The short answer
PDGM and PDPM are two separate Medicare payment models with similar philosophies. PDGM, the Patient-Driven Groupings Model, pays home health agencies for 30-day periods of care. PDPM, the Patient Driven Payment Model, pays skilled nursing facilities (SNFs) a daily rate. Both replaced older systems that rewarded therapy volume, and both now base payment on patient characteristics, such as diagnoses, function and comorbidities.
If you work in post-acute care, especially in home health billing, coding or care transitions, you need to understand both. Many patients move from a hospital to a SNF and then home with home health, and the way each setting is paid affects the other.
Where each model came from
PDPM took effect on October 1, 2019, replacing the Resource Utilization Groups, Version IV (RUG-IV) system for Medicare Part A SNF stays. Under RUG-IV, payment depended heavily on the number of therapy minutes provided, which encouraged high therapy volume regardless of patient need.
PDGM took effect three months later, on January 1, 2020, as required by the Bipartisan Budget Act of 2018. It replaced the 153-group home health model, which paid more when therapy visits crossed set thresholds, and shortened the unit of payment from 60 days to 30 days.
Both changes followed years of criticism from MedPAC and others that therapy-driven payment did not reflect patients' clinical needs.
PDGM vs PDPM at a glance
Feature | PDGM (home health) | PDPM (skilled nursing facility) |
|---|---|---|
Setting | Patient's home | Skilled nursing facility |
Effective date | January 1, 2020 | October 1, 2019 |
Unit of payment | 30-day period of care | Per day (per diem) |
Assessment tool | OASIS-E1 | MDS 3.0 |
Diagnosis driver | Primary diagnosis sets 1 of 12 clinical groups | Primary diagnosis sets clinical category for PT and OT; other conditions drive SLP and NTA |
Function measure | OASIS functional items | MDS Section GG items |
Payment structure | One case-mix weight per period, from 432 groups | Five case-mix components added together, plus a non-case-mix component |
Therapy volume | Does not drive payment | Does not drive payment |
Low-volume rule | LUPA: per-visit payment below 2 to 6 visits | Not applicable |
Time-based adjustments | Early vs late periods | Variable per diem adjustment for PT, OT and NTA |
Claim type of bill | 032X | 021X |
Value-based program | Expanded HHVBP Model | SNF VBP Program |
How PDGM builds a payment
Under PDGM, each 30-day home health period is assigned to one of 432 case-mix groups using five factors:
Admission source: community or institutional.
Timing: early (first period) or late (later periods).
Clinical grouping: 12 groups from the primary ICD-10-CM diagnosis.
Functional impairment level: low, medium or high, from OASIS.
Comorbidity adjustment: none, low or high, from secondary diagnoses.
The resulting case-mix weight multiplies the national standardized 30-day rate, which is $2,038.22 for CY 2026, and the payment is wage-adjusted. Periods with fewer visits than their low-utilization payment adjustment (LUPA) threshold are paid per visit. High-cost periods can earn outlier payments.
How PDPM builds a payment
PDPM works differently. Instead of one group per period, each SNF day is paid as the sum of several components, each with its own case-mix classification:
PDPM component | What drives classification |
|---|---|
Physical therapy (PT) | Clinical category from the primary diagnosis, plus Section GG function score |
Occupational therapy (OT) | Same clinical category and function inputs as PT |
Speech-language pathology (SLP) | Acute neurologic condition, SLP-related comorbidities, cognitive status, swallowing disorder and mechanically altered diet |
Nursing | Clinical conditions and services, function, depression and restorative nursing |
Non-therapy ancillary (NTA) | A comorbidity score based on conditions and extensive services |
Non-case-mix | Room, board and overhead; the same for all residents |
PT and OT each have 16 case-mix groups, SLP has 12, nursing has 25 and NTA has 6, producing tens of thousands of possible combinations.
PDPM also uses a variable per diem adjustment. PT and OT payments decline gradually as a stay lengthens, starting after day 20. NTA payments are tripled for the first three days of a stay to reflect high early costs, then drop to the standard level. Home health has a different time adjustment: early 30-day periods carry higher weights than late periods.
For FY 2027, which began October 1, 2026, CMS finalized a 2.4% SNF payment update, worth about $882.74 million, and did not finalize new PDPM-related payment adjustments, although it continues to study case-mix growth.
Assessments: OASIS vs MDS
Both models rely on standardized assessments, but the timing and use differ.
Home health (OASIS-E1). Completed at start of care, resumption of care, recertification, transfer and discharge. The start of care OASIS must be completed within five days after start of care. OASIS functional responses directly drive the PDGM functional level.
SNF (MDS 3.0). Under PDPM, the 5-day PPS assessment generally sets payment for the entire Part A stay. Facilities can complete an optional Interim Payment Assessment (IPA) if a patient's condition changes significantly. Section GG functional items feed the PT, OT and nursing components.
In both settings, assessment accuracy is a payment issue and a compliance issue. Auditors compare assessment answers with clinical documentation.
