The Centers for Medicare & Medicaid Services (CMS) has officially released the Calendar Year (CY) 2026 Home Health Prospective Payment System (PPS) Final Rule, outlining substantial updates to Medicare payment methodology, PDGM refinements, quality reporting changes, and strengthened program integrity requirements. Although CMS initially proposed a deeply concerning payment reduction of approximately $60 per 30-day period, the final rule ultimately implements a significantly smaller—but still impactful—net decrease of roughly $19 per 30-day period after all permanent, temporary, and technical adjustments.
For home health agencies nationwide, CY 2026 introduces some of the most meaningful regulatory and financial updates since the rollout of the Patient-Driven Groupings Model (PDGM) in 2020. Understanding these changes is essential for maintaining compliance, financial viability, quality performance, and operational readiness.
This comprehensive guide breaks down the key elements of the Final Rule and explains what agencies must do now to prepare.
Overview of the CY 2026 Home Health PPS Final Rule
CMS estimates that home health agencies will see a –1.3% overall reduction, totaling a $220 million decrease in Medicare home health payments for CY 2026. This includes:
Permanent budget neutrality adjustments
Temporary behavior-adjustment reductions
Updates to PDGM case-mix parameters
Technical adjustments to wage index and labor calculations
CMS emphasized that its revised payment model reflects actual behavior changes by agencies under PDGM, using the most current 2024 claims and cost report data. This updated dataset led CMS to retreat from the far more severe payment cut originally proposed.
While the reduction of approximately $19 per 30-day payment period is far less drastic than the earlier proposal, agencies should still prepare for measurable financial pressure heading into 2026.
Payment Rates & PDGM Adjustments for CY 2026
The Final Rule finalizes both permanent and temporary payment adjustments applied to PDGM in CY 2026:
• –1.023% permanent adjustment
This corrects for PDGM behavioral assumptions, consistent with CMS’s multi-year effort to reestablish budget neutrality under PDGM.
• –3.0% temporary adjustment
This temporary reduction recoups past overpayments CMS believes occurred due to assumed—versus actual—behavioral shifts. CMS maintains authority to continue applying temporary adjustments in future years.
• Updated PDGM clinical and operational elements
Agencies will see updates to:
Case-mix weights
Functional impairment levels
Comorbidity subgroups
Low Utilization Payment Adjustment (LUPA) thresholds
Wage index and labor share
Outlier calculations
These refinements may affect reimbursement unpredictably across patient populations, depending on case mix, therapy utilization, and geographic factors.
What the Final Rule Means for Agency Financial Planning
Although CMS reduced the size of the payment cut, the finalized decrease still compounds existing fiscal pressures, including:
Rising staff wages
Overtime and staffing shortage costs
Increased regulatory burden
Declining margins from overhead and travel expenses
HHVBP value-based payment risk
Home health agencies should evaluate:
✔ Profitability under revised PDGM case-mix weights
✔ Potential LUPA exposure
✔ Staffing and scheduling efficiency
✔ HHVBP performance scores
✔ Impact of new program integrity rules on operations and credentialing
✔ Cash flow projections for 2026
Financial modeling and operational restructuring may be necessary, especially for smaller agencies and those heavily dependent on Medicare revenue.
Home Health Quality Reporting Program (HH QRP) Changes
The CY 2026 Final Rule includes impactful updates to the HH QRP, affecting both the reporting burden and how agencies demonstrate compliance with federal data submission requirements.
1. Removal of the COVID-19 Vaccination Reporting Measure
CMS is eliminating the COVID-19 vaccination measure, reducing administrative burden and reflecting the transition of COVID-19 from emergency status to endemic management.
2. Removal of Four Standardized Patient Assessment Data Elements (SPADEs)
These elements, considered low utility or inconsistent in data reliability, will no longer be required in CY 2026. Removing these items is intended to streamline OASIS requirements and improve accuracy.
3. Revised HHCAHPS® Survey Beginning April 2026
CMS will implement an updated survey aligned with national patient experience trends. Agencies should prepare for:
Revisions to survey structure
Updated administration requirements
Potential changes in HHVBP scoring impact
4. Updated Reconsideration and Extraordinary-Circumstance Exception Processes
CMS is modernizing QRP dispute processes to allow:
Agencies must ensure timely submission and maintain thorough documentation to avoid QRP payment penalties.
Home Health Value-Based Purchasing (HHVBP) Program: Major Changes for 2026
The CY 2026 Final Rule significantly reshapes the HHVBP model, shifting focus toward functional outcomes, patient communication, and cost efficiency.
