On June 30, 2025, the Centers for Medicare & Medicaid Services (CMS) released the Calendar Year (CY) 2026 Home Health Prospective Payment System proposed rule for home health agencies (HHAs). CMS released a fact sheet accompanying the proposed rule.
The proposed rule updates Medicare home health payment rates for CY 2026 and includes behavioral adjustments, recalibration of case-mix weights, and changes to low-utilization payment adjustment (LUPA) thresholds. It also proposes revisions to the face-to-face encounter policy, the Home Health Quality Reporting Program (HH QRP), and the expanded Home Health Value-Based Purchasing (HHVBP) Model, along with technical updates to conditions of participation for home health agencies.
Proposals related to payment and accreditation requirements for Durable Medical Equipment Prosthetics, Orthotics, and Supplies (DMEPOS) suppliers and the Competitive Bidding Program are summarized in a separate summary document.
This proposed rule is scheduled for publication in the Federal Register on July 2, 2025.
Comments are due by August 29, by 5:00pm ET.*
CMS PROPOSES 6.4% PAYMENT CUT FOR HOME HEALTH AGENCIES IN CY 2026
The Home Health Prospective Payment System (PPS) provides standardized, case-mix and area wage-adjusted payments for 30-day periods of care.
In this proposed rule, CMS proposes a permanent -4.059% reduction to the 30-day base payment rate to account for differences between assumed and actual provider behavior changes under the Patient-Driven Groupings Model (PDGM). This adjustment reflects cumulative findings from claims data spanning CYs 2020 through 2024 and builds on previously applied partial adjustments from CY 2023 through CY 2025.[1] This cut addresses higher-than-expected aggregate expenditures and fulfills statutory budget neutrality requirements.[2]
In addition to the permanent adjustment, CMS also proposes a temporary -5.0% reduction to the CY 2026 payment rate to begin recoupment of approximately $5.3 billion in cumulative overpayments from CYs 2020 to 2024. This one-time reduction is projected to recover about $786 million (roughly 14.8% of the total), based on estimated CY 2026 utilization. The temporary adjustment would not carry forward into future payment rates but may be followed by additional adjustments in later years to reconcile the remaining overpayment amount and future years’ data.
Comments are solicited on both the proposed -4.059% permanent adjustment and the -5.0% temporary adjustment.
CMS PROPOSES 2.4% MARKET BASKET UPDATE AND REVISED PAYMENT RATES
CMS proposes a 2.4% payment update for agencies that report quality data, based on a 3.2% home health market basket increase reduced by a 0.8% productivity adjustment.[3] Agencies that do not meet quality reporting requirements would receive only a 0.4% update. The updated 30-day base payment rate for CY 2026 would be $1,933.61 for compliant HHAs and $1,895.85 for non-compliant HHAs.
CMS PROPOSES MODEST UPDATES TO LUPA THRESHOLDS FOR CY 2026 BASED ON 2024 UTILIZATION DATA
LUPA thresholds determine whether a 30-day home health period is paid as a full episode or per-visit, based on the number of visits delivered. In the CY 2026 HH PPS proposed rule, CMS proposes to update low-utilization payment adjustment (LUPA) thresholds using CY 2024 claims data, in line with its policy to annually recalibrate based on current utilization. CMS found minimal change in visit volume, with 15 case-mix groups seeing a one-visit decrease and 4 groups a one-visit increase. Final thresholds will reflect more complete data in the final rule.
CMS PROPOSES UPDATES TO FUNCTIONAL IMPAIRMENT LEVELS AND COMORBIDITY ADJUSTMENTS FOR CY 2026
For CY 2026, CMS proposes to update functional impairment levels and comorbidity adjustment subgroups under the PDGM using CY 2024 claims data. Functional levels (low, medium, and high) are determined by a scoring system based on responses to OASIS items related to activities of daily living and hospitalization risk. CMS will update the point values and thresholds for each clinical group using the same methodology as in prior years.
CMS also proposes 20 low comorbidity subgroups and 100 high comorbidity interaction subgroups, reflecting diagnoses with statistically significant resource use impacts. These updates aim to better align payment with patient complexity and care needs.
CMS PROPOSES CY 2026 UPDATES TO PDGM CASE-MIX WEIGHTS BASED ON 2024 DATA
CMS proposes to update the case-mix weights used in the Patient-Driven Groupings Model (PDGM) for CY 2026 using the most recent complete data—CY 2024 home health claims and OASIS assessments. These updates are part of CMS’s annual recalibration process, designed to ensure that payment weights reflect current patient characteristics and resource use. Under the PDGM, patients are classified into one of 432 case-mix groups based on clinical condition, admission source, episode timing, functional impairment level, and comorbidity adjustment.
