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DEPARTMENTS: Payment Strategies

Impact of the New Home Health Agency Payment System on Wound/Ulcer Management

Schaum, Kathleen D. MS

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Advances in Skin & Wound Care: February 2020 - Volume 33 - Issue 2 - p 65-67
doi: 10.1097/01.ASW.0000650936.98664.c4
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Every year wound/ulcer management providers and professionals await the release of the Medicare payment system Final Rules for the site of care where they work. In the past, providers and professionals rarely paid attention to the Medicare payment systems for other sites of care. As bundled payments, episode of care payments, bonuses for increased quality of care and decreased total costs of care, teleconsultations, virtual visits, and so forth are becoming popular, providers and professionals are becoming more vested in managing wounds/ulcers of the Medicare beneficiaries as they move from one site of care to another. In 2020, wound/ulcer management providers and professionals should pay attention to the Medicare payment system changes not only in their major place of work, but also in all of the other sites of care to which they refer and for which they coordinate care, provide teleconsultations, and so on.

Home health agencies (HHAs) interface with nearly every other site of care. Until 2020, accepting patients with wounds/ulcers led to either a negative cash flow or a neutral cash flow for HHAs. Now wound/ulcer management providers and professionals can expect HHAs to be more willing to admit patients with wounds/ulcers. In fact, if HHAs do not admit these patients, they will have a lower acuity case-mix, which will lead to decreased revenues.

Effective January 1, 2020, HHAs received the most significant change to their Medicare payment system in two decades. The new HHA payment system gives more attention to patients with wounds/ulcers than did the old payment system. Physicians and other qualified healthcare professionals who are trained to diagnose and treat patients with wounds/ulcers are very important to the success of HHAs. In addition, nurses and therapists who are wound-certified and who have excellent wound/ulcer management experience will be highly valued by the HHAs and the patients.

Therefore, this article discusses how the new 2020 Medicare payment system for HHAs impacts wound/ulcer management. If you wish to read all the details about the 2020 Medicare payment system changes, please read the actual 2020 Home Health Prospective Payment System Final Rule.1


Twenty years ago, Medicare implemented the home health (HH) prospective payment system that was based on case-mix adjusted payment for 60-day episodes of care. In other words, Medicare paid the HHA based on a national standardized 60-day episode payment rate that was adjusted for the applicable case-mix weight and wage index. That bundled payment covered all HH services provided during the 60-day episode of care. A nurse or therapist from the HHA used the Outcome and Assessment Information Set instrument to assess the patient's condition, as well as the expected therapy needs (physical, speech-language pathology, or occupational). Unfortunately, in the case-mix adjusted prospective payment system, Medicare paid the HHA more for providing care to patients who required many therapy visits than for patients who required wound/ulcer management. Therefore, HHAs focused more attention on admitting patients who required therapy than admitting those who required wound/ulcer management.

Effective January 1, 2020, Medicare implemented the most significant HHA reimbursement change since the HHA prospective payment system was implemented in 2000. The new case-mix adjustment methodology for 30-day (rather than 60-day) episodes of care is called the patient-driven groupings model (PDGM). The PDGM relies more heavily on patient characteristics and other patient information to place the 30-day episodes of care into meaningful payment categories. The model (1) has built-in incentives for nursing and caring for medically complex patients, (2) sets higher reimbursement rates for wound care, and (3) eliminates the use of therapy service thresholds. Following are the four main PDGM variables that make up the 432 case-mix groups in the Home Health Resource Group payment categories for each patient’s 30-day episode of care.

  • A. Admission Source and Timing (institutional early, institutional late, community early, and community late).

Institutional admissions pertain to any acute or post-acute care the patient had in the 14 days prior to the HH admission. The PDGM pays higher reimbursement rates for patients who start HH services following an institutional stay.

Community admissions are ones where the patient had no acute or post-acute care in the 14 days prior to the HH admission.

  • B. Clinical Grouping (explains the primary reason the patient is receiving HH services and is derived from the principal diagnosis reported on HH claims).

In the 2020 Interactive Grouper Tool2 released by the CMS, physicians can locate/print/review the Excel spreadsheet that lists (in the file tab labeled “ICD10 DXs”) the 43,122 International Classification Of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) diagnosis codes that the CMS believes justify medical necessity for HH care. When physicians review the list, they will find that using symptoms (eg, muscle weakness, unspecified abnormalities of gait and mobility, repeated falls, unspecified osteoarthritis and unspecified site, and so forth) to justify medical necessity for HH care is no longer acceptable. Instead, the physician must identify the root cause of the symptom and select the specific ICD-10-CM code that describes each patient’s primary diagnosis.