Measures Removed from HHVBP:
The following HHCAHPS®-based measures will no longer be part of the HHVBP scoring structure:
Care of Patients
Team Communication
Professional Care
CMS determined these measures demonstrated limited performance differentiation and carried administrative complexity.
Measures Added to HHVBP:
1. Medicare Spending per Beneficiary – Post-Acute Care (MSPB-PAC)
A claims-based measure evaluating cost efficiency and care coordination post-discharge.
Agencies with avoidable ED visits or hospitalizations will be most at risk.
2. Three New OASIS-Based Functional Measures
Focused on patient engagement, safety, and communication:
Talking with patients about home safety
Reviewing prescription and over-the-counter medications
Discussing side effects of medications
These measures emphasize the agency’s responsibility to ensure patient understanding, reduce preventable harm, and improve patient education.
Adjusted Weighting Across Categories
The scoring structure will shift to reflect CMS’s emphasis on:
Cost-effective care
Improved patient communication
Reduced unnecessary spending
Improved patient safety outcomes
Agencies should evaluate their internal HHVBP dashboards and prepare staff training to adapt to the new scoring methodology.
Conditions of Participation (CoPs): Important Clarification on OASIS Reporting
One of the most impactful regulatory clarifications in the Final Rule is CMS’s statement that:
OASIS reporting applies to all skilled patients, regardless of payer source.
This includes:
Agencies must ensure that all skilled patients have correctly completed OASIS assessments—even when not billing Medicare.
Failure to do so constitutes a CoP deficiency, and repeated failure may lead to:
Condition-level findings
Plans of Correction (POCs)
Increased survey frequency
Potential enforcement actions
Agencies should audit their scheduling and intake processes to verify consistent OASIS compliance across all payer types.
Provider Enrollment, Revocation, and Deactivation Updates
CMS is also strengthening program integrity rules to address fraud, abuse, and credentialing issues. New provisions include:
1. Expanded Grounds for Denial, Revocation, and Deactivation
CMS now has greater authority to deny or revoke enrollment for:
False or misleading ownership disclosures
Incomplete or inaccurate provider information
Failure to meet regulatory or billing requirements
Certain adverse legal actions
2. Shortened Reporting Timeframe for Adverse Legal Actions
Agencies must report adverse actions within 30 days
(previously 90 days).
Failure to report is grounds for revocation.
3. Expanded Authority for Retroactive Effective Dates
CMS can now grant retroactive enrollment effective dates under additional circumstances, particularly when administrative delays occur.
Agencies should review internal credentialing workflows to avoid enrollment lapses that could risk claims denials or revocations.
What Agencies Should Do Now: Strategic Preparation for 2026
To meet the demands of the Final Rule, home health agencies should begin preparing immediately by:
✔ Conducting a full PDGM financial impact analysis
Modeling expected reimbursement changes under updated case-mix weights and thresholds.
✔ Strengthening HHVBP performance improvement initiatives
Especially around medication teaching, safety education, and reducing spending per beneficiary.
✔ Enhancing Quality Assurance and Performance Improvement (QAPI) systems
Focusing on OASIS accuracy, documentation quality, and survey readiness.
✔ Updating policies for provider enrollment reporting requirements
Including tracking criminal, administrative, and civil legal actions.
✔ Training staff on new OASIS-based HHVBP measures
Particularly home safety and medication discussions.
✔ Updating OASIS workflows to include all skilled patients
Regardless of payer source.
Operational readiness will be essential for agencies to remain compliant and financially stable throughout CY 2026 and beyond.
Conclusion: Prepare Now for a Transformative Year in Home Health
The CMS CY 2026 Home Health PPS Final Rule represents a substantial shift in home health reimbursement, value-based purchasing priorities, and compliance expectations. Although the finalized payment cuts are less severe than originally proposed, agencies must proactively strengthen quality reporting, documentation accuracy, operational oversight, and financial planning.
HealthBridge is available to support home health and hospice agencies with:
Quality assurance chart reviews
Documentation improvement strategies
Mock surveys and survey readiness coaching
Medicare CoP compliance
OASIS accuracy audits
Operational restructuring
Regulatory and accreditation support
With the right preparation, agencies can mitigate risk, protect reimbursement, and excel under the evolving CMS regulatory landscape.
References:
https://www.ecfr.gov
https://www.cms.gov
https://www.cms.gov/medicare
https://www.cms.gov/medicare/payment/homehealthpps
https://www.cms.gov/medicare/quality/home-health-quality-reporting
https://www.cms.gov/medicare/quality-initiatives-patient-assessment-instruments/value-based-programs/hhvbp
