PDGM Reimbursement Optimization: 5 Documentation Strategies That Directly Impact Your Bottom Line

Under PDGM, what your clinicians document in the first 30 days determines your entire reimbursement. These five strategies make sure you're capturing every dollar you've earned.

The Patient-Driven Groupings Model fundamentally changed the economics of home health. Before PDGM, therapy volume was the primary reimbursement lever — more therapy visits meant higher payment. After PDGM, documentation became the lever. Your clinical grouping, your functional level, your comorbidity adjustment — every component of your per-period payment is determined by what's documented in the OASIS and the clinical record.

This shift caught many agencies off guard. Agencies that had optimized their operations around therapy utilization found themselves in a payment model where clinical documentation quality matters more than visit volume. Several years into PDGM, most agencies understand this conceptually. But many are still leaving significant reimbursement on the table because their documentation practices haven't fully caught up.

Here are five documentation strategies that directly influence PDGM reimbursement — and that every agency should have in place.

Strategy 1: Nail the Primary Diagnosis on the SOC Assessment

Under PDGM, the primary diagnosis is one of two variables (along with the admission source) that determines your clinical grouping. There are twelve clinical groups under PDGM, and the difference in payment between the highest and lowest groups can be substantial. The primary diagnosis on the SOC OASIS assessment sets this grouping for the entire 30-day payment period.

The most common mistake agencies make is defaulting to the broadest applicable diagnosis rather than the most specific one. A patient admitted after a hip replacement might be coded with a general "aftercare following joint replacement" code when a more specific code — reflecting complications, laterality, or the specific type of replacement — would place them in a higher-paying clinical group.

The second common mistake is misidentifying the primary diagnosis entirely. Under PDGM, the primary diagnosis must reflect the primary reason for the home health episode, not necessarily the patient's most serious overall condition. A patient with congestive heart failure and a new wound might need a wound-related primary diagnosis if wound care is the principal reason for the episode, even though CHF is the more serious chronic condition.

Getting the primary diagnosis right requires close coordination between the clinician completing the SOC assessment and the coding team. The clinician needs to document with enough specificity to support the most accurate code. The coder needs to understand the plan of care well enough to select the diagnosis that best represents the episode's clinical focus.

Strategy 2: Capture Every Relevant Comorbidity

PDGM includes a comorbidity adjustment that increases reimbursement when a patient has certain secondary diagnoses. These comorbidities must appear in the clinical documentation and be coded on the claim. If a relevant comorbidity is present but not documented — or documented but not coded — the agency misses the adjustment.

The challenge is that comorbidity capture depends on thorough clinical documentation during the SOC visit. A clinician focused on assessing the patient's primary condition may not systematically document every secondary diagnosis, especially chronic conditions that are stable and not the focus of the current episode. But under PDGM, those stable chronic conditions can still qualify for a comorbidity adjustment if they're documented and coded.

Agencies should provide clinicians with specific guidance on comorbidity documentation. This isn't about upcoding or adding diagnoses that aren't clinically present. It's about ensuring that every condition the patient actually has is accurately reflected in the clinical record. A patient who takes medication for hypertension has hypertension, and it should be documented — even if the home health episode is primarily about wound care.

A systematic approach to medication reconciliation during the SOC visit is one of the most effective ways to identify comorbidities that might otherwise be missed. Every medication corresponds to a condition. If the patient is taking a statin, they have hyperlipidemia. If they're taking a beta-blocker, they have a cardiac condition. Walking through the medication list with attention to the underlying diagnoses ensures that nothing falls through the cracks.

Strategy 3: Score Functional Items to Reflect the True Level of Impairment

The functional level is the third component of the PDGM payment calculation, and it's determined by the OASIS functional items — primarily the Section GG items that measure the patient's actual performance during the assessment.

Clinicians have a natural tendency to score functional items optimistically. This is well-intentioned — they want to reflect the patient's potential, or they don't want to paint an overly negative picture. But under PDGM, optimistic scoring directly reduces reimbursement. A patient who truly requires substantial assistance with transfers but is scored as needing only supervision will be grouped into a lower functional level, and the agency's payment will be lower for the entire 30-day period.

Accurate functional scoring requires clinicians to assess based on what the patient actually does during the visit, not what they could do on their best day or what they report being able to do. The GG item definitions are specific about this: the score should reflect the patient's usual performance, not their best performance.

Interrater reliability is critical here. If your clinicians aren't calibrated on functional scoring — if one nurse consistently scores higher than another for patients with similar impairment levels — your reimbursement is inconsistent and likely understated for a significant portion of your census.

Strategy 4: Document Timing and Episode Characteristics with Precision

PDGM differentiates between early and late episodes and between community and institutional admission sources. These distinctions affect payment, and they depend on accurate documentation of episode timing and the patient's admission source.

The admission source — whether the patient is coming from the community (living at home) or from an institutional setting (hospital, SNF, inpatient rehab) — must be documented accurately on the SOC assessment. Institutional admissions receive a higher payment adjustment because patients being discharged from institutional settings typically have higher acuity and more complex care needs.

Agencies sometimes fail to capture the institutional admission source correctly, particularly for patients who were briefly in an institutional setting. A patient who spent two days in an observation unit and then returned home might be documented as a community admission when they actually qualify as an institutional admission. The documentation should reflect where the patient was immediately before the home health episode began.

Early episodes (the first 30-day period) versus late episodes (subsequent 30-day periods) carry different payment weights. While this distinction is largely automatic based on episode sequencing, documentation errors in SOC and recertification timing can create episode sequence problems that affect payment.

Strategy 5: Align Your QA Process with PDGM Payment Drivers

Most agency QA processes were designed before PDGM, and many haven't been meaningfully updated. They focus on general documentation completeness and OASIS accuracy, which is necessary but not sufficient.

A PDGM-optimized QA process specifically targets the four components that drive payment: clinical grouping (primary diagnosis), comorbidity adjustment, functional level, and admission source/timing. For every chart that goes through QA review, the reviewer should be asking four targeted questions. Is the primary diagnosis the most specific and appropriate code for this episode? Are all clinically present comorbidities documented and coded? Do the functional scores accurately reflect the patient's assessed performance level? And is the admission source correctly identified?

This focused approach catches the errors that have the largest financial impact. A QA process that flags a minor documentation inconsistency but misses an incorrect primary diagnosis isn't protecting the agency's revenue — it's generating busywork while the real money leaks out.

AI-powered QA tools can automate this focused review across your entire census, not just a sample. When every chart is automatically screened for PDGM payment driver accuracy before the claim is submitted, the agency captures reimbursement it would otherwise miss.

Putting It Together

These five strategies aren't independent — they're interconnected. A clinician who documents comorbidities thoroughly also provides better data for primary diagnosis selection. A coder who selects the most specific primary diagnosis benefits from thorough functional scoring that accurately reflects the patient's acuity. A QA process that focuses on PDGM payment drivers catches gaps in all of the above.

The agencies that consistently optimize PDGM reimbursement aren't doing any one of these things. They're doing all of them, systematically, for every patient and every episode.

The difference between an agency that captures 95% of its earned reimbursement and one that captures 85% is the difference between a healthy margin and a break-even operation. Under PDGM, documentation quality is financial performance.

Lime Health AI combines AI-powered documentation, ICD-10 coding, and OASIS QA review to help your agency capture every dollar of earned reimbursement under PDGM. Request a demo to see how it works.