Final CMS Rule Brings Home Health Payment Cuts, Competitive Bidding, More

WASHINGTON—Home health agencies will see a 1.3% cut to Medicare payments in 2026—a significant improvement to Washington’s initial proposal but still a blow for aging-in-place providers, advocates said.

The Centers for Medicare & Medicaid Services (CMS) released the final rule for 2026 for the Home Health Perspective Payment System on Friday, and in it backed away from a proposed cut of up to 9%. Instead, the new rule includes a 1.023% permanent cut to home health agency reimbursement rates and a 3% temporary reduction, or a $220 million decrease in payments compared to 2025.

The final rule also sets a timeline for reopening the competitive bidding program for durable medical equipment (DME), with early education starting as soon as this month and a target of January 2028 for full implementation—a move DME supporters say will unfairly burden the already stressed sector. Read more about DME-related changes here. 

While acknowledging that the final rule was an improvement, Steve Landers, CEO of the Alliance for Care at Home, said that “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.” 

Other Components of the Final Rule

In addition to setting payment rates for home health agencies (HHAs) and outlining competitive bidding, the final rule: 

• Finalizes changes to who may conduct the face-to-face encounter (home health)
• Changes accreditation processes for DME providers
• Updates the Home Health Quality Reporting Program (QRP) by removing COVID-19 and several assessment items  
• Finalizes updates to the Home Health Consumer Assessment of Healthcare Providers and Systems survey beginning April 2026
• Includes an update to the Home Health Value Based Purchasing Program to reflect the new HHCAPHS survey and proposes four new measures
• Finalizes Medicare provider enrollment changes

Wage Index Changes 

CMS finalized its proposal to update the wage index for 2026 using the most recent available pre-floor, pre-reclassified hospital wage data. CMS also finalized its proposal to continue its 5% cap on any annual wage index decrease at the county level, to mitigate the impact in year-to-year changes. According to the Alliance, it will be important for HHAs to consider their wage index to understand the impact on payment rates in various regions. 

Changes to the Face-to-Face Encounter 

CMS changed the face-to-face regulation to allow physicians to perform the encounter—in addition to nurse practitioners, clinical nurse specialists and physician assistants—to perform the face-to-face encounter regardless of whether they are the certifying practitioner or whether they cared for the patient in the acute or post-acute facility from which the patient was directly admitted to home health.  

Revised Payment Approach to Home Health Perspective Payment System 

The Alliance commended CMS for revisiting aspects of its flawed payment approach, including ending permanent payment adjustments in calendar year (CY) 2026. CMS also acknowledged it had difficulty separating behavioral changes caused by the patient-driven groupings model (PDGM) and those not related to PDGM in looking at previous data. 

For 2026, payments to HHAs will be reduced by 1.3%, or $220 million, which reflects the impact of a 2.4% update in payments due to the statutorily-required annual payment update, a 0.9% reduction in payments due to a permanent budget neutrality adjustment, a 2.7% reduction in payments due to a temporary budget neutrality adjustment, and a 0.1% decrease in payments related to a proposed update to the fixed-dollar loss ratio. 

In total, CMS’s changes from proposed to final rule amount to approximately $915 million more in payments to home health agencies for 2026.

However, the organization said in a statement, “more action is needed to help preserve integrity, stability and predictability in Medicare’s home health benefit. While CMS reduced the amount of overpayments that inform the temporary payment adjustments down to $4.7 billion for CY 2020 through 2024, home health agencies will continue to face several more years of temporary adjustments without additional action.”

“Congress must take further action to enact lasting reforms to the system that protect patient access to these services and ensure the sustainability of the Medicare home health benefit,” Landers said.

A fact sheet on the final rule is available here.