Using a fixed-effects regression model, CMS recalculated weights by estimating the relationship between these factors and actual resource use, measured via cost-per-minute plus non-routine supply costs. Functional scores and comorbidity adjustments were updated based on statistically significant associations with resource use. CMS proposes implementing the updated weights in a budget-neutral manner using a recalibration neutrality factor of 1.0051, ensuring overall spending remains unchanged when applied to CY 2024 data.
The updated case-mix weights and methodology are outlined in Table 24 of the unpublished rule,[4] and will be finalized after review of more complete CY 2024 data. CMS is soliciting comments on the proposed weights and neutrality factor.
WAGE INDEX AND OUTLIER PAYMENT ADJUSTMENTS
CMS proposes to continue to use hospital wage data (updated with OMB Bulletin 23-01) and apply a 5% cap on wage index decreases, applicable to both counties and CBSAs. Areas without hospital data (e.g., rural Puerto Rico, Northern Mariana Islands, American Samoa) would continue to receive special wage index proxies.
To comply with the statutory 2.5% cap on total outlier payments, CMS proposes increasing the Fixed Dollar Loss (FDL) ratio from 0.35 to 0.46, while maintaining the loss-sharing ratio at 0.80. These technical adjustments help ensure outlier payments remain within budgeted limits while accounting for high-cost cases.
CMS PROPOSES EXPANDED FLEXIBILITY FOR HOME HEALTH FACE-TO-FACE ENCOUNTER REQUIREMENTS
CMS proposes to revise the face-to-face encounter requirement for Medicare home health services to allow more provider types to conduct the encounter, addressing long-standing stakeholder concerns and aligning with the CARES Act. Under current regulations, the encounter must be performed by the certifying physician, an allowed non-physician practitioner (NPP), or—in specific circumstances—a provider with hospital privileges who treated the patient prior to home health admission. Stakeholders have argued that this narrow definition creates operational barriers, especially when a different clinician within the same group practice performs the encounter.
To reduce confusion and improve access, CMS proposes amending 42 CFR § 424.22(a)(1)(v)(A) to permit any physician, nurse practitioner, clinical nurse specialist, physician assistant, or certified nurse-midwife[5] to perform the face-to-face encounter. CMS would also remove the current paragraph (v)(C), which restricts the encounter to a more limited set of circumstances when the certifying practitioner did not perform it.
The agency seeks public comment on whether these proposed changes sufficiently balance flexibility with appropriate oversight.
CMS PROPOSES HH QRP CHANGES, INCLUDING MEASURE REMOVALS, SURVEY REVISIONS, AND DATA SUBMISSION REFORMS
Under the Home Health Quality Reporting Program (HH QRP), home health agencies (HHAs) must submit specified data used to assess care quality. Agencies that fail to comply face a 2-percentage-point reduction in their annual payment update.
CMS Proposes Removing COVID-19 and SDOH Measures
CMS proposes removing the “COVID-19 Vaccine: Percent of Patients Who Are Up to Date” measure, citing declining COVID-19 case rates and high provider burden. If finalized, data from assessments conducted on or after the publication date would no longer be used, with the measure formally removed as soon as technically feasible. CMS also proposes ending public display of the measure after the January 2026 Care Compare refresh.
Additionally, CMS proposes to remove four social determinants of health (SDOH) assessment items from the Outcome and Assessment Information Set (OASIS)—one related to Living Situation, two to Food, and one to Utilities—also citing high provider burden. These items would no longer need to be collected for patients discharged on or after April 1, 2026.
Technical Updates to Reconsideration Policy and All-Payer Reporting
CMS proposes updates to clarify the HH QRP reconsideration policy and make technical corrections to the OASIS All-Payer Data Submission requirements, emphasizing that current reporting standards apply to all patients regardless of payer.
CMS Proposes Revised HHCAHPS Survey and Reporting Methodology
Following extensive testing initiated in 2022, CMS proposes a significantly revised Home Health Consumer Assessment of Healthcare Providers and Systems (HHCAHPS®) Survey. The new version is shorter, includes new questions based on stakeholder feedback, and removes lower-priority items. CMS also proposes updated case-mix and mode adjustments and new quality measures tied to the revised survey. The updated survey would take effect with the April 2026 sample month.
CMS Seeks Feedback on Future Quality Measure Concepts
To align with the Universal Foundation of quality measures, CMS invites input on four potential future measure concepts: interoperability and IT capacity, cognitive function, well-being, and nutrition. While CMS will not respond to comments directly, input will inform future measure development.
