 30%, but the consensus among the stacked group of experts interviewed by HHCN seems to be along those lines.
Our team’s verdict: it’s hard to say how accurate 30% is going to be, but something in that ballpark appears to be a very real possibility.
Why Is PDGM Projected to Put So Many Providers Out of Business?
Simply stated, PDGM drastically shifts the timing of billing and reimbursement for home health agencies, so that most the revenue that would typically come in January and February will be pushed out to March. Agencies without a significant reserve of cash may see their cash flow run dry during those months. This is largely due to RAPs (Requests for Advance Payment) going away.
The drop in cash flow during those first two months is a primary reason for the projected rise in home health agencies closing their doors; however, there are other long-term effects that will likely contribute to a prolonged series of home health bankruptcies beyond the initial wave in January and February.
Which Home Health Agencies Will Be Affected Most?
According to CMS, as quoted in article by NDoc Software, we have a strong idea of which home health agencies will benefit under PDGM and which ones won’t.
Those who will see a strong benefit from PDGM:
Those who will see strong losses under PDGM:
While CMS identifies agencies with 1,000+ annual episodes of care as a group that will be potentially negatively impacted by PDGM, other sources, including a recent article in Home Health Care News, speculate that agencies doing less than $2 million in annual revenue will be the losers in the long run.
How PDGM Will Affect Non-Medical, Private Duty Home Care Agencies
PDGM will send ripples throughout the healthcare continuum. Here’s what some of those ripples are going to look like for non-medical home care providers.
First, referral partnerships are likely to be affected drastically. Home health providers are a key source of referrals to private duty agencies; according to the 2019 Home Care Benchmarking Study, they were the #2 referral source for home care agencies, surpassed only by current and past clients.
Many private duty providers are likely to see the referral landscape shifting under their feet as home health partners go bankrupt or make shifts to their strategies.
These partnerships may look drastically different in cases where smaller, locally-based home health agencies go bankrupt or are acquired by larger companies to ensure survival. While each case will be different, it’s likely that these changes will benefit the private duty agencies who have entrenched partnerships with established companies who provide multiple types of care across the continuum, especially those that are facility-based.
Second, some experts, including members of Home Care Pulse’s leadership team, believe that this presents a growth opportunity for private duty agencies. As clients are displaced by their home health agencies going of business, private duty might end up picking up some of the slack in instances where proactive basic-needs care is adequate in the short term.
Additionally, private duty agencies looking to move into home health should recognize that the home health space just got more complicated and more difficult. Experts interviewed by Home Health Care News have predicted that home health startups will become a thing of the past with these new changes.
Our team is unconvinced that moving into the home health space as a private duty agency will become impossible, but it’s important to become familiar with how the landscape will change and what this will require on your part. Ultimately, no one can say for sure what kind of impact on private duty PDGM will have.
Stressful Times Ahead
In the end, it’s hard to know how PDGM will affect private duty, non-medical home care providers. Private duty has often flourished in times when home health and other parts of the care continuum struggle.
While PDGM is ultimately projected (long-term) to increase payments in the home health space, growing pains along the way may create opportunities for other non-medical care providers who can assist in a supporting role.
One thing is certain: if you’re partnered with a home health agency, now would be a good time to send them donuts. They’ve got stressful times ahead.