What the CY 2026 Home Health Final Rule Actually Does
On November 28, 2025, the Centers for Medicare & Medicaid Services (CMS) issued the Calendar Year 2026 Home Health Prospective Payment System Final Rule, CMS-1828-F. For home health agencies, this is the annual rule that sets Medicare payment rates and adjusts the Patient-Driven Groupings Model (PDGM) for the coming year. It is the single most important reimbursement document your finance and clinical teams will read this cycle.
The short version: agencies face a modest net reduction in aggregate Medicare payments for 2026, but the headline number hides a more nuanced picture. The final rule landed meaningfully softer than the proposed rule, which had signaled a much larger cut. Understanding exactly which levers CMS pulled — and which ones it eased off — is what lets you plan staffing, coding, and cash flow with confidence rather than anxiety.
This article walks through every payment component in plain language, verifies each figure against the official CMS fact sheet, and closes with concrete action items for protecting revenue. The goal is calm clarity, not alarm.
The Headline Number: A 1.3% Aggregate Decrease
CMS estimates that Medicare payments to home health agencies in CY 2026 will decrease in the aggregate by an estimated 1.3%, or roughly $220 million, compared to CY 2025, according to the CMS-1828-F fact sheet.
That figure is important context. When the proposed rule (CMS-1828-P) was released in mid-2025, industry analysts were bracing for a far steeper reduction driven by a large one-time behavioral clawback. The final rule scaled that back considerably. The 1.3% aggregate decrease is a national estimate across all agencies; your agency's actual change depends on your case mix, geography, and quality-reporting status.
It is also worth naming what the "aggregate" figure is not. It is not a flat 1.3% cut to every claim. It is the net result of several offsetting adjustments — a positive market-basket update pulling one way, and behavioral and technical adjustments pulling the other. To budget accurately, you have to look at each component.
Breaking Down the Payment Math
CMS builds the final payment change from four moving parts. Here is each one, with the exact figures from the final rule fact sheet.
The 2.4% Payment Update (a Positive)
The starting point is the routine, statutorily required payment update. For CY 2026, CMS finalized a 2.4% payment update, which it estimates as a $405 million increase for home health agencies that submit required quality data. That update reflects a home health market basket increase reduced by a productivity adjustment, per the CMS-1828-F fact sheet and the accompanying CY 2026 rate-update guidance (MM14304).
This is the only large positive in the equation. Everything below it reduces payment.
The Permanent Behavioral Adjustment (a Negative)
This is the component that generates the most confusion, so it is worth slowing down. When CMS implemented PDGM and the 30-day unit of payment on January 1, 2020, the law required the agency to assume how provider billing behavior would change. It then has to reconcile those assumptions against what agencies actually did, and apply permanent and temporary adjustments to keep spending budget-neutral. This authority runs from 2020 through 2026.
For CY 2026, CMS finalized a permanent prospective adjustment of -1.023% to the 30-day payment rate, which it translates to an estimated 0.9% decrease, or about $150 million, in the final rule.
The critical detail — and the reason the final rule is softer than the proposal — is the data window. CMS had proposed using CY 2020 through CY 2024 claims to calculate this adjustment. After commenters argued that behavior change after 2022 might reflect factors unrelated to PDGM (such as the OASIS-E assessment rollout, expanded value-based purchasing, and rising Medicare Advantage penetration), CMS narrowed the calculation to CY 2020 through CY 2022 data only. That change materially reduced the permanent adjustment.
For historical perspective, CMS applied permanent reductions of 3.925% in CY 2023, 2.890% in CY 2024, and 1.975% in CY 2025 — each representing half of the estimated required adjustment at the time, per the fact sheet. The CY 2026 permanent figure of -1.023% continues that downward trend.
The Temporary Adjustment (a Negative)
Separate from the permanent adjustment, CMS is authorized to recover past overpayments that accumulated because actual behavior diverged from assumptions in prior years. The agency calculated that the total temporary adjustment owed from CY 2020 through CY 2022 is $4.76 billion, according to the final rule.
CMS did not attempt to recover all of that in a single year. To avoid a destabilizing one-year shock — and the access-to-care problems that could follow — it finalized a -3.0% temporary adjustment applied to the CY 2026 payment rate, which it estimates as a 2.7% decrease, or about $460 million. Because this is a temporary (single-year) adjustment rather than a permanent baseline change, it applies to 2026 and CMS will continue to evaluate whether further temporary adjustments are needed as it analyzes claims data through CY 2026.
