Even with your description, it is not 100% clear what you propose to do. It would be easier to understand if you post a plan, a simple sketch that shows the house, walk, deck, etc., and the extent of the proposed addition. Or you could open up in a paint program, a picture that shows the overall area, and with a line tool draw the extent of the new patio. (Post any pictures directly into the thread so they are easy to view.)

The grade looks relatively flat so it doesn't seem that the addition would present any great problem. In general, you'll need to establish the patio grade so that it drains AWAY from the house. Then you'll deal with what to do in order to channel water farther away from, and out, of the area and how to blend grade to the patio.

Based on the pictures, I can't see why you would need to change grade of patio surface. Seems like it would be a single, relatively flat area.

This is the area I'm speaking of

This is the direction of drainage. Green indicates 2-3% grade, yellow is 3-4% and red is 4%+

My idea for the patio. Pavers in black grid area. Will remove the landscape timbers to butt up to the rock bed.

Your drawing more or less shows drainage running parallel to the house so this would be a flaw in grading that needs to be rectified. The drainage should run away from the house for a few feet, at least, and then run off in a direction that coordinates with the overall lay of land. The grading could direct water straight away from the house or somewhat at a diagonal. It could be a slightly warped surface that begins shedding water straightaway and gradually transitions to a diagonal, skewed toward the direction of overall flow. (A subtly warped surface would appear flat and the warping would not be perceptible to the eye. A possibility might look along these lines...

I'm wondering why you would leave the gravel bed between the deck and patio. It seems like it would be better to widen the steps. They/it could be the entire width of the deck, if desired. The wider they are, the more of a direct connection from one space to the other and the better the visual and traffic flow. The step(s) also add the possibility of temporary, impromptu, extra seating facing the patio area. If the gravel space remains it seems to divide the two spaces for no good reason. It would be better to bring the patio all the way to the deck, even if the steps are less than the full deck width. If for some reason you are creating two separate "rooms" to be divided with a screen/wall so there is less interaction between the spaces, then you might leave the gravel bed/potential planting space.

Note, what happens with grading is dependent on what the grading is doing in the rest of the yard. We have no information about that so I'm speculating in the above drawing.

Thanks so much! I really like the idea of removing the gravel bed, that never occurred to me.

The overall grade for my whole street is from West to East (kinda the direction that my arrows point, so from the 'patio' area to the wooden deck). It flows North away from the house a bit (as the arrows somewhat indicate). I spoke with a friend today who offered to bring his John Deere over with a grading skid and fix that.

So I guess the plan, then, is to fix the grade to come away from the house a few feet into the yard, then continue draining to the East. Remove the gravel bed and small landscape and join the patio to the deck (I really like the idea of opening the deck up).

I want to clarify a point about when I said the steps could be "the entire width of the deck." While the whole side of the deck can be open to the patio, you'll need to have stair rail at each end of the steps, which runs contiguous with deck rail. It is not just because these are physically useful. They also serve as VISUAL cues to people standing on the deck. It's especially useful to people who are unfamiliar with the layout (or drinking beer!) They could fall off the deck, especially in low light, if the level change is not made obvious.