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Medicare payments to home health agencies in 2026 will decrease in the aggregate by an estimated 1.3%, or $220 million, compared with 2025, according to the Centers for Medicare and Medicaid Services final rule released on Friday.
Home health agencies were bracing for a 6.4% payment cut as proposed by CMS in June.
The final rule includes a 1.023% permanent cut and a 2.7% temporary reduction.
The 1% permanent adjustment is based on CMS implementing the Home Health Patient-Drive Groupings Model in 2020. The model accounts for differences between assumed and actual behavioral changes on estimated aggregate expenditures, according to CMS.
The Patient-Driven Groupings Model was a requirement under the Social Security Act and the Bipartisan Budget Act of 2018. Its goal is to better align payments with patient care needs, especially for clinically complex individuals, CMS said.
The law requires CMS to make assumptions about behavior changes that could occur between 2020 and 2026. It also requires temporary increases or decreases to a 30-day payment amount.
The permanent cuts have been ongoing since 2020 and end in 2026. For 2023, 2024 and 2025, CMS previously applied reductions of 3.925%, 2.890% and 1.975%, respectively, which were half the estimated required permanent adjustment, according to CMS.
CMS modified the permanent adjustment after commenters raised concerns that behavior change after 2022 might be attributable to factors unrelated to the implementation of the Patient-Driven Groupings Model. It added approximately $915 million more in payments.
CMS reduced the amount of overpayments in the temporary adjustment down to $4.7 billion for 2020 through 2024.
"As required by law, we will continue to evaluate the impact of differences between assumed behavior and actual behavior changes on estimated aggregate expenditures through CY 2026 claims," CMS said. "We will continue to analyze the calculated temporary adjustment each year through CY 2026 claims to determine any future temporary adjustments to account for retrospective overpayments."
The Home Health Prospective Payment System final rule for 2026 started with a 2.4% ($405 million) increase, but was offset by an estimated 0.9% decrease that reflects the final permanent adjustment (a $150 million decrease), an estimated 2.7% reduction that reflects the final temporary adjustment (a $460 million decrease) and an estimated 0.1% reduction that reflects the updated fixed-dollar loss ratio for outlier payments (a $15 million decrease).
WHY THIS MATTERS
CMS made significant adjustments in the Home Health Perspective Payment System Final Rule in response to community concerns regarding patient access and data integrity, according to the National Alliance for Care at Home.
However, since 2019, Medicare home health providers have experienced severe cuts that have led to a cascade of home health agency closures and reduced patient access to care, especially in rural and underserved communities, the Alliance said on its website.
"While the Alliance acknowledges that CMS took into account some of the home health community's recommended changes in its final rule, resulting in a lower payment cut for next year, 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," said Dr. Steve Landers, CEO for the Alliance. "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."
THE LARGER TREND
The final rule also updates a recalibration of case-mix weights and changes to low-utilization payment adjustment (LUPA) thresholds.
It updates the Home Health Quality Reporting Program and the expanded Home Health Value-Based Purchasing Model, as well as technical updates to conditions of participation for home health agencies.
This rule also finalizes changes to the face-to-face encounter policy by broadening the language to align with the language in the section of the Coronavirus Aid, Relief and Economic Security Act, 2020 (CARES Act) regarding which physicians can perform the face-to-face encounter.
CMS is removing the COVID-19 Vaccine: Percentage of Patients Who Are Up to Date Measure and the corresponding Outcome and Assessment Information Set (OASIS) data element beginning in 2026.
Email the writer: SMorse@himss.org