Calendar Year (CY) 2027 Home Health Prospective Payment System Proposed Rule
Fact Sheet (CMS-1844-P)
On July 1, 2026, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that announces policy changes under the Home Health (HH) Prospective Payment System (PPS), consistent with the legal requirements to update Medicare payment policies for home health agencies (HHAs) annually. This fact sheet discusses the proposed rule’s major provisions.
Medicare Provider Enrollment
In its ongoing efforts to crush fraud, waste, and abuse, CMS is proposing several provider enrollment provisions. The provisions would affect any providers and suppliers participating in the Medicare program. These changes would help reduce improper Medicare payments and protect beneficiaries. The proposals include, but are not limited to, the following:
- Retroactive Revocations — Under current regulations, certain Medicare enrollment revocations become effective prospectively — specifically, 30 days after the date that CMS or the CMS contractor mails notice of the revocation to the affected provider or supplier (hereafter “provider”). However, other revocations take effect retroactively to the date the provider’s noncompliance began. The agency is proposing to make all revocation grounds retroactive. This action would help CMS recover monies paid to non-compliant providers and help ensure taxpayer money is paid only to legitimate, compliant providers.
- Adding or Expanding Bases for Revocation or Denial — CMS is proposing to add several new grounds for revocation or denial of enrollment and to expand some of our existing grounds. Among these proposals are the following:
- Change in Majority Ownership — Hospices; HHAs; and suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) must reenroll in Medicare as a new provider and undergo a survey/accreditation if they experience certain changes in majority ownership. CMS proposes to deny or revoke enrollment if this requirement is violated.
- Program or License Suspension/Termination — CMS currently may deny or revoke enrollment if a provider: (1) has a suspended/revoked license in another state; or (2) is suspended/revoked from Medicaid or another federal healthcare program. The agency proposes expanding this to include similar suspensions/revocations involving the provider’s owners or managing employees/organizations.
The proposed revocation/denial authorities would address situations noted by CMS as involving provider noncompliance and fraud, waste, and abuse. They also would allow the agency to target improper activity by those who own or operate providers.
CY 2027 Proposed Payment and Policy Updates for Home Health Agencies
CMS’ proposals in this proposed rule would help improve patient care and protect the Medicare program’s sustainability for future generations.
In this proposed rule, CMS includes an analysis of home health utilization. It also analyzes the difference between assumed versus actual behavior change on estimated aggregate expenditures for home health payments linked to changing the unit of payment to 30 days and implementing the Patient-Driven Groupings Model (PDGM) case-mix adjustment methodology. This rule analyzes the difference between assumed versus actual behavior change on estimated aggregate expenditures, discusses the permanent adjustments applied in previous years, and proposes a temporary adjustment to the CY 2027 home health base payment rate of 3.0%.
CMS is not proposing an additional permanent adjustment to the CY 2027 30-day base payment rate; however, this proposal would continue to satisfy the statutory requirements at section 1895(b)(3)(D)(ii) of the Social Security Act (the Act) as we continue to annually analyze the data through CY 2026 claims, as required by law, to determine any additional permanent adjustments to account for the impact of implementing the PDGM. This adjustment accounts for differences between assumed behavior changes and actual behavior changes on estimated aggregate expenditures because of the CY 2020 implementation of the PDGM and the change to a 30-day unit of payment. For CY 2023, 2024, and 2025, CMS previously applied reductions of 3.925%, 2.890%, and 1.975%, respectively, which were half of the estimated required permanent adjustment. CMS also applied a permanent adjustment of -1.023% in CY 2026.
In addition, CMS is proposing to recalibrate the PDGM case-mix weights; update the fixed dollar loss (FDL) for outlier payments; and update the low utilization payment adjustment (LUPA) thresholds, functional impairment levels, and comorbidity adjustment subgroups for CY 2027. This proposed rule also discusses provision of palliative care services under the Medicare home health benefit and includes a request for information (RFI) regarding the construction of a home health specific wage index.
This rule also proposes routine, statutorily required updates to the home health payment rates for CY 2027. The CY 2027 updated rates include the proposed CY 2027 home health payment update of 2.1% ($370 million increase) and an estimated 0.3% decrease that reflects the proposed FDL ($50 million increase). CMS estimates that Medicare payments to HHAs in CY 2027 would increase in the aggregate by 2.4%, or $420 million, compared to CY 2026, based on the proposed policies.
PDGM and Behavior Assumptions
On January 1, 2020, CMS implemented the home health PDGM and a 30-day unit of payment, as required by section 1895(b) of the Social Security Act, as amended by the Bipartisan Budget Act of 2018. The PDGM better aligns payments with patient care needs, especially for clinically complex individuals. The law required CMS to make assumptions about behavior changes that could occur because of the 30-day unit of payment and the PDGM. CMS finalized three behavior assumptions in the CY 2019 HH PPS final rule: clinical group coding, comorbidity coding, and LUPA threshold. The law also requires CMS to annually determine the impact of differences between assumed behavior changes and actual behavior changes on estimated aggregate expenditures, beginning with 2020 and ending with 2026, and to make temporary and permanent increases or decreases, as needed, to the 30-day payment amount to offset such increases or decreases.
