Payment, PDGM & Billing
Reviewed by Zach Newman · Last reviewed July 2026
Getting paid in home health depends on terms most people never learned in school. Under PDGM, a single episode moves through the Notice of Admission, a HIPPS code, LUPA thresholds, and case-mix weighting before one clean claim ever goes out. This glossary of home health billing terms defines the language of the revenue cycle, from the 30-day payment period to denials management, so nothing about how your agency gets paid stays a mystery.
42 terms30-Day Payment Period
The 30-day payment period is the unit of payment for Medicare home health under the Patient-Driven Groupings Model (PDGM). Each period is independently classified into one of 432 case-mix groups and billed on its own claim, with two payment periods fitting inside each 60-day certification period.
ADR (Additional Documentation Request)
An Additional Documentation Request (ADR) is a formal request from a Medicare review contractor, most often the Medicare Administrative Contractor (MAC), asking a provider to submit medical records that support a claim selected for review. For home health agencies, an ADR typically requires the plan of care, face-to-face documentation, OASIS, visit notes, and orders. Missing the response deadline, generally 45 days for MAC reviews, results in an automatic denial.
Admission Source
Admission source is the Patient-Driven Groupings Model (PDGM) variable that classifies each 30-day payment period as institutional or community. A period is institutional when the patient was discharged from a qualifying inpatient setting within the 14 days before home health admission, and institutional periods carry higher case-mix weights because those patients typically need more resources.
Case Rate
A case rate is a fixed payment negotiated with a payer that covers all home health services for a defined case, usually an episode of set length, no matter how many visits the agency delivers. It is a common alternative to per-visit payment in Medicare Advantage and commercial contracts. Because case rates transfer utilization risk to the agency, pricing them requires reliable cost and utilization data.
Case-Mix Weight
A case-mix weight is the numeric multiplier assigned to each of the 432 case-mix groups under the Patient-Driven Groupings Model (PDGM). It scales the national standardized 30-day base payment rate up or down to reflect the expected resource intensity of patients in that group, making it the single biggest driver of what a period pays.
Clean Claim
A clean claim is a claim submitted with complete, accurate information that the payer can adjudicate and pay on first pass, with no rejections, requests for more information, or manual intervention. Clean claim rate, the share of claims that pay first time, is one of the most telling indicators of a home health agency's revenue cycle health, since every claim that is not clean adds cost, delay, and denial risk.
Clinical Grouping
Clinical grouping is the Patient-Driven Groupings Model (PDGM) variable that assigns each 30-day payment period to one of 12 categories based on the principal diagnosis reported on the claim. The group reflects the primary reason for home health care and shapes the period's case-mix weight, functional thresholds, and LUPA threshold.
Comorbidity Adjustment
The comorbidity adjustment is the Patient-Driven Groupings Model (PDGM) variable that adjusts a 30-day period's payment based on the patient's secondary diagnoses. Periods are classified as no adjustment, low, or high, with the tiers reflecting how much documented comorbid conditions are expected to increase the cost of care.
Consolidated Billing
Consolidated billing is the Medicare rule that makes the home health agency responsible for billing virtually all covered home health services for a patient under its plan of care. While a home health period is open, other providers generally cannot bill Medicare separately for bundled services and must look to the agency for payment instead.
Days Sales Outstanding (DSO)
Days Sales Outstanding (DSO), often called days in accounts receivable, measures the average number of days between earning revenue and collecting the cash. It is typically calculated as accounts receivable divided by average daily revenue. For home health agencies, DSO is the headline cash flow metric, because payroll comes due every one to two weeks regardless of when Medicare, Medicare Advantage plans, and other payers actually pay.
Denials Management
Denials management is the systematic process of preventing, tracking, appealing, and eliminating the root causes of denied and rejected claims. In home health, denials cluster around eligibility documentation, untimely filings, authorization gaps with Medicare Advantage plans, and technical errors, and a mature denials program treats each denial as both revenue to recover and a defect signal to fix upstream.
Eligibility Verification
Eligibility verification is the process of confirming a patient's insurance coverage and benefit status before and during a home health episode. For Medicare patients it means checking Part A and B entitlement, Medicare Advantage enrollment, hospice elections, and open home health episodes at other agencies before committing to a start of care. Skipped or shallow verification is one of the most common root causes of home health denials.
Episodic Payment
Episodic payment is a reimbursement model in which a home health agency receives one predetermined amount for an entire episode or period of care, regardless of the number of visits delivered within it. Medicare pays this way for 30-day periods under the Patient-Driven Groupings Model (PDGM), and some Medicare Advantage and commercial contracts use episodic structures as well. The model shifts utilization risk from the payer to the agency.
Final Claim
The final claim is the Medicare claim a home health agency submits after each 30-day payment period ends, reporting every visit, supply, and diagnosis for the period along with the HIPPS code that identifies its case-mix group. It is how the agency actually gets paid under the Patient-Driven Groupings Model (PDGM), since the Notice of Admission that precedes it carries no payment.
