Addressing cash flow challenges before 2020 begins
by David Hoover
November 1, 2019

The home health industry has grown accustomed to change over the years. The latest change involves a complete overhaul of the way the Centers for Medicare & Medicaid Services (CMS) will reimburse providers for care. When the Patient-Driven Groupings Model (PDGM) goes into effect Jan. 1, 2020, it will create challenges for providers who are not prepared to deal with its impact on the revenue cycle. Embracing new technologies is the best way to adapt to changes with PDGM so that operations are streamlined to maximize cash flow.

PDGM Billing Challenges

Under PDGM, the current 60-day episode of care will be divided into two 30-day billing periods, effectively doubling the work and halving the time to complete each billing requirement. The requirements for each billing period are the same as exist under the Prospective Payment System (PPS), but to maintain cash flow, agencies will have to complete billing requirements in two 30-day cycles. In addition to the second request for anticipated payment (RAP) and final claims, agencies will have to deal with posting additional payments and adjustments and will have a higher number of claims to manage. PDGM will require an improvement to operational processes to ensure pertinent information is acquired as early as possible in the revenue cycle.

The new payment model emphasizes claim information and reduces dependency on OASIS data. This requires more specific information to be obtained during the referral and intake process. The clinical grouping, admission source and timing and diagnosis all play a role in determining each claim amount and must be accurate to ensure proper reimbursement.

Separating the episode into two 30-day billing periods will affect an agency’s cash flow, shifting more payments to the end of the 60-day episode. An example of the impact of this change to the cash flow is shown in the chart. PDGM eliminates RAP reimbursement for agencies certified on or after Jan. 1, 2019, and CMS has indicated a desire to move away from RAP reimbursement completely in future years.

Developing Solutions

A payment process overhaul of this magnitude, coupled with shrinking margins, is forcing home health providers to find ways to improve their workflow without additional resources. These solutions should make it easier to eliminate duplicate efforts, speed up claim submission and improve cash flow.

Agencies should strive to meet the 80/20 rule that is well-known in the business community—that is, an agency should spend 80% of its resources on the 20% of claims that impact cash flow. The idea is to spend time working on the exception rather than the rule. In this industry, that translates into only spending time reviewing the smaller number of claims that have issues, rather than reviewing claims that are already compliant. Technology can be a useful tool to identify the exceptions and automate the process for the rest.

Applying Technology

Automation provides many benefits. It can help eliminate manual intervention, quickly identify issues to eliminate wasted efforts, and help maintain process compliance. With the introduction of two billing cycles under PDGM, the workload of billers will double. Instead of hiring more people to submit, process and post claims, use automation to streamline the entire process.

Data analytics can identify issues with a claim early so it can be corrected before reaching the next stage in the revenue cycle. Analyzing ungroupable diagnoses during the intake process can help avoid a non-reimbursable claim. Validating OASIS data for documentation inconsistencies can improve quality and prevent compliance issues. Applying claim processing rules to claims prior to submission can eliminate the need to rework a claim.

Data modeling capabilities can help identify comorbidity pairings and avoidable Low Utilization Payment Adjustments (LUPAs), as well as suggest clinical pathways to help streamline the revenue cycle. These modeling tools may use external and historical data to intervene during normal operations when an issue has been identified—and provide corrective actions.

System integrations will provide a more streamlined process and eliminate duplication of data entry. Using multiple systems is a normal business practice, but efficient data transmission can help eliminate duplicate efforts and reduce errors. Order management can be integrated to provide easier processing and communication for providers. Referral management can create a more thorough and effective means to obtain appropriate intake information. Effective integrations can help eliminate duplicate efforts and data entry errors.


Thriving under PDGM will require more efficient processes to maintain cash flow. Technology will be the best way to improve those processes. Automation will help eliminate repetitive, manual efforts and allow more frequent submissions. Data analytics can be used to identify issues and resolve them; modeling can help predict financial outcomes. System integration can deliver the efficient use of operating solutions and eliminate wasted efforts. Technology offers many benefits that can be used to assist agencies during the transition to PDGM and in the months beyond.

Shrinking margins make it difficult to justify hiring additional staff to meet new demands brought on by changing regulations. That is why it is important to look to helpful technology to effectively address the new demands. Understanding your revenue cycle, quickly identifying issues and driving claim resolution is paramount to every agency’s future.