PostAcuteTools
Guide · Home Health

How PDGM Works

The Patient-Driven Groupings Model is how Medicare pays home health agencies. This is the whole grouper, start to finish — the move to 30-day periods, the five variables that build 432 case-mix groups, the LUPA cliff, and the HIPPS code.

In short

PDGM pays per 30-day period. Each period is sorted into one option for five variables — admission source, timing, clinical group, functional level, and comorbidity — which combine into one of 432 case-mix groups. The group’s weight scales the base payment, unless too few visits trigger a per-visit LUPA.

What PDGM replaced

PDGM took effect January 1, 2020, replacing the original Home Health PPS case-mix model. Two big things changed. First, the unit of payment moved from a 60-day episode to a 30-day period — so a typical stay is now billed as two periods rather than one episode. Second, like PDPM did for skilled nursing, PDGM removed therapy volume as a payment factor, basing payment on the patient’s clinical characteristics from the diagnosis codes and OASIS instead.

The big picture

Every 30-day period is classified on five separate axes. Each axis has a fixed set of options, and the combination lands the period in one of 432 case-mix groups. Each group carries a weight that scales the national 30-day base payment.

Admissionsource2Community / Inst.Timing2Early / LateClinicalgroup12MMTA + 5 specialtiesFunctionallevel3Low / Med / HighComorbidity3None / Low / High2 × 2 × 12 × 3 × 3432 case-mix groups× case-mix weight30-day payment
Each 30-day period is sorted into one option per variable; the combinations yield 432 case-mix groups, each with a weight that scales the base payment.

The five variables

  • Admission source (community or institutional) — institutional means the patient came from an acute or post-acute stay in the 14 days before the period.
  • Timing (early or late) — only the first 30-day period is early; every period after it is late.
  • Clinical group (twelve options) — assigned by the principal diagnosis, which sets the main reason for home health.
  • Functional impairment level (low, medium, high) — scored from a set of OASIS items on function and risk.
  • Comorbidity adjustment (none, low, high) — from secondary diagnoses. Low means one qualifying comorbidity; high means two or more that interact to raise resource use.

The twelve clinical groups

The principal diagnosis assigns the period to exactly one clinical group. Seven are subgroups of MMTA — Medication Management, Teaching, and Assessment — and five are specialty groups.

MS RehabNeuro RehabWoundsComplex NursingBehavioral HealthMMTA — Surgical aftercareMMTA — Cardiac / circ.MMTA — EndocrineMMTA — GI / GUMMTA — Infectious / neoplasmMMTA — RespiratoryMMTA — Other
The twelve clinical groups, assigned by the period’s principal diagnosis. Seven are MMTA subgroups (Medication Management, Teaching & Assessment); five are specialty groups.

LUPA: the low-utilization cliff

Each of the 432 groups has a visit threshold between two and six visits. If a period has fewer visits than its threshold, it isn’t paid the full case-mix amount at all — instead it’s paid per visit, which is far less. Cross the threshold by even one visit and the period flips to the full 30-day payment. That sharp step is why LUPA management matters so much in home health.

Payment1234567number of visits in the 30-day periodLUPA thresholdbelow → per-visitat / above → full 30-day payment
If visits fall below the group’s threshold (2–6 visits, set per group), the whole period is paid per visit instead of the full case-mix amount — a sharp cliff. A threshold of 4 is shown for illustration.

The HIPPS code

The classification is packed into a five-character HIPPS code on the claim. Unlike PDPM, the first character combines two variables (admission source and timing):

1st char3Source & timing1–42nd charAClinical groupA–L3rd charBFunctional levelA–C4th char2Comorbidity1–35th char1Placeholderfixed
The five-character PDGM HIPPS code. The first character combines admission source and timing; the next three encode clinical group, functional level, and comorbidity; the fifth is a placeholder. Values shown are illustrative.

The first character runs 1–4 (community-early, institutional-early, community-late, institutional-late), the next three carry clinical group, functional level, and comorbidity, and the fifth is a placeholder. Decode or build one with the HH HIPPS Decoder.

Putting it together

  • Classify the period on all five variables → one of 432 groups.
  • Multiply the 30-day base payment by that group’s case-mix weight.
  • Wage-index adjust the labor share to the local area.
  • If visits fall below the group’s LUPA threshold, pay per visit instead.
  • Apply any outlier or other adjustments.

Because a typical 60-day stay is now two 30-day periods, the early/late and admission-source logic can make the first and second period pay quite differently for the same patient.

Key takeaways

  • PDGM pays per 30-day period, not a 60-day episode, and ignores therapy volume.
  • Five variables combine into 432 case-mix groups (2 × 2 × 12 × 3 × 3).
  • The principal diagnosis sets the clinical group; secondary diagnoses drive the comorbidity adjustment.
  • LUPA pays per visit when visits fall below the group’s 2–6 visit threshold — a steep cliff.
  • The HIPPS code combines admission & timing in its first character.

Try it on the tools

PDGM Calculator →Scenario Simulator →LUPA Calculator →HH HIPPS Decoder →Current Rates →

Last reviewed May 2026. Educational overview only — verify specifics against the current CMS PDGM guidance and HH PPS Final Rule before billing.