PDGM, the Patient-Driven Groupings Model, is the case-mix payment system Medicare uses to reimburse home health agencies. Instead of paying based on how many therapy visits a patient receives, PDGM sets payment for each 30-day period based on the patient's clinical and functional characteristics, as documented at referral, at OASIS assessment, and in the coding on the claim. CMS has updated PDGM's payment rates and case-mix weights for calendar year (CY) 2026, effective January 1, 2026; this guide explains how the model works and what agencies should know heading into the new year.
What Is PDGM, in Plain English?
PDGM stands for Patient-Driven Groupings Model. It's the payment model the Centers for Medicare & Medicaid Services (CMS) has used to reimburse Medicare-certified home health agencies since it took effect on January 1, 2020, under the Bipartisan Budget Act of 2018. PDGM replaced the prior payment model's reliance on the number of therapy visits delivered and instead bases payment on patient characteristics (diagnosis, functional status, and referral pattern) captured through documentation rather than visit counts.
The name reflects the intent: payment is meant to be driven by the patient's actual clinical picture, not by how much therapy was scheduled.
How Does PDGM Actually Work?
Each home health payment period is classified into one of PDGM's case-mix groups, known as Home Health Resource Groups (HHRGs), based on five variables documented in the referral, OASIS assessment, and coding:
A few structural points worth understanding:
How Does PDGM Affect Home Health Reimbursement?
Reimbursement under PDGM is determined by the case-mix group a payment period is assigned to, and that assignment is entirely dependent on documentation, not on visit volume. The admission source, timing, principal diagnosis, OASIS functional responses, and coded comorbidities all feed directly into which of the 432 HHRGs a period lands in, and each HHRG carries a different case-mix weight that determines the payment rate.
This means two patients receiving clinically similar care can be reimbursed differently if their documentation captures their functional status or comorbidities differently, and a period can also fall into LUPA status, changing how it's paid entirely, based on visit count relative to that group's threshold.
What's Changing for Home Health Reimbursement in 2026?
CMS finalized the CY 2026 Home Health Prospective Payment System rule (CMS-1828-F) on November 28, 2025, effective January 1, 2026. According to CMS's own fact sheet, the rule includes:
Source: CMS, "Calendar Year (CY) 2026 Home Health Prospective Payment System Final Rule (CMS-1828-F)," Fact Sheet, November 28, 2025. Agencies should confirm the current national standardized 30-day payment rate and their own HHRG-specific case-mix weights directly against CMS's published CY 2026 rate tables.
Why Do Coding and OASIS Accuracy Matter Under PDGM?
Because case-mix group assignment is built entirely from documented information, a gap in that documentation can shift a period into a lower-paying HHRG or into LUPA status, independent of the care actually delivered. A few examples of where accuracy directly affects the payment outcome:
None of this requires more visits or different clinical care; it requires the documentation to accurately reflect the care and the patient that were already there.
What Can Home Health Agencies Do to Improve Reimbursement Accuracy?
How This Connects to Murphi's Revenue Integrity Module
Murphi fetches the relevant chart (referral, face-to-face, OASIS, and plan of care) from an agency's existing EHR, where permitted, and runs it through structured checks: coding, OASIS consistency, compliance (face-to-face, plan of care, visit notes), PDGM/HHRG grouping review, and ADR documentation organization. Findings are surfaced for a reviewer to resolve, and the approved result is returned to the EHR the same day the chart was written - rather than after a claim has already gone out or an ADR letter has arrived.
Frequently asked questions
What does PDGM stand for?+
PDGM stands for Patient-Driven Groupings Model. It's the case-mix payment model CMS has used to reimburse Medicare home health agencies since January 1, 2020, basing payment on patient clinical and functional characteristics rather than the volume of therapy visits delivered.
How is PDGM different from the previous home health payment model?+
PDGM replaced 60-day payment episodes with 30-day payment periods and removed therapy visit volume as a factor in payment. Instead, each period is classified into one of 432 case-mix groups based on admission source, timing, clinical grouping, functional impairment level, and comorbidity adjustment.
What is a LUPA under PDGM?+
LUPA stands for Low-Utilization Payment Adjustment. If the number of visits delivered in a 30-day period falls below that case-mix group's visit threshold, the period is paid on a per-visit basis instead of the full case-mix payment. LUPA thresholds are recalibrated annually.
How many PDGM case-mix groups are there?+
There are 432 case-mix groups, known as Home Health Resource Groups (HHRGs), under PDGM. Each HHRG has its own case-mix weight and LUPA visit threshold, both recalibrated annually.
What changed in the CY 2026 home health payment rule?+
CMS finalized the CY 2026 Home Health PPS rule on November 28, 2025, effective January 1, 2026. It includes a net estimated 1.3% aggregate payment decrease, a -1.023% permanent adjustment and -3.0% temporary adjustment, recalibrated case-mix weights and LUPA thresholds, and a broadened face-to-face encounter policy.