In the CY 2023 HH PPS final rule (87 FR 66790), CMS finalized a methodology for analyzing the differences between assumed and actual behavior changes on estimated aggregate expenditures and calculated levels of actual and estimated aggregate expenditures. Based on analyses of CYs 2020 and 2021 claims data, CMS determined a permanent adjustment was needed and finalized implementing half (-3.925%) of the permanent adjustment estimated at the time (-7.85%). For CYs 2024 (88 FR 77676) and 2025 (88 FR 88373), using CY 2022 and 2023 claims, respectively, CMS similarly implemented half of the permanent adjustments estimated at those times (-2.890% out of -5.779% total for 2024 and -1.975% out of -3.95% total for 2025).
In the CY 2026 final rule (90 FR 55342), we finalized applying the remaining permanent adjustment for claims years 2020-2022 as our analysis indicated that behavior changes after 2022 could be related to other factors beyond the PDGM implementation. As such, we exercised the authority expressly delegated under the statute to apply permanent adjustments “at a time and in a manner appropriate” to the remaining permanent adjustment of -1.023% to account for behavior changes associated with PDGM implementation in CYs 2020 through 2022. We also exercised our authority to begin recouping retrospective overpayments (i.e., the temporary adjustment) for CYs 2020 through 2024 and finalized a temporary adjustment with a 3.0% reduction in CY 2026.
In the CY 2027 HH PPS proposed rule, like what was finalized in the CY 2026 HH PPS final rule (90 FR 55364 through 55365), we state that we believe any behavior changes reflected in preliminary CY 2025 claims for this CY 2027 proposed rule may not be directly attributable to the PDGM. Other confounding factors began in CY 2023 (i.e., continued recalibration of case-mix weights, a change to the OASIS-E, and previous reductions to the home health payment rate). Therefore, we are not proposing an additional permanent adjustment to the CY 2027 30-day base payment rate. This proposed rule continues to satisfy the statutory requirements at section 1895(b)(3)(D)(ii) of the Act as it includes our annual analysis of the data, as required by law, to determine if any additional permanent adjustments would be needed based on the impact of assumed versus actual behavior change on estimated aggregate expenditures from implementing the PDGM and the 30-day unit of payment.
In accordance with the statutory requirement to ensure that the permanent adjustments are implemented in a budget-neutral manner, we are proposing to implement a temporary adjustment of -3.0% to the CY 2027 national, standardized payment rate. This proposal would continue recoupment of the retrospective overpayments made for CYs 2020 through 2025 through “one or more” temporary adjustments. We believe that continuing to incrementally adjust the base payment rate to account for the calculated temporary dollar amount to date may help reduce the need for a large reduction in future years.
Update to the Fixed Dollar Loss Amount
The HH PPS allows outlier payments to be made to providers for periods of care with unusually large costs due to patient home healthcare needs. Outlier payments are made for periods of care when the estimated costs exceed a threshold amount. To determine the threshold, the 30-day period of care payment rate is multiplied by a fixed-dollar loss (FDL) ratio and then wage-adjusted to derive the FDL amount. The FDL ratio is determined so outlier payments do not exceed 2.5% of total payments (as required by section 1895(b)(5)(A) of the Act) and are annually recalibrated as part of the routine payment update. The proposed FDL for CY 2026 is 0.29.
Recalibration of PDGM Case-Mix Weights
Each of the 432 payment groups under the PDGM has an associated case-mix weight and LUPA threshold. CMS’ policy is to annually recalibrate the case-mix weights and LUPA thresholds with the most complete utilization data available at the time of rulemaking. In this proposed rule, CMS is proposing to recalibrate the case-mix weights — including the functional levels and comorbidity adjustment subgroups — and LUPA thresholds with CY 2025 data to more accurately pay for the types of patients HHAs are serving.
Provision of Home Health Palliative Care Services
CMS is interested in encouraging beneficiary access to community-based palliative care under the Medicare home health benefit. In this rule, we state that we believe the Medicare home health benefit can be an important step in the care continuum when a patient needs palliative care, either during episodes of serious or progressive illness. In this rule we are seeking comments on how to best promote access to community-based palliative care services through existing Medicare benefits, including the Medicare home health benefit. This proposed rule acknowledges the role of home health in palliative care services and states that CMS will provide examples of such services through sub-regulatory guidance.
Request for Information (RFI) on a Home Health-Specific Wage Index
This proposed rule also includes an RFI on the appropriateness of developing a home health-specific wage index from an alternate data source (e.g., Bureau of Labor Statistics) consistent with CMS’s statutory authority and regulatory requirements.