Functional Impairment Level
Functional impairment level is the Patient-Driven Groupings Model (PDGM) variable that classifies each 30-day payment period as low, medium, or high based on responses to specific OASIS items. Higher impairment levels carry higher case-mix weights, making OASIS functional accuracy a direct driver of home health payment.
G-Codes
G-codes are Healthcare Common Procedure Coding System (HCPCS) Level II codes that Medicare uses to describe services that have no matching CPT code. In home health billing, G-codes identify the discipline and type of each visit reported on the claim, such as skilled nursing, therapy, medical social work, or home health aide services. Every billable visit line on a home health claim pairs a G-code with a revenue code and units of time.
HETS
HETS (HIPAA Eligibility Transaction System) is the system the Centers for Medicare & Medicaid Services (CMS) uses to answer real-time Medicare eligibility inquiries from providers. Home health agencies query HETS, usually through their EHR, a clearinghouse, or a Medicare Administrative Contractor portal, to confirm a patient's Medicare Part A and B status, Medicare Advantage enrollment, hospice election periods, and other coverage details before admitting and billing.
HHRG (Home Health Resource Group)
A Home Health Resource Group (HHRG) is the case-mix group Medicare assigns to a 30-day payment period under the Patient-Driven Groupings Model (PDGM). Each of the 432 HHRGs carries a case-mix weight that determines how much the period pays, and the group is reported on the claim as a HIPPS code.
HIPPS Code
A Health Insurance Prospective Payment System (HIPPS) code is the five-character code reported on a Medicare home health claim to identify the case-mix group for a 30-day payment period. It is the billing representation of the Home Health Resource Group (HHRG) and determines the case-mix weight applied to the period's payment.
Home Health PPS
The Home Health Prospective Payment System (HH PPS) is the method Medicare uses to pay home health agencies a predetermined, case-mix adjusted amount for each unit of care rather than reimbursing actual costs. Since January 2020 the unit of payment has been a 30-day period under the Patient-Driven Groupings Model (PDGM). Annual rulemaking updates the base rate, case-mix weights, wage index, and LUPA thresholds.
LUPA (Low Utilization Payment Adjustment)
A Low Utilization Payment Adjustment (LUPA) occurs when the number of visits in a 30-day payment period falls below the threshold for the period's case-mix group. Instead of the full period payment, Medicare pays national per-visit rates for the visits actually delivered, which typically totals a fraction of the case-mix amount.
LUPA Threshold
The LUPA threshold is the minimum number of visits a home health agency must deliver in a 30-day payment period to receive the full case-mix payment under the Patient-Driven Groupings Model (PDGM). Thresholds vary by case-mix group, ranging from 2 to 6 visits, and periods that fall short are paid per visit as a Low Utilization Payment Adjustment (LUPA).
MAC (Medicare Administrative Contractor)
A Medicare Administrative Contractor (MAC) is a private company that CMS contracts with to process Medicare fee-for-service claims and administer the program within a defined jurisdiction. Home health and hospice claims are handled by dedicated HH+H MACs: Palmetto GBA, CGS Administrators, and National Government Services, each serving an assigned group of states. Your MAC is the operational front door for claims, NOAs, medical review, and first-level appeals.
Managed Care Contracting
Managed care contracting is the process of negotiating and managing agreements with Medicare Advantage, Medicaid managed care, and commercial health plans that define how a home health agency is paid outside traditional Medicare. A contract sets payment rates and structure, authorization requirements, billing and timely filing rules, and termination provisions. Contract quality directly determines whether non-Medicare census is profitable or a drain.
Medicare Advantage in Home Health
Medicare Advantage (MA), also called Medicare Part C, is the program in which private health plans contract with Medicare to deliver Part A and B benefits, including home health. For agencies, MA means negotiated payment rates, prior authorization requirements, and plan-specific billing rules in place of the uniform fee-for-service system. With more than half of Medicare beneficiaries enrolled in MA plans, managing these contracts well has become core to agency economics.
Medicare Fee-for-Service
Medicare fee-for-service (FFS), also called Original Medicare or traditional Medicare, is the arrangement in which the federal government pays providers directly for covered services under Parts A and B. For home health agencies, FFS patients are paid under the Home Health Prospective Payment System using PDGM, with claims processed by Medicare Administrative Contractors. FFS is the reference payer against which agencies compare every other contract.
Medicare Home Health Benefit
The Medicare home health benefit covers intermittent skilled care delivered in a beneficiary's home by a Medicare-certified home health agency. Eligible patients pay nothing out of pocket for covered home health services, and Medicare pays the agency directly, currently under the Patient-Driven Groupings Model. Eligibility rests on homebound status, a skilled need, a plan of care, a face-to-face encounter, and certification by an allowed practitioner.
