The U.S. Centers for Medicare & Medicaid Services (CMS) released its delayed and much-anticipated CY 2026 home health final payment rule on Friday, Nov. 28.
CMS estimates that the final rule will decrease aggregate Medicare payments to home health agencies by 1.3%, or $220 million, compared to calendar year 2025.
This is well below the 6.4% aggregate reduction CMS proposed in June. The changes in the final rule mean that home health providers will see about approximately $915 million more in payments next year, the National Alliance for Care at Home noted. While the Alliance commended CMS for making these changes, the organization emphasized that the final rule still represents a payment cut that will hurt providers and patients.
“While the Alliance acknowledges that CMS took into account some of the home health community’s recommended changes in its final rule, resulting in a lower payment cut for next year, a 1.3% overall reduction in payments compared to 2025 will likely result in continued reductions in patient access, the closure of more home health agencies, and more patients waiting in costly hospital settings instead of recovering safely at home,” said Dr. Steve Landers, CEO for the Alliance.
The final rule includes an estimated 2.4% rate increase, offset by an estimated final permanent adjustment of 0.9% and a final temporary adjustment that will lower payments by 2.7%. The rule also contains an estimated 0.1% decrease related to an updated fixed-dollar loss (FDL) ratio for outlier payments.
As for the permanent and temporary adjustments related to Patient-Driven Groupings Model (PDGM)-related behavior changes, the rule finalizes a permanent -1.023% adjustment.
“For this final rule we modified the permanent adjustment from our proposal after commenters raised concerns that behavior change after CY 2022 might be attributable to factors unrelated to the implementation of the PDGM, such as the introduction of the OASIS-E assessment; expansion of home health value-based purchasing; and increased Medicare Advantage penetration,” CMS’ fact sheet stated.
CMS also is finalizing a -3.0% temporary adjustment to be applied to the 2026 payment rate. This level of adjustment is meant to “mitigate a significant single year payment reduction, financial instability and potential access to care issues,” according to the fact sheet.
The proposed rule had included provisions that amounted to a 9% reduction in the 30-day base payment rate – the largest cut ever proposed.
The rule marks the fourth straight year of permanent cuts to home health Medicare payments. In 2024, CMS’ final home health rule included a net aggregate payment increase of 0.5% – but the baseline cuts amounted to a -1.975% permanent projected adjustment.
CMS’ announcement was dramatically delayed compared to years past. Typically, the rule is issued at the end of October or early November, but a record 43-day government shutdown significantly delayed its issuance.
Katie Smith Sloan, president and CEO of LeadingAge, the association of nonprofit providers of aging services, described the rule as “an improvement over past actions.”
“To meet [rising] demand, payment support is critical,” Sloan said in a statement. “The final rule, released today, demonstrates some recognition by CMS of this reality. In a marked contrast to Medicare fee-for-service payment rate decisions made since CY2023 – which had resulted in nearly 9% in cuts – CMS today finalized a payment reduction of 1.3%, which includes a -1.023 percent permanent adjustment and the -3.0 percent temporary adjustment.”
The full fact sheet on the final rule can be viewed here.
Other final changes
CMS finalized several other changes in its final rule, including factors beyond payment rates.
The proposed rule included changes to the face-to-face encounter policy that would allow physicians to perform face-to-face encounters regardless of whether the physician is the certifying practitioner or whether they cared for the patient in the facility from which the patient was referred. The final rule solidified this change.
Also included in the final rule were modifications to the home health value-based purchasing (HHVBP) model, updated low-utilization payment adjustment (LUPA) thresholds, and a recalibration of PDGM case weights.
Additionally, the final rule includes elements focused on rooting out fraud, waste and abuse, including creating several new Medicare provider enrollment provisions and revising others.