This is the largest single downward pull in the 2026 math. It is also the one most likely to recur in some form, because the outstanding balance far exceeds what a single 3.0% year recovers.
The Outlier / Fixed-Dollar-Loss Adjustment (a Small Negative)
Finally, CMS updated the fixed-dollar-loss (FDL) ratio used to fund outlier payments — the additional payments that cover unusually expensive episodes. The updated FDL ratio produces an estimated 0.1% decrease, roughly $15 million, per the fact sheet. It is small, but it is one more reason the net number is a decrease rather than an increase.
Putting the Four Pieces Together
Stacking the components from the CMS-1828-F fact sheet: a +2.4% update, minus a 0.9% permanent adjustment, minus a 2.7% temporary adjustment, minus a 0.1% outlier adjustment, nets to the estimated -1.3% aggregate change (approximately -$220 million). Positive market-basket growth is real, but the behavioral adjustments more than absorb it.
What Happened to the Base Payment Rate
Rates on paper are only as useful as the dollar figures behind them. Under the finalized policies, the CMS CY 2026 rate-update guidance (MM14304) sets the national, standardized 30-day period base payment rate at approximately $1,933.61 for agencies that submit required quality data and a lower rate for agencies that do not. Agencies that fail to meet quality-reporting requirements are paid at a reduced base rate, which is why quality compliance is a direct revenue lever, not just a paperwork exercise.
Because your actual payment per period is the base rate multiplied by a case-mix weight and adjusted by your local wage index, the base rate alone does not tell you what any given episode pays. It is the anchor, though — and it is the number your billing team should load into models and clearinghouse edits for January 1.
PDGM Case-Mix Recalibration, LUPA Thresholds, and Comorbidities
Beyond the top-line rate, the final rule recalibrates the engine underneath every claim. Each of the 432 PDGM payment groups carries its own case-mix weight and low-utilization payment adjustment (LUPA) threshold. For CY 2026, CMS finalized a recalibration of the case-mix weights, functional-impairment levels, comorbidity-adjustment subgroups, and LUPA thresholds using CY 2024 utilization data, per the final rule.
This matters more than the headline percentage for many agencies. Recalibration redistributes dollars across clinical groups. A group your agency serves heavily may see its weight rise or fall independent of the aggregate change, and a shifted LUPA threshold can turn a profitable period into a LUPA — or the reverse — based on a single visit. Two agencies with identical patient volumes can experience very different 2026 revenue simply because of where their case mix sits after recalibration.
Getting ahead of this requires modeling your own historical claims against the new weights and thresholds rather than assuming the national average applies to you. This is precisely the kind of exercise a strong data insights capability is built for: mapping your real episode mix onto the recalibrated PDGM grid to see where your margin actually moves.
Wage Index and Budget Neutrality
CMS applies budget-neutrality factors so that geographic wage adjustments and case-mix recalibration do not change aggregate spending by themselves. In the CY 2026 rule, the wage-index and labor-share budget-neutrality factors and the case-mix budget-neutrality factor are recalculated and applied to the standardized 30-day rate and per-visit rates, as described in the rate-update guidance (MM14304).
The practical takeaway for agencies: your local wage index still drives a large share of what each episode actually pays, and wage-index shifts can move an individual agency's payment even when the national factor is neutral. Agencies operating across multiple CBSAs (core-based statistical areas) should verify the 2026 wage index for every service county, because a boundary or index change in even one market can meaningfully alter blended payment.
Quality Reporting (HH QRP) Changes
The final rule also trims the Home Health Quality Reporting Program. According to the CMS-1828-F fact sheet, CMS is:
- Removing the COVID-19 Vaccine "Up to Date" measure and its corresponding OASIS data element, beginning with the CY 2026 HH QRP.
- Removing four standardized patient-assessment items — one Living Situation item, two Food items, and one Utilities item — beginning with CY 2026.
- Revising the HHCAHPS survey beginning with the April 2026 sample month.
- Updating the reconsideration policy so agencies can request reconsideration of a noncompliance determination by demonstrating compliance, with limited extraordinary-circumstance extensions (for events like cyber-attacks or natural disasters).