NOA (Notice of Admission)
The Notice of Admission (NOA) is a one-time submission that tells Medicare a home health admission has begun. It is due within 5 calendar days of the start of care, and a late NOA reduces payment for each day between the start of care and the day the NOA is accepted. The NOA replaced Requests for Anticipated Payment (RAPs) on January 1, 2022.
Outlier Payment
An outlier payment is an additional Medicare payment for a 30-day home health period whose estimated cost of care substantially exceeds its case-mix payment. It exists to protect agencies against outsized losses on unusually resource-intensive patients, and it is subject to both a national spending target and a per-agency cap.
PDGM (Patient-Driven Groupings Model)
The Patient-Driven Groupings Model (PDGM) is the Medicare payment system for home health, in effect since January 1, 2020. It pays agencies a case-mix adjusted rate for each 30-day period of care, placing every period into one of 432 payment groups based on patient characteristics rather than the volume of therapy visits delivered.
PEP (Partial Episode Payment)
A Partial Episode Payment (PEP) adjustment prorates a 30-day payment period when the period ends early because the patient transferred to another home health agency, or was discharged with goals met and then readmitted to home health, within the same 30 days. The agency is paid for the portion of the period it was responsible for rather than the full case-mix amount.
Per-Visit Rate
A per-visit rate is a payment amount tied to each individual home health visit, usually set separately by discipline such as skilled nursing, physical therapy, or aide services. Medicare uses national per-visit rates to pay LUPA periods, and per-visit payment is the most common structure in Medicare Advantage and Medicaid managed care contracts. Under per-visit payment, revenue scales directly with the number of visits delivered.
Pre-Claim Review
Pre-claim review is a Medicare process in which a home health agency submits the documentation supporting a claim to the review contractor before the final claim is billed, rather than after. Affirmed requests receive a Unique Tracking Number (UTN) that goes on the claim, which then pays without further medical review of those services. It is the flagship option under the Review Choice Demonstration (RCD) in six states.
RAP (Request for Anticipated Payment)
A Request for Anticipated Payment (RAP) was the claim a home health agency filed at the start of each payment period to receive an upfront portion of the expected Medicare payment. RAP payments were phased down to zero in 2021, and the RAP itself was eliminated and replaced by the Notice of Admission (NOA) on January 1, 2022. The term now matters mainly as historical context.
RCD (Review Choice Demonstration)
The Review Choice Demonstration (RCD) is a CMS program that requires Medicare home health agencies in participating states to have essentially all claims reviewed, letting each agency choose how: pre-claim review before final billing, postpayment review after payment, or reduced-review options earned through good performance. RCD currently operates in Illinois, Ohio, Texas, North Carolina, Florida, and Oklahoma, and CMS extended it for five more years effective June 1, 2024.
Revenue Codes in Home Health
Revenue codes are the four-digit codes on institutional claims that categorize each line item by the type of service provided. On a Medicare home health claim, they identify each visit line by discipline, mark supply lines, and flag the special 0023 line that carries the HIPPS code for the payment period.
Revenue Cycle Management (RCM)
Revenue cycle management (RCM) is the end-to-end process of converting care delivered into cash collected: referral intake, eligibility verification, authorization, clinical documentation and coding, claim submission, payment posting, denials and appeals, and reporting. In home health, RCM is unusually front-loaded, because most payment failures trace back to intake, eligibility, and clinical documentation rather than to the billing office.
Sequential Billing
Sequential billing is the Medicare requirement that home health claims for an admission process in chronological order: the Notice of Admission first, then each 30-day period claim in date sequence. A claim cannot finalize until the claims ahead of it have processed, which makes one stuck claim a cash-flow problem for the entire admission.
TPE (Targeted Probe and Educate)
Targeted Probe and Educate (TPE) is the Medicare Administrative Contractor (MAC) medical review program that examines a sample of 20 to 40 claims per round from providers whose billing looks unusual compared to peers or whose services have high improper payment rates. Providers with high error rates receive one-on-one education and up to two more rounds; those who fail all three rounds can be referred to CMS for stronger action.
Timing (Early vs. Late Periods)
Timing is the Patient-Driven Groupings Model (PDGM) variable that classifies each 30-day payment period as early or late. The first 30-day period in a sequence of home health care is early, every subsequent adjacent period is late, and early periods carry higher case-mix weights because resource use is typically heaviest at the start of care.
Type of Bill 32X
Type of bill (TOB) 32X is the family of type of bill codes that identifies Medicare home health claims for services under a home health plan of care. The first digits mark the claim as home health, and the final character tells the payer what kind of submission it is: a Notice of Admission, an original final claim, an adjustment, or a cancellation.
UPIC Audit
A UPIC audit is an investigation by a Unified Program Integrity Contractor, the CMS contractor charged with detecting and investigating suspected fraud, waste, and abuse in Medicare and Medicaid. Unlike routine medical review, a UPIC audit is triggered by fraud indicators such as data outliers, complaints, or referrals, and can lead to payment suspension, extrapolated overpayment demands, and referral to law enforcement.
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