billing
Preparing for revenue shortfalls before the new billing mandate
by Corinne Kuypers-Denlinger

On or after Jan. 1, 2020, the Patient-Driven Groupings Model (PDGM) will replace the Home Health Prospective Payment System (HH PPS) as the methodology for calculating episode payments. Arguably, this is the biggest change to home health agency operations since the implementation of the Interim Prospective Payment System in 1998, which resulted in many home health agencies closing their doors.

If history is an indicator, agencies are strongly advised to plan by assessing readiness, educating staff and making necessary operational and/or administrative changes before the implementation of PDGM. Agencies should pay close attention to billing workflow processes, as the revenue cycle is greatly accelerated in PDGM.

Making changes to your current business practices now will improve productivity and profitability in the short term while positioning your agency for a smoother transition to PDGM.

PDGM Legislative Mandate

The Balanced Budget Act of 2018 mandated that the Centers for Medicare & Medicaid Services (CMS) eliminate therapy as a consideration in calculating payment and go from a 60-day episode to a 30-day period of care for billing purposes. By law, CMS is required to make behavioral assumptions when calculating episode payments. For PDGM, CMS assumes agencies will:

  • Change their documentation and coding practices to place the highest-paying diagnosis code as the reason skilled nursing is in the home.
  • Record on the claim as many diagnoses as allowed (one primary and up to 24 secondary) to take advantage of the co-morbidity adjustment.
  • Increase the number of visits for patients who are one to two visits away from the low utilization payment adjustment (LUPA) threshold to receive a 30-day period payment rather than the LUPA payment.

CMS will pay close attention to agencies’ primary code selection, reporting of comorbidities and cases that hover near the LUPA threshold to support those behavioral assumptions—which is why it is critical that agencies be ready on Day One to comply with PDGM’s dramatically different formula for calculating episode payments.

Efficient, Compliant Billing Starts at Intake

Managing the revenue cycle has always been important, of course, but in the PDGM era, workflow processes that move compliant claims efficiently through the process could mean the difference between financial viability and continuous cash flow shortfalls.

The Home Health Financial Management Association (HHFMA) defines the revenue cycle as including “all administrative and clinical functions that contribute to the capture, management and collection of patient-service revenue.”

Just as the clinical care teams need to work in coordination across disciplines, the operational and administrative teams need to work with one another and with the clinical team. In PDGM, there is more billing activity required. There is twice the posting and twice the reconciliation, all in accelerated cycle times. Consequently, the risk of error is higher and there are penalties at every step in the process.

Complete and compliant documentation leading to prompt and proper payment starts at intake. In PDGM, agencies will rely heavily on intake staff to capture:

  • Referral source: institutional or community
  • Timing: early or late
  • Reason for home health orders and primary diagnosis
  • Comorbidities and physician questions
  • Patient demographics
  • Eligibility

Intake staff do not need to be clinical but must have clinical oversight. If this is not in place now, plan for it. It will also be helpful if intake staff have some training in medical terminology and in ICD-10 coding, as ensuring complete referral documentation often takes some detective work.

Strategies for Increasing Billing Efficiencies

Historically, the billing staff has been responsible for gathering any documentation not secured during intake. But in PDGM, there is little margin for error and no time to backtrack. Best practice is for intake staff to work from a checklist that details exactly what the billing department needs to submit a claim, complete with recommendations as to how to obtain missing documentation from referral sources.
At the same time, agencies must analyze current billing practices and implement strategies to accelerate workflow processes. Currently, average time to request for anticipated payment (RAP) is 12 days nationwide. With two 30-day payment periods, average time to RAP should be three to five days.

Here are some strategies to consider putting in place that will improve billing operations now, and result in a smoother transition to PDGM:

  • Leverage your quality assurance and performance improvement (QAPI) plan to do meaningful performance improvement programs (PIPs) for billing/collections.
  • Bill daily.
  • Set productivity and cash goals for each staff member.
  • Review each job description and ask yourself if technology can help.
  • Go electronic in billing/cash posting.
  • Conduct pre-billing audits and collaborate with clinical staff to improve outcomes.
  • Conduct a monthly review of all accounts receivable (AR) aged greater than 60 days.
  • Trend denials by reason.
  • Monitor unsigned orders/face-to-face (F2F) encounter management.
  • Consider using an electronic physician signature portal.

Establish Key Performance Indicators

If you don’t already have key performance indicators (KPIs) for every functional area of your agency against which to benchmark your agency’s performance, now is a good time to start. Setting these KPIs now and assessing how they need to be adjusted as PDGM is implemented will make for a smoother transition.

For each of these, determine your agency’s current state, set targets and adjust now to improve operations immediately and increase the likelihood of a smooth transition to PDGM. This also is the time to understand where your referrals come from. If the greatest percentage come from the community category, you will want to work with your sales and marketing team to target institutional providers. Similarly, analyze your payer mix to determine if there is opportunity to make changes and improve your revenue profile.

Additional measurable KPIs to consider putting in place in preparation:

  • F2F complete, correct, signed and dated at start of care 98% of the time
  • Coding and OASIS reviewed completed in two days 95% of the time
  • Orders completed, sent out and returned signed and dated within 30 days 95% of the time
  • OASIS completed and exported to repository within seven days 98% of the time
  • Monitor admissions and re-certifications (create strategies with clinical if you can’t RAP within a specified time)

There is general agreement among industry experts that agencies will experience some cash flow disruption as PDGM is implemented. Estimates range from a 20% drop in revenue to as high as 43% through March. Although PDGM is designed to be budget neutral, experts warn that agencies should be prepared for a revenue decline in the early months. The only way to mitigate that risk is to prepare for the change. Start at intake and work your way through each clinical, operational and administrative workflow to anticipate impact and adjust accordingly.


Key Performance Indicators to watch

Here are some of the KPIs an agency’s financial department should be monitoring, measuring and managing to mitigate risk of cash flow issues during and after the transition to PDGM.

  1. Referrals/admissions conversion percentage
  2. Referral source
  3. Payer mix
  4. Visits denied for no authorization
  5. Missed visits
  6. Days from referral to admission
  7. Days to request for anticipated payment
  8. Case-mix weight
  9. OASIS error percentage
  10. Outstanding orders by age
  11. Days to final claim
  12. Accounts receivable balances
  13. Days sales outstanding
  14. Write-offs
  15. Rebills



Corinne Kuypers-Denlinger is the vice president of post-acute care growth strategies for Quality in Real Time, a provider of multilevel internal and outsourced coding, billing and consulting for the post-acute industry. Visit qirt.com.