None of these individually changes your payment, but collectively they change what your clinicians document and what your QA team validates. Because quality-reporting compliance directly determines whether you are paid at the full or reduced base rate, keeping OASIS workflows aligned with the removed and revised items is a quiet but real revenue safeguard.
HHVBP Model Changes
The expanded Home Health Value-Based Purchasing (HHVBP) Model continues to put a meaningful share of payment at risk based on performance. For CY 2026, the final rule reshapes the applicable measure set:
- Three HHCAHPS survey-based measures are being removed — Care of Patients, Communication Between Providers and Patients, and Specific Care Issues — because of the April 2026 HHCAHPS survey changes.
- Four measures are being added: three OASIS-based measures related to bathing and dressing, and one claims-based Medicare Spending Per Beneficiary measure for the post-acute care setting.
- Individual measure and category weights are being adjusted to reflect the new measure set.
For agencies, the addition of a spending-efficiency measure and functional-outcome measures shifts where performance dollars are won or lost. Under a value-based model, clean, complete, accurately coded documentation is not only a compliance concern — it is the raw material your performance scores are built from. This is a natural point of contact with your home health review processes: OASIS accuracy and coding integrity feed both your case-mix weight and your HHVBP score.
Other Provisions Agencies Should Note
Two additional finalized changes are worth flagging.
Face-to-face encounter flexibility. CMS broadened the face-to-face encounter regulation at 42 CFR 424.22(a)(1)(v) to align with the CARES Act, allowing a wider set of physicians to perform the encounter regardless of whether they are the certifying practitioner, per the fact sheet. This reduces a common source of eligibility denials tied to who documented the encounter.
Provider-enrollment tightening. The rule finalizes expanded grounds for retroactive revocation of Medicare enrollment and new bases for deactivation — including deactivating physicians and practitioners who have not ordered or certified services for 12 consecutive months. This raises the stakes on enrollment hygiene and on confirming that your ordering and certifying practitioners remain active and compliant.
What This Means for Your Agency's Revenue
Step back from the individual percentages and the strategic picture is straightforward. Aggregate Medicare home health payment is down modestly for 2026, the behavioral adjustments continue to offset market-basket growth, and there is an outstanding temporary-adjustment balance that signals continued pressure in future years. At the same time, the final rule is less severe than proposed, which buys agencies planning room.
In an environment of flat-to-declining rates, revenue does not come from higher unit prices — it comes from capturing every dollar you are already entitled to. That means fewer denials, cleaner OASIS documentation, accurate case-mix capture, defensible coding, and disciplined LUPA management. A 1.3% national headwind is entirely recoverable through operational excellence; agencies that leak 3-5% of earned revenue to preventable denials and coding errors have far more upside in their own back office than in any rate update. Strengthening your end-to-end revenue cycle management is the most direct lever you control.
Action Items: Protecting Revenue Under the 2026 Rule
Here is a concrete checklist your leadership team can work through before and during January 2026.
- Reload your rate tables. Update your billing system and clearinghouse with the CY 2026 base 30-day rate, and confirm you are configured for the full (compliant) rate, not the reduced rate.
- Re-model your case mix against the recalibrated weights. Run your historical episodes through the CY 2026 PDGM weights and LUPA thresholds to find clinical groups where your margin shifted. Prioritize the groups that make up the largest share of your volume.
- Audit LUPA exposure. Because recalibrated thresholds can flip periods into or out of LUPA on a single visit, review visit-planning for periods near the new thresholds.
- Tighten OASIS accuracy. Align documentation with the removed and revised HH QRP items, and ensure functional and comorbidity items are captured accurately, since they drive both case-mix weight and HHVBP scores.
- Protect your quality-reporting status. A missed reporting requirement moves you to the reduced base rate. Treat HH QRP compliance as a revenue control, and use the updated reconsideration pathway if you receive a noncompliance determination you can rebut.
- Prepare for HHVBP measure changes. Brief clinical teams on the new bathing, dressing, and spending-efficiency measures, and update your performance dashboards for the April 2026 HHCAHPS transition.
- Verify wage index by county. Confirm the CY 2026 wage index for every CBSA you serve so blended-rate models are accurate.
- Clean up enrollment. Confirm ordering and certifying practitioners are active and compliant given the tightened revocation and deactivation rules.
