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PDGM and COVID-19 Impacts on Home Health Agency Cash Flow


The year 2020 has brought many changes for home healthcare organizations, starting with the shift toward value-based care in the Patient-Driven Groupings Model (PDGM). This new method of billing, the most significant change in 20 years, requires organizations to bill for 30-day periods, instead of the 60-day periods performed previously. Luckily, organizations were able to prepare somewhat for this change to take place.

But organizations had to shift again when coronavirus (COVID-19) spread worldwide, shutting down the economy.

Both PDGM and COVID-19 upturned the home healthcare industry’s financial books, even with time to prepare. Has your agency fallen into negative cash flow from these events?

How PDGM Has Upheaved the Books

It’s understandable that a major overhaul in the way billing is done can lead to confusion, mishap and a learning curve. However, this impacts an aspect of home healthcare that most organizations can’t afford to lose: money.

These changes affect revenue, expenses and cash flow for organizations:

  1. As previously mentioned, the largest PDGM adjustment has been processing two sets of final claims every 30 days instead of one at the end of each 60-day episode. To describe the strain this puts on organizations, the process of obtaining signed plans of care, physician orders, face-to-face encounters, and completing visits will be needed twice as often and more frequently to maintain cash flow.
  2. The Centers for Medicare and Medicaid Services (CMS) has reduced the amount of Request for Anticipated Payment (RAP) payments to 20%, instead of the previous 50-60% normally received upfront on episodes of care. This adjustment is more like a warning, as RAPs will soon be eliminated altogether.

There are situations under PDGM where payment rates may have been reduced by the model itself and/or there may be operational changes, like increasing costs on intake or producing more claims, requiring additional revenue cycle staff. These are very real effects caused by PDGM that may decrease organizations’ profit margins and cash flow.

COVID-19 Creates a Negative Financial Impact

When organizations were beginning to adjust to a new way of billing, the world got turned upside down in March by the COVID-19 pandemic. With any state of emergency comes challenges with cash flow.

  1. Organizations have seen countless visits being refused by patients or staff, fearful of the spread of this virus. When you’re decreasing visits in home health (many commercial payers still pay per visit) , organizations can lose out on those revenues.
  2. With fewer visits comes a higher rate of Low Utilization Payment Adjustment (LUPA) periods, decreasing revenue under episodic reimbursement situations. Because of the pandemic, hospitals essentially closed their doors to elective procedures. This leads to fewer patients coming out of the hospital who need home health services for surgeries on knees, hips, and other elective procedures that had been put off.
  3. Alongside fearful patients come distracted referral sources. COVID-19 disrupted the entire healthcare continuum, with referral sources included in that mix. Organizations are most likely getting fewer referral sources. Limited access to referral sources can be debilitating since they are often the source of documentation needed for billing. That in turn could slow down cash flow.

Not only have we seen decreases in revenues and potential cash flow, but COVID-19 has also increased the cost of doing business. Essential items, like PPE, have been difficult for many organizations to find, driving the market price up. That fear of having an outsider in the home and potentially spreading the virus prompted the need for more telemonitoring, causing an investment in equipment.

The need for remote workers increased technology costs (separate from telemonitoring), and the general disruption, slowed down overall productivity. Crisis management naturally increases costs.

Revenue Cycle Management Cash Flow Analysis

Some organizations may not have planned correctly for how PDGM would affect their cash flow, not knowing the chaos of COVID-19 that would shortly follow. Organizations should always accurately plan for long-term and short-term cash needs from payroll to payroll.

Axxess provides tools and guidance for you to succeed under PDGM. With an innovative home health software that ensures compliance and helps your organization take better care of patients, Axxess is used by enterprise organizations to maintain lasting success as the industry evolves.

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