The principal diagnosis code entered on the claim determines to which 1 of 12 PDGM clinical groups the patient will be assigned for the 30-day period of care:

  1. Wounds
  2. Neuro rehab
  3. Musculoskeletal rehab
  4. Complex nursing interventions
  5. Behavioral health
  6. Medication management, teaching, assessment (MMTA-other), or one of six MMTA subgroups:
    1. MMTA surgical aftercare
    2. MMTA cardiac and circulatory
    3. MMTA endocrine
    4. MMTA gastrointestinal/genitourinary system
    5. MMTA infectious disease (includes diagnoses related to neoplasms and blood-forming disease)
    6. MMTA respiratory

NOTE: Claims with primary diagnoses that do not fall under one of PDGM’s 12 clinical groupings will not be processed by the CMS.

NOTE: Wound Care (postoperative wound aftercare and skin/nonsurgical wound care) is 1 of the 12 clinical groups. The primary reason for the HH encounter is for the assessment, treatment, and management of surgical or nonsurgical wounds. Physicians should select the specific ICD-10-CM codes that describe the patients’ wounds/ulcers.

  • C. Functional Impairment Level (low, medium, or high)

Responses to various Outcome and Assessment Information Set items are used to determine the functional level for the 30-day period of care:

  • M1033 Risk of hospitalization
  • M1800 Grooming
  • M1810 Current ability to dress upper body
  • M1820 Current ability to dress lower body
  • M1830 Bathing
  • M1840 Toilet transferring
  • M1850 Transferring
  • M1860 Ambulation/locomotion
  • D. Comorbidity Adjustment (none, low, or high)

In the Interactive Tool Grouper Tool (on the tab labeled “Comorbidities”), described previously, physicians can locate/print/review the specific ICD-10-CM codes that may receive a comorbidity adjustment. The tool lists 3,097 comorbidity codes, but only a subset of those conditions that affect resource use will cause a comorbidity adjustment. Up to 24 secondary diagnosis codes reported on the claim will be used to determine if a comorbidity exists relative to the primary diagnosis. If one of the reported secondary diagnosis codes is listed on the low comorbidity list (see Interactive Grouper Tool tab labeled “Comorbidity-Low”), the episode of care will receive a low comorbidity payment adjustment. If at least two secondary diagnosis codes are listed on the high comorbidity list (see Interactive Grouper Tool tab labeled “Comorbidity-high”), the episode of care will receive a high comorbidity adjustment.

NOTE: A skin comorbidity subgroup appears in more than 50% of the high comorbidity adjustment interaction subgroups. See the Table for the high comorbidity subgroups that include one of the skin comorbidity subgroups.


When you review the case-mix weights for each of the 432 Home Health Resource Group payment groups,3 you will quickly see that the wound care clinical group is among the highest case-mix weights and results in the highest HHA payments. Therefore, wound/ulcer management will most likely be a major emphasis of HHAs in 2020.

No matter whether you work in an HHA or refer patients to an HHA, you should understand the importance of correctly diagnosing patients with a principal diagnosis that determines the clinical group and secondary diagnoses that identify comorbidities that coexist with the principal diagnosis and that can affect the HH plan of care in terms of services provided and time spent with patients. Including comorbidities as part of the PDGM case-mix adjustment is essential because many are tied to poor outcomes, complex care needs, and increased care management that can result in higher healthcare costs. Therefore, wound/ulcer management providers and professionals should take the time to “paint the picture” of each patient’s condition through specific primary and secondary diagnoses. CAUTION: All primary and secondary diagnoses reported on the HHA claim must be addressed in the physician’s plan of care.

Not only must physicians meticulously diagnose the patient’s primary and secondary diagnoses and write an aggressive plan of care, but they, and all other wound/ulcer management providers and professionals, also must provide aggressive care with quality outcomes and thoroughly document their work in the medical record.

If HHAs do not have a sufficient number of trained wound/ulcer staff, they may look to partner with wound/ulcer management providers and professionals for staff education and for patient care. Therefore, all stakeholders should be advised that the new PDGM payment system did not eliminate “consolidated billing”: HHAs should execute contracts with providers and professionals who perform procedures that are on the HHA consolidated billing list. Finally, HHAs may now be open to innovative models of wound/ulcer management, such as telehealth and teleconsultations. Now is the time for wound/ulcer management providers and professionals to uncover new opportunities (and new models of care) for sharing expertise!


1. Centers for Medicare & Medicaid Services. 2020 Home Health Prospective Payment System Final Rule. Federal Register 2019;84(217):60478–646.
2. Centers for Medicare & Medicaid Services. Home Health Patient-Driven Groupings Model: CY 2020 Interactive Grouper Tool. Last accessed November 18, 2019.
3. Centers for Medicare & Medicaid Services. Home Health Patient-Driven Groupings Model: CY 2020 PDGM Case Mix Weights and LUPA Thresholds. Last accessed November 18, 2019.
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