- Instrument your denials. Track denial reasons at a granular level so you can see whether rate pressure is being compounded by preventable revenue leakage — and fix the root causes.
The 2026 rule is a manageable, well-telegraphed adjustment rather than a crisis. Agencies that treat it as a prompt to sharpen documentation, coding, and denial management will absorb the change comfortably. If you want help modeling the payment impact on your specific book of business or pressure-testing your revenue cycle against the new rates, that is exactly the work our data insights and revenue cycle management teams do every day.
Frequently Asked Questions
What is the CMS 2026 home health final rule?
It is the CY 2026 Home Health Prospective Payment System Final Rule (CMS-1828-F), issued by CMS on November 28, 2025. It sets Medicare home health payment rates for 2026, recalibrates the PDGM case-mix model, and finalizes quality-reporting and value-based-purchasing changes. It is the annual, statutorily required update to how Medicare pays home health agencies.
How much will home health Medicare payments change in 2026?
CMS estimates an aggregate decrease of about 1.3%, or roughly $220 million, compared with CY 2025, according to the CMS-1828-F fact sheet. This is a national average; your agency's actual change depends on case mix, geography, and quality-reporting status.
What is the home health payment update for 2026?
The base payment update is a positive 2.4% (about $405 million) for agencies that submit required quality data, reflecting a market-basket increase reduced by a productivity adjustment, per the final rule. Behavioral and outlier adjustments then reduce that positive update to the net 1.3% aggregate decrease.
What is the PDGM behavioral adjustment for 2026?
There are two behavioral adjustments. The permanent prospective adjustment is -1.023% (an estimated 0.9% / $150 million decrease), and the temporary adjustment is -3.0% (an estimated 2.7% / $460 million decrease), both per the CMS-1828-F fact sheet. The permanent adjustment changes the baseline going forward; the temporary adjustment applies to 2026 to recover past overpayments.
Why is the final rule less severe than the proposed rule?
CMS narrowed the data window used to calculate the permanent behavioral adjustment. It had proposed using CY 2020-2024 claims but finalized using only CY 2020-2022 data, after commenters argued that later behavior change reflected factors unrelated to PDGM, such as OASIS-E, expanded value-based purchasing, and Medicare Advantage growth. This produced a smaller permanent adjustment, as described in the final rule.
What is the temporary adjustment and will it continue?
The temporary adjustment recovers overpayments that accumulated because actual billing behavior diverged from CMS's assumptions. CMS calculated a total outstanding balance of $4.76 billion for CY 2020-2022 and applied a -3.0% temporary adjustment for 2026 to avoid a one-year shock, per the fact sheet. Because the outstanding balance far exceeds what one 3.0% year recovers, agencies should plan for the possibility of continued temporary adjustments in future rules.
How does PDGM recalibration affect my agency specifically?
CMS recalibrated all 432 PDGM payment groups' case-mix weights and LUPA thresholds using CY 2024 data, per the final rule. Because this redistributes dollars across clinical groups, two agencies can see very different results. The only reliable way to know your impact is to model your own historical episodes against the new weights and thresholds rather than relying on the national average.
What are the 2026 quality reporting (HH QRP) changes?
CMS is removing the COVID-19 Vaccine "Up to Date" measure and four standardized assessment items (one Living Situation, two Food, one Utilities), revising the HHCAHPS survey beginning April 2026, and updating the reconsideration policy, per the CMS-1828-F fact sheet. Quality-reporting compliance still determines whether you are paid the full or reduced base rate, so it remains a direct revenue issue.
What changed in the HHVBP model for 2026?
CMS is removing three HHCAHPS-based measures (Care of Patients, Communication Between Providers and Patients, and Specific Care Issues) and adding four measures — three OASIS-based bathing and dressing measures and one claims-based Medicare Spending Per Beneficiary measure — while adjusting measure weights, per the final rule. These shifts change where performance-based dollars are won or lost.
What should agencies do first to protect revenue?
Reload 2026 base rates into billing systems, model your case mix against the recalibrated PDGM weights and LUPA thresholds, tighten OASIS accuracy, protect your quality-reporting status, and instrument denials so preventable revenue leakage does not compound the rate pressure. In a flat-rate environment, disciplined revenue cycle management and home health review recover far more than any rate update provides.