Home Health (HH) Quality Reporting Program (QRP)
In the proposed rule, CMS summarizes potential initiatives to improve alignment between the HH QRP and expanded Home Health Value-Based Purchasing (HHVBP) Model. With respect to the HH QRP, CMS is proposing to revise the following:
- The HH QRP assessment data submission deadlines beginning with the CY 2027 HH QRP program year.
- The HH QRP OASIS and HHCAHPS Annual Payment Update (APU) reporting timeframes to report a calendar year of data (January 1 through December 31).
- Some of the regulatory text supports rule proposals and improving the digital information transfer during the reconsideration process.
Additionally, CMS is soliciting public comments on an RFI on future measure concepts for the HH QRP, specifically on a potential Advanced Care Planning measure.
Expanded HHVBP Model
CMS is not proposing any expanded HHVBP Model-specific policy changes in this proposed rule. However, CMS has included in the proposed rule a summary of the Model with context relevant to potential alignment between the HH QRP and the expanded HHVBP Model.
Durable Medical Equipment Benefit Expansion for Infusion Pumps and Drugs
CMS is proposing to amend the definition of durable medical equipment (DME) at 42 CFR 414.202 to implement Section 6222(a) of the Consolidated Appropriations Act, 2026 (CAA, 2026), which expands coverage under the DME benefit to certain external infusion pumps and associated home infusion drugs that would be considered appropriate for home use if certain criteria are met, such as the requirement for the drug to be administered by or under the supervision of a healthcare professional. The effective date of this provision is April 1, 2027.
Specifically, section 6222(a) of the CAA, 2026, amends the definition of DME at section 1861(n) of the Act to include coverage of external infusion pumps and associated home infusion drugs (as defined in subsection (iii)(3)(C) of the Act) or other associated supplies that do not meet the “appropriate for use in the home” requirement applied to the definition of DME under §414.202 if the following criteria added as new paragraphs (1), (2), and (3) of Section 1861(n) of the Act are satisfied:
- The prescribing information approved by the Food and Drug Administration for the home infusion drug associated with the pump instructs that the drug should be administered by or under the supervision of a healthcare professional.
- A qualified home infusion therapy supplier (as defined in subsection (iii)(3)(D)) administers or supervises the administration of the drug or biological in a safe and effective manner in the patient’s home (as defined in subsection (iii)(3)(B)).
- The prescribing information described in paragraph (1) instructs that the drug should be infused at least 12 times per year —
- intravenously or subcutaneously; or
- at infusion rates that the Secretary determines would require the use of an external infusion pump.
To ensure safe home infusions of the newly covered drugs, we are proposing that the healthcare professional under section 1861(n)(1) of the Act can be a registered nurse, clinical nurse specialist, nurse practitioner, physician assistant, or physician. In addition, we are proposing that the requirement that the drug be infused at least 12 times per year means at least once per month to reflect how dosing of drugs is normally prescribed.
Improvements to the DMEPOS Competitive Bidding Program (CBP)
CMS is proposing an enhancement to the DMEPOS Competitive Bidding Program designed to better inform beneficiaries and caregivers, empowering them to make well-informed healthcare decisions. CMS would like to revise the DMEPOS CBP reporting form, known as Form C, to include a new “country of origin” field for lead items furnished by contract suppliers. During an active round of the DMEPOS CBP, Form C collects product information such as manufacturer name, model name, and model number, which is then displayed in the Medicare Supplier Directory on Medicare.gov. The new country of origin information also would be added to the Medicare Supplier Directory, giving Medicare beneficiaries and other interested parties the country of origin for their medical equipment included in the DMEPOS CBP. Suppliers can typically identify the country of origin from product markings (e.g., “Made in [Country]”), as required by U.S. Customs and Border Protection rules, or by obtaining documentation such as manufacturer certifications, commercial invoices, or customs entry records. Full details about this Form C update will be shared through official notices under OMB Control Number 0938-1408 (CMS-10744) before suppliers are required to report this information.
DMEPOS Requirements for Identical Replacement Items
CMS is proposing to clarify that an additional comprehensive beneficiary “face-to-face” examination to gather “subjective and objective information associated with diagnosing, treating, or managing a clinical condition for which the DMEPOS is ordered” is not necessary when the item being ordered and furnished is a replacement item (i.e., for this purpose, this is an item described by the same Healthcare Common Procedure Coding System [HCPCS] code). If a claim for a replacement DMEPOS item is audited, the provider must nevertheless submit documentation from the original face-to-face encounter to demonstrate that medical necessity, billing, and coverage requirements have been satisfied. Accordingly, the intent of 42 C.F.R. 410.38, which requires a face-to-face encounter for certain DMEPOS items, would continue to apply when the item is initially furnished; however, this clarification would make clear that the face-to-face encounter would not need to be repeated solely for replacement items.
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