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Hi John,
Your understanding is correct. The GND pin (pin 8) should be connected to PGND at the negative node of Vout decoupling cap. At the same time, GND is also connected to the negative node of REFOUT decoupling cap. This way Vout and REFOUT share the same ground potential which is good for output regulation.
In real application, the Vout decoupling cap is usually close to the IC, so the ground potential difference between PGND pin and negative node of output decoupling cap is very small. So we can see applications that both PGND and GND pins are connected to the thermal pad.
Regards,
Weidong