Diagnosis coding under each model
In PDGM, the primary diagnosis is critical because it determines the clinical group. Some ICD-10-CM codes, such as many symptom codes, are not accepted as a primary diagnosis and cause the claim to be returned. Secondary diagnoses add comorbidity adjustments.
In PDPM, the primary diagnosis maps to a clinical category that drives PT and OT classification. Other diagnoses and conditions affect SLP, nursing and the NTA comorbidity score. Accurate capture of conditions such as dysphagia, cognitive impairment or specific comorbidities can change several components at once.
Both models reward complete, specific, well-documented coding, and both expose providers to audit risk if codes are not supported.
Therapy under both models
Neither model pays more simply because more therapy is delivered. That was the central reform.
Under PDPM, CMS also limited concurrent and group therapy to 25% of a resident's therapy minutes per discipline. Under PDGM, therapy visits still matter for LUPA thresholds, and therapy remains a covered skilled service, but there are no payment jumps at specific visit counts.
Critics worried therapy would decline under both models. Utilization did shift after 2019 and 2020, which is one reason CMS has applied budget-neutrality adjustments to both systems.
Budget neutrality and rate adjustments
Both models were designed to be budget neutral when introduced. In both cases, CMS later found spending was higher than expected.
For PDPM, CMS recalibrated the model in FY 2023 and FY 2024, phasing in a total reduction of about 4.6% over two years. For PDGM, CMS has applied permanent behavioral adjustments in several years, including a −1.023% permanent adjustment and a −3% temporary adjustment for CY 2026. CMS has proposed another temporary −3% reduction for CY 2027, alongside an overall 2.4% increase and a proposed $2,092.27 base rate. That home health proposal had not been finalized at the time of writing.
How SNF stays affect home health payment
The two models meet at discharge. When a patient leaves a SNF and starts home health within 14 days, the first home health period is classified as institutional under PDGM, which generally carries a higher case-mix weight. Agencies report this with occurrence code 62 on the claim. Medicare also checks its own claims history and may recode the admission source if the agency's information does not match.
That makes care transitions a billing issue. Intake teams should confirm prior inpatient and SNF stays, discharge dates and diagnoses at referral. Missing an institutional stay can underpay the agency. Reporting one that did not happen can trigger recoding and scrutiny.
Billing differences that matter
Billing element | Home health under PDGM | SNF under PDPM |
|---|---|---|
Initial notice | Notice of Admission (TOB 032A) within 5 calendar days | No NOA; claims billed for covered days |
Claim frequency | One final claim per 30-day period (TOB 0329) | Usually monthly claims for covered days (TOB 021X) |
HIPPS code meaning | Admission source and timing, clinical group, functional level, comorbidity | PT/OT group, SLP group, nursing group, NTA group, assessment indicator |
Key timing risk | Late NOA payment reduction | Late or missed MDS assessments |
Low-volume adjustment | LUPA per-visit payment | Not applicable |
What this means for home health agencies
Home health agencies do not bill PDPM, but understanding it helps. Patients arriving from SNFs bring diagnoses, functional assessments and care plans shaped by PDPM documentation. Agencies that coordinate closely with SNF partners can capture accurate institutional admission sources, smoother diagnosis handoffs and better outcomes.
Inside the agency, PDGM success depends on getting the details right on every period: groupable primary diagnoses, accurate OASIS, timely NOAs and careful LUPA tracking. Many agencies rely on specialized home health billing services to manage this, especially when post-acute referrals make admission source and coding more complex.
Agencies comparing options for home health billing in USA markets should ask how vendors verify institutional stays and reconcile Medicare's HIPPS recoding. Regional context matters too. Desert communities served by home health billing companies in Palm Springs see many SNF-to-home transitions among older residents. Texas agencies using home health billing services in Houston manage these transitions under Review Choice Demonstration review. New York agencies focused on home health billing in NYC coordinate with large hospital and SNF networks and complex managed care plans.
The Trucare Home health billing Company checks prior inpatient and SNF history at intake, so each PDGM period is billed with the right admission source from the start.
FAQs
What is the main difference between PDGM and PDPM? PDGM pays home health agencies per 30-day period. PDPM pays skilled nursing facilities per day. Both base payment on patient characteristics rather than therapy volume.
Do PDGM and PDPM use the same assessment? No. PDGM uses OASIS-E1. PDPM uses the MDS 3.0.
Which came first, PDPM or PDGM? PDPM started October 1, 2019. PDGM started January 1, 2020.
Does a SNF stay increase home health payment? If home health begins within 14 days of SNF discharge, the first period is classified as institutional under PDGM, which usually carries a higher case-mix weight.
Sources: IHA CY 2026 HH PPS final rule summary; CMS CY 2027 HH PPS proposed rule fact sheet; Federal Register: FY 2027 SNF PPS final rule; AHCA/NCAL: FY27 SNF final payment rule; BerryDunn: FY 2027 SNF PPS final rule; CGS home health billing codes sheet.
