CMS proposing significant payment cut for home health agencies in 2026

For CY 2026, CMS is proposing an overall 6.4% reduction to home health payments (or an estimated $1.135 billion) compared to 2025. The proposed rate update includes: a 2.4% annual payment update ($425 million increase); an estimated 3.7% decrease ($655 million decrease) related to the statutorily required permanent behavior adjustment; an estimated 4.6% decrease ($815 million decrease) reflecting the proposed temporary adjustment; and an estimated 0.5% decrease ($90 million decrease) reflecting a proposed update to the fixed-dollar loss ratio for outlier payments.

The proposed overall payment decrease is due to a combination of a temporary adjustment and a behavioral assumption adjustment that CMS believes is necessary to account for provider reactions to the Patient-Driven Groupings Model (PDGM) and ensure the implementation of PDGM is budget-neutral, as required by Congress. PDGM became effective on January 1, 2020, and was intended to better align payments with patient care needs by using patient characteristics, such as diagnoses and functional impairment level, to determine payment rather than the number of services or therapy visits. In the Bipartisan Budget Act of 2018, Congress required CMS to make assumptions about agency behavior changes resulting from PDGM and to make temporary and permanent payment adjustments to offset expenditure changes. CMS focused on differences in clinical group coding, comorbidity coding, and low utilization payment adjustments (LUPAs). CMS previously applied a 3.925% reduction for CY 2023; a 2.89% reduction for CY 2024; and a 1.975% reduction for CY 2025. According to CMS calculations, Medicare still paid more under PDGM than it would have under the old payment system. Therefore, CMS proposed a permanent adjustment of -4.059% to be made to the 30-day base payment rate in CY 2026 to address the differences in aggregate expenditures under PDGM.

In addition, CMS is proposing to implement a temporary 5.0% reduction to the CY 2026 national, standardized payment rate (approximately $786 million) to begin recouping retrospective overpayments resulting from changes in agency behavior in CY 2020, 2021, 2022, 2023, and 2024. Last year, CMS estimated the overpayments at $4.455 billion but did not propose a temporary adjustment for CY 2025. In the proposed rule, CMS indicated that the calculated temporary adjustment amount for CYs 2020 through 2024 is now at $5.3 billion. CMS anticipates proposing additional temporary adjustments for CY 2025 and 2026 in future rulemaking.

In addition to the payment update, CMS is also proposing to recalibrate the PDGM case-mix weights and update the low utilization payment adjustment (LUPA) thresholds, functional impairment levels, and comorbidity adjustment subgroups for CY 2026.

CMS is proposing changes to the HH QRP and the HHVBP. For the HH QRP, CMS is proposing to remove the COVID-19 Vaccine: Percentage of Patients Who Are Up to Date Measure and the corresponding Outcome and Assessment Information Set (OASIS) data element, as well as the four social determinants of health assessment items that were adopted last year for the CY 2027 HH QRP.

• Living situation: What is your living situation today?
• Food (2 items): 1) Within the past 12 months, you worried that your food would run out before you got money to buy more; 2) Within the past 12 months, the food you bought just didn’t last, and you didn’t have money to get more.
• Utilities: In the past 12 months, has the electric, gas, oil, or water company threatened to shut off services in your home?

Additionally, CMS proposes to implement a revised Home Health Consumer Assessment of Healthcare Providers and Systems® (HHCAHPS) survey, effective with the April 2026 sample month. Based on patient and provider feedback, CMS shortened the survey to reduce burden and assess new topics that are important to patients. See Table 31 for a comparison of the current and proposed HHCAHPS Survey measures. For more information, see the 2024-2025 Pre-Rulemaking Measure Review Recommendations Report.

The proposed rule also includes Requests for Information (RFI) on future HH QRP measure concepts, including interoperability, cognitive function, well-being, and nutrition.

For the HHVBP, due to the proposed changes to the HHCAHPS survey, CMS is proposing to remove the following measures:

• Care of Patients
• Communications between Providers and Patients, and
• Specific Care Issues.

CMS is also proposing the addition of four measures to the HHVBP measure set beginning with CY 2026, including the claims-based Medicare Spending per Beneficiary for the Post-Acute Care (PAC) setting measure as well as three OASIS-based function measures:

• Improvement in Bathing (based on OASIS item M1830)
• Improvement in Upper Body Dressing (based on OASIS item M1810)
• Improvement in Lower Body Dressing (based on OASIS item M1820)

CMS included an RFI related to the potential addition of a respecified version of the Falls With Major Injury measure that uses fee-for-service claims, encounter data, and OASIS data. CMS is also seeking general comments on other potential future model concepts that may be considered for inclusion in the expanded HHVBP Model.

Several areas listed above are important for occupational therapy. With the help of member experts, AOTA will address the importance of measuring quality and the role of OT for each of these areas in comments to the proposed rule.

According to CMS data highlighted in the proposed rule, including simulated data for 2018, the utilization of visits per 30-day periods of care for all disciplines (skilled nursing, PT, OT, SLP, home health aide, social worker) declined from 9.86 in 2018 to 7.86 in 2024. Refer to Table 3 on page 29120 for the breakdown, which shows yearly declines. OT visit utilization declined from 1.02 visits per 30-day period in 2018 to 0.73 visits per 30-day period in 2024.

While the proposed addition of bathing and dressing measures to the HHVBP may help OT practitioners show the value of OT in home health, AOTA is extremely concerned that the proposed payment cut may further reduce the utilization of OT services and patient access to medically necessary OT services. Since the adoption of PDGM, AOTA has heard from numerous OTs and OTAs about PDGM’s negative impact on their ability to treat HH patients who need their services. These reports include that agencies are pressuring therapists to reduce the number of visits, including OT visits, and that agencies are using algorithms to determine how many therapy visits to allow based on diagnosis and not relying on the therapist’s clinical judgment.

AOTA continues to communicate our concerns and recommendations to CMS and encourages practitioners to share their experiences and the impact on patient care with CMS. We are developing written comments to CMS, expressing our concerns with the proposed rule, as well as input on OT’s role in quality measures and as a key member of the care team. We will continue to urge CMS to adopt safeguards to protect patient access to medically necessary OT services. It is imperative that agencies rely on the therapist’s clinical judgment to determine the type and amount of therapy services that an individual patient needs.

Comments on the HH PPS proposed rule are due August 29, 2025. CMS typically releases the final HH PPS rule in early November – watch for AOTA updates.