As part of an aggressive rate cut, CMS has issued the Health Prospective Payment System (HPPS) Proposed Rule for CY 2026. This proposed rule will impact home health billing and OASIS coding and should be a primary consideration for any revenue cycle leaders evaluating vendors for home health billing services.
The fact sheet issued by CMS [1] provides an overview of the proposed rule, and we have summarized the key points that revenue cycle leaders, CFOs, and home health billing teams need to know right now.
Key Updates Impacting Home Health Billing & Coding in 2026
On June 30, 2025, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule updating Medicare payment policies and rates for home health agencies (HHAs) for calendar year (CY) 2026. This fact sheet updates Medicare payment policies annually for HHAs and outlines the major points of the rule.
The rule is a result of the Bipartisan Budget Act of 2018 and proposes a permanent prospective adjustment to the CY 2026 home health payment rate of -4.059% to address the effect of implementing the Patient-Driven Groupings Model (PDGM). This adjustment addresses discrepancies between assumed and actual behavioral shifts on projected aggregate expenditures from the CY 2020 implementation of the PDGM and the transition to a 30-day unit of payment.
CMS is also proposing a 5.0% temporary reduction on a prospective basis to the CY 2026 base payment rate. This temporary adjustment is designed to recoup retrospective overpayments and the agency will continue to analyze data through CY 2026 claims.
CMS is also proposing:
- Recalibrating the PDGM case-mix weights
- Updating the low utilization payment adjustment (LUPA) thresholds
- Adjusting functional impairment levels
- Revising comorbidity adjustment subgroups
- Modifying the fixed-dollar loss (FDL) for outlier payments
The rule also proposes changes to the face-to-face encounter policy, aligning it with the CARES Act of 2020 in terms of which practitioners can perform the face-to-face encounter – a change that may streamline documentation but still requires close tracking in home health coding workflows. The agency says that these changes will help elevate patient care and protect the Medicare program’s sustainability. For leaders managing the intricate details of home health billing services, these changes demand attention and adjustment to your revenue cycle strategy.
Payment Impact on Home Health Agencies
The proposed rule for home health agencies (HHAs) presents significant impact for the home health coding.
- The proposed 2026 updated rates include a 2.4% payment update (which is offset by several reductions).
- An estimated 3.7% decrease reflects the net impact of the proposed permanent behavior adjustment.
- An estimated 4.6% decrease reflects the net impact of a proposed temporary adjustment
- A further 0.5% decrease reflects the effects of a proposed update to the fixed-dollar loss (FDL) ratio
CMS estimates that in total, Medicare payments to HHAs in 2026 would decrease by 6.4%, or $1.135 billion, compared to 2025. To adjust and respond, home health revenue cycle leaders should consider vendors specialized in home health billing services to protect and even improve cash flows.
The Home Health Quality Reporting Program and the HHVBP Model
Home health agencies will also see updates to the Home Health (HH) Quality Reporting Program (QRP) and the expanded Home Health Value-Based Purchasing (HHVBP) Model. The QRP updates include the proposed removal of the COVID-19 vaccine measure and four assessment items in the Outcome and Assessment Information Set (OASIS).
The rule also proposes revising the reconsideration policy, enabling providers to submit a request for reconsideration of a noncompliance determination if they can demonstrate compliance. CMS proposes implementing a revised Home Health Consumer Assessment of Healthcare Providers and Systems (HHCAHPS) survey starting with April 2026.
These changes to the applicable measure set will cause CMS to modify the current weights of individual measures and measure categories. The changes to these quality programs mean that revenue cycle leaders need strong support in OASIS coding and home health billing services.
Industry Response: Comments on the HHP Rule
Stakeholders across the home health landscape have vocally opposed the proposed rule – more than 10,000 comments have been filed with CMS [2].
Critics argue that the estimated 6.4% decrease in payments will limit access to care. Many voices have warned that home health agencies, which already operate with minimal margins, would be devastated by the proposed cuts, harming patients, agencies, and the Medicare program. They also point out that the proposed cuts will impede providers’ ability to invest in technology and strain their referral partnerships.
The American Hospital Association (AHA) has voiced concern over the potential for CMS’s proposed updates to create further disruption and access challenges for beneficiaries:
“The [American Hospital Association] is very concerned about ongoing access challenges for beneficiaries needing HH care, and the potential for CMS’ proposed updates to lead to further disruption. HH agencies are vital to Medicare beneficiaries’ recoveries, and they partner with acute care and other hospitals to ensure patients can receive the right care in the most appropriate setting. Hospitals rely on HH agencies for safe and timely discharge of patients and to avoid extended hospital stays. We already see the strain on HH operations – and other post-acute care providers – due to financial challenges, creating ripple effects throughout the continuum of care, including for acute and post-acute hospitals. Despite this, CMS proposes inadequate HH agency payment rate updates and further erroneous behavioral adjustments. We urge the agency to reconsider these proposals and take steps to ensure HH agencies receive payment updates that match their financial reality and enable them to continue to provide high-quality care to Medicare beneficiaries.”
How to Optimize Home Health Billing Services & OASIS Coding
The CY 2026 PPS rule will demand precision, speed, and compliance across your entire home health revenue cycle. That means ensuring:
- PDGM case-mix and LUPA thresholds are applied correctly
- OASIS data is coded accurately and submitted on time
- Denials are proactively worked to protect cash flow
- Billing workflows are optimized to handle rate adjustments
3Gen Consulting specializes in helping HHAs navigate exactly these challenges. From home health billing services to OASIS coding support, our team ensures you stay compliant, maximize reimbursement, and adapt quickly to CMS rule changes.
Let’s future-proof your home health revenue cycle. Contact us today to discuss how we can help you respond to PDGM updates, strengthen your billing processes, and protect your bottom line.