CMS Requests Input on Shortening Data Submission Window
CMS is evaluating whether to shorten the current 4.5-month data submission window to 45 days to reduce the lag between data collection and public reporting. An internal analysis showed only 1.3% of OASIS submissions occur between 60 days and the end of the submission period. CMS seeks feedback on how a shorter window might affect reporting timelines, data actionability, public display, and provider workflows.
CMS Explores Advancing Digital Quality Measurement (dQM)
CMS is requesting information on efforts to advance digital quality measurement in home health, particularly through the use of Fast Healthcare Interoperability Resources (FHIR®) for interoperable reporting of patient assessment data. CMS seeks feedback on current integration levels, implementation challenges and opportunities, and the potential use of interoperability as a future quality measure concept. The full list of RFI questions is located on pages 144–147 of the unpublished rule.
OVERVIEW OF THE HHVBP MODEL
The expanded Home Health Value-Based Purchasing (HHVBP) Model, finalized in the CY 2022 HHA final rule, requires participation from HHAs nationwide. The model adjusts payments by up to 5% based on agency performance on selected quality measures.
CMS Proposes New Measure Removal Criterion
CMS currently evaluates measures for removal using eight established factors. This year, CMS proposes adding a ninth criterion: “It is not feasible to implement the measure specifications.” This would allow CMS to remove measures when revisions to data collection instruments prevent required data from being collected. Public comments are invited on this proposal.
CMS Proposes HHVBP Measure Set Overhaul for CY 2026, Emphasizing Functional Gains and Cost Efficiency
CMS proposes several updates to the expanded HHVBP Model for CY 2026 to align with proposed survey changes, improve functional measurement, and promote cost-effective care. Three HHCAHPS Survey-based measures (Care of Patients, Communication Between Providers and Patients, and Specific Care Issues) would be removed if proposed revisions to the HHCAHPS instrument are finalized, as the measures could no longer be scored as specified.
To replace them, CMS proposes adding four measures: the Medicare Spending Per Beneficiary – Post-Acute Care (MSPB-PAC) measure to assess cost efficiency during and after home health episodes, and three OASIS-based functional measures (Improvement in Bathing, Upper Body Dressing, and Lower Body Dressing) to capture patient recovery more comprehensively. These function measures build on existing OASIS data.
CMS also proposes adjusting measure weights. For larger-volume HHAs, OASIS-based and claims-based measures would each account for 40% of the Total Performance Score, while HHCAHPS-based measures would drop to 20%. Weights for smaller-volume HHAs would remain unchanged. CMS seeks comment on these proposals and the revised weighting approach.
CMS Proposes Enhancements to HHVBP Model with Updated Falls Measure and Patient Experience Survey Revisions to Improve Accuracy and Reduce Burden
CMS is considering updates to the expanded HHVBP Model to improve performance measurement and reduce provider burden. Proposed changes include: (1) adopting broad, outcome-focused measures aligned with ASPE, RAND, and IMPACT Act guidance that also assess appropriateness, overuse, and value; (2) revising the Falls with Major Injury measure using claims, encounter, and OASIS data to improve accuracy; and (3) updating the HHCAHPS survey to initially score new measures based on achievement only, beginning in CY 2028, while retaining three safety-related items as standalone, weighted measures. CMS seeks input on these proposals and suggestions for burden-reducing performance measures.
CMS PROPOSES TECHNICAL UPDATES TO HHA CoPS TO REFLECT OASIS ALL-PAYER REQUIREMENTS
CMS proposes revising the Home Health Agency Conditions of Participation (CoPs) to replace the term “beneficiary” with “patient” to align with the all-payer OASIS reporting requirements finalized in previous rules.[6] This change clarifies that OASIS data submission applies to all patients receiving skilled services, not just Medicare beneficiaries. The proposal does not alter existing assessment timelines, data elements, or exemptions for certain patient groups, such as those under 18 or receiving only non-skilled services.
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Download a copy of this summary here.
This Applied Policy® Summary was prepared by Meghan Basler with support from the Applied Policy team of health policy experts. If you have any questions or need more information, please contact her at mbasler@appliedpolicy.com or at 908-752-9875.
*This post has been updated to correct the closing date for comments. When the proposed rule was published in the Federal Register, the deadline was set for August 29, not September 2 as noted in the original release.
[1] Previously applied partial adjustments by year: CY2023 (-3.925%), 2024 (-2.89%), 2025 (-1.975%)
[2] Section 1895(b)(3)(D)(ii) of the Social Security Act.
[3] Per-visit rates, used for LUPAs, are also updated by 2.4% (or 0.4% for non-compliant HHAs), but excluded from the permanent and temporary PDGM payment adjustments.
[4] Table 24 can be found on page 75 of the unpublished rule.
[5] As defined in regulation and authorized by state law
[6] Sections § 484.45(a) and § 484.55(d)(1)(i)