What this rule really means for your bottom line …
On the surface, the Calendar Year 2027 Home Health Prospective Payment System proposed rule (CMS-1844-P) looks like good news. CMS is proposing a 2.4% aggregate payment increase for 2027 — about $420 million more flowing to home health agencies nationwide. If you stopped reading there, you’d be forgiven for feeling optimistic. Don’t stop reading there.
Buried inside that same rule is a proposed temporary 3% reduction to the base payment rate, meant to recoup what CMS says are systemic overpayments tied to the Patient-Driven Groupings Model. CMS’s own estimate puts the cumulative PDGM overpayment at roughly $4.9 billion between 2020 and 2025.
This isn’t a new fight — CMS has been chipping away at PDGM “behavior assumptions” every year since 2023, with permanent cuts of 3.925% in 2023, 2.890% in 2024, 1.975% in 2025, and 1.023% in 2026. What’s different about the 2027 proposal is that this latest 3% adjustment is framed as temporary and separate from the permanent cuts already on the books — but temporary or not, it lands the same way on your agency’s cash flow. Net it out against the headline 2.4% increase and most agencies should plan for a payment environment that is flat to negative in real terms, not the modest bump the top-line number suggests.
If you run a home health agency, the practical takeaway is to model both numbers, not just the one CMS puts in its press release. Pull your CY2026 PDGM case-mix distribution, apply the proposed 3% temporary reduction alongside the 2.4% aggregate update, and see what your actual net payment trend looks like for 2027 budgeting purposes. Agencies that only budget off the headline increase are going to be surprised in January.
The payment math isn’t even the part of this rule that should worry you most. CMS is proposing a significant expansion of its program integrity and enrollment authority, and the changes go well beyond home health-specific policy — they reach every Medicare-enrolled provider type. A few provisions stand out for home health agencies specifically.
First, CMS wants to make revocation grounds retroactive to the date of the non-compliant conduct, rather than the date CMS discovers it. That’s a meaningful shift in exposure: an agency could be revoked today for something that happened months or years ago, with payment recovery reaching back to that original date. CMS estimates this alone could save the program $82 million a year — which is another way of saying it expects to claw back real money from providers.
Second, the rule introduces a “geographic saturation” concept as a new revocation trigger, allowing CMS to flag and potentially revoke agencies operating in areas it considers to have an excessive concentration of similar providers. If your agency operates in a market with several other home health providers — which describes a lot of New England — this is worth watching closely as the rule moves toward finalization.
Third, CMS is proposing to shorten the window for submitting claims after a revocation from 60 days down to 15 days, and to expand “associational” denial grounds tied to ownership, shared office locations, and business relationships with providers who have already been denied or revoked. Combined with new disclosure requirements around private equity and REIT ownership, this rule is asking agencies to know a lot more about their ownership structure, their landlords, and their business partners than they may currently track in one place.
None of this is final yet. The comment period on CMS-1844-P runs through August 31, 2026, and CMS has a track record of adjusting proposed provisions — sometimes significantly — based on industry feedback. Agencies and their trade associations still have time to weigh in, and this is exactly the kind of rule where organized comments from operators (not just their national associations) can carry weight, particularly on the geographic saturation and retroactive revocation provisions.
In the meantime, three things are worth doing now, before the final rule lands. Run the net payment modeling described above so your 2027 budget reflects reality rather than the headline number. Take an honest inventory of your ownership structure, management agreements, and any shared office arrangements, so you know where “associational” exposure might exist under the proposed rules. And if you have a compliance program, make sure it can support a retroactive look-back — because that’s the direction CMS is heading, in this rule and in the broader enforcement posture we’ve seen across home health and hospice this year.
We’ll follow this rule through the comment period and final publication and update this guidance as the numbers firm up.