If you’ve been holding your breath waiting for the 2026 Medicare Home Health Final Rule, you can finally exhale. The Centers for Medicare & Medicaid Services (CMS) released the final details in late November 2025.
The headline news? It’s a mixed bag. While agencies are facing a rate cut, it is significantly less severe than the doom-and-gloom scenarios proposed earlier this year.
Let’s break down what this rule means for your agency, your bottom line, and your daily operations.
The Financial Landscape: What’s Happening to Your Agency’s Reimbursement?
The biggest question on everyone’s mind is always: “Are we getting paid more or less?”
For 2026, the short answer is less, but not as much less as we feared. CMS has finalized an estimated net decrease of 1.3% in aggregate payments. This equates to roughly $220 million being cut from the industry across the country.
Here is the math behind that number:
- The Good News: You are getting a 2.4% market basket increase (an inflation update).
- The Bad News: This is wiped out by two major negative adjustments:
- A permanent behavioral adjustment of -1.023%. (CMS believes agencies gamed the PDGM system to get higher payments, so they are permanently lowering the base rate to correct it).
- A temporary adjustment of -3.0%. This is a one-time clawback to recoup money CMS says was overpaid in previous years.
The Takeaway: While a 1.3% cut hurts, especially with rising labor costs, it is much better than the massive 6% cut that was originally proposed. It’s a reprieve, but it still means margins will be tighter.
CMS loves to play this game. Propose a devastating cut, and then they “listen” to providers and finalize a smaller cut. For many home health agencies, this is asking whether you would like to be bled slowly or all at once. When your agency is scraping by with paper thin margins, does it even matter?
Major Rule Changes You Need to Know
Beyond the dollar figures, CMS has tweaked the rules of the road for home health agencies.
A Win for Flexibility: Face-to-Face Encounters
This is a significant operational win. In the past, the rules around who could conduct the Face-to-Face encounter were rigid.
- The Change: CMS is now allowing Nurse Practitioners, Clinical Nurse Specialists, and Physician Assistants to perform the face-to-face encounter, even if they are not the certifying practitioner.
- Why it Matters: This removes a huge administrative bottleneck. It aligns with how modern home health teams actually work and should help speed up the admission process.
Quality Reporting: Less is More?
CMS is doing some housecleaning in the Home Health Quality Reporting Program (HH QRP):
- Removed: The COVID-19 Vaccine measure (“Percentage of Patients Who Are Up to Date”) is gone.
- Removed: Four Social Determinants of Health (SDOH) items (related to living situation, food, and utilities) have been removed to reduce the burden on data collection.
Value-Based Purchasing (HHVBP): Raising the Bar
If you are competing for bonuses in the Value-Based Purchasing model, the goalposts have moved.
- Survey Measures Cut: CMS removed three measures based on the HHCAHPS survey (care of patients, communication, and specific care issues) because the survey itself is being updated.
- New Measures Added: To replace them, they’ve added measures focused on functional improvement (bathing, dressing) and a new claims-based measure: Medicare Spending Per Beneficiary.
- Translation: CMS is looking harder at actual patient outcomes and total cost of care rather than just patient satisfaction surveys.
The Takeaway: If your agency provides quality care, this is your chance to shine. We all know how patient satisfaction surveys can sometimes provide skewed results. Less data collection removes an administrative burden for your team. However, you need to keep an eye on the average spend per beneficiary. CMS wants to crack down on agencies who load up claims with extra services that patients do not need. This hands yet another advantage to the biggest players – they can get by with tighter margins and a loss of additional services because they have the volume to do so.
Operational Considerations: Adjusting Your Workflow
How should these changes impact your day-to-day operations?
Watch Your LUPA Thresholds
CMS recalibrated the Case-Mix Weights and LUPA (Low Utilization Payment Adjustment) thresholds.
- The Risk: A visit pattern that was “safe” in 2025 might trigger a LUPA (a much lower per-visit payment) in 2026.
- The Fix: Your intake and scheduling teams need to be aware of the new thresholds. Review your visit frequencies for standard pathways to ensure you aren’t accidentally falling one visit short of a full episode payment.
Speed Up Your Data Corrections
CMS has drastically shortened the window you have to correct your quality data before it goes public.
- Old Rule: Roughly 4.5 months to review and correct data.
- New Rule: 45 days!
- The Fix: You can no longer wait until the end of the quarter to fix OASIS errors. You need a “real-time” scrubbing process to catch errors as they happen, or your public star ratings could take a hit.
The Takeaway: Your agency’s billing and revenue cycle management operations need to be in tip-top shape. No delays, no excuses, no “I’ll get back to you on that,” period. If your biller can’t make it happen, it’s time to make a change before you find yourself struggling to make payroll.
Impact on Overhead and Finances
This rule is going to squeeze your agency’s finances. Every agency is different, and every market is different, but here is the reality for most agencies in 2026:
- Margins Will Shrink: With a 1.3% revenue cut and inflation still driving up the cost of gas, supplies, and nursing salaries, your profit margin will shrink.
- Cash Flow Constraints: The 3.0% temporary “behavioral” adjustment is a direct hit to cash flow for every episode you bill in 2026.
- Labor Costs: The 2.4% market basket increase likely does not cover the actual wage increases your staff are demanding. You will need to be incredibly efficient with staffing utilization to stay in the black.
The Takeaway: It’s time to get lean and mean. That means making hard choices and possibly making cuts that you don’t want to make. This can be hard for agency owners to do, let alone see. Sometimes you need an objective third party to do a comprehensive analysis and give you the facts. Give us a call – we can help.
How to Prepare for the Future
The agencies that thrive in 2026 won’t be the ones who just complain about the cuts; they will be the ones who adapt. Here is your checklist to prepare for the year ahead:
Audit Your Coding
With the recalibration of case-mix weights, “close enough” coding isn’t good enough. Ensure your coders are capturing all comorbidities. Under-coding a patient’s complexity is essentially leaving free money on the table. However, caution is needed. Don’t just load up a claim with codes that you hope will pay. This is not just unethical; it paints a huge target on your back!
Leverage the New Face-to-Face Flexibility
Don’t let referrals sit in limbo waiting for a doctor’s signature. Update your policies immediately to allow NPs and PAs to clear these hurdles. This is the easiest way to improve your admission speed and volume.
Focus on Functional Improvement
With the new Value-Based Purchasing measures, your reimbursement will increasingly depend on whether patients actually get better at bathing, dressing, and moving. Train your therapists and aides to document these improvements clearly.
No More Delays with OASIS Assessments
Your agency needs to move quickly and catch LUPA risks and coding errors before each claim is submitted. No excuses.
Final Thoughts
The 2026 Final Rule is a challenge, but it’s a manageable one. Your agency has survived one of the most difficult periods in home health, and you’re not going to go down now! By focusing on operational efficiency, accurate coding, and taking advantage of the new regulatory flexibilities, you can win while still providing excellent care.
How We Can Help Your Agency Succeed!
Every agency is different, and every market is different. Some agencies may be able to survive by slimming down their operations while they explore new lines of service. Others may be able to strategically expand and make up for slim margins with volume when their competition folds. There is no one-size-fits-all solution. Call us today for an honest, no-pressure conversation with people who know home health and strive to help local providers succeed. The first step to success is proper planning and understanding where your agency is today, so you can build a better tomorrow!