CY 2027 Home Health Payment Changes: What the CMS Proposed Rule (CMS-1844-P) Means for Your Agency

Sep 4

5 min read

Home health agencies would see a net 2.4% Medicare payment increase — about $420 million — in calendar year 2027 under the proposed rule CMS issued on July 1, 2026 (CMS, CY 2027 HH PPS Proposed Rule, CMS-1844-P). After a 1.3% cut in 2026, that is the first proposed raise in the PDGM era — but the relief is partial: CMS proposes to keep the -3.0% temporary "clawback" adjustment in place while, for the first time, proposing no additional permanent behavioral cut. Layered on top are recalibrated case-mix weights, an aggressive expansion of provider-enrollment revocation authority, and a new home-infusion DME benefit. Because this is a proposed rule, the numbers can still move before the final rule (expected around November 2026). Here is what changed, sourced directly from CMS.

Key Takeaways

CMS proposes a net +2.4% ($420 million) increase to home health payments for CY 2027 (CMS-1844-P).
The base payment update is +2.1% ($370 million), before outlier and other adjustments (CMS-1844-P).
No additional permanent PDGM adjustment is proposed for 2027 — a first (CMS-1844-P).
The -3.0% temporary adjustment continues, recouping CY 2020-2025 overpayments (CMS-1844-P).
Case-mix weights and LUPA thresholds would be recalibrated using CY 2025 data across the 432 PDGM payment groups (CMS-1844-P).
CMS proposes to make all enrollment revocation grounds retroactive to the date noncompliance began (CMS-1844-P).
A change in majority ownership could trigger revocation if reenrollment/survey rules are violated (CMS-1844-P).
A new DME benefit for external infusion pumps and home infusion drugs takes effect April 1, 2027 (CMS-1844-P; CAA, 2026 §6222).
CMS opened RFIs on a home health-specific wage index (BLS data) and on palliative care access (CMS-1844-P).
This is a proposed rule; the final rule is expected around November 2026, so figures may change.

1. The Headline: A Proposed +2.4% Net Increase for CY 2027

After the CY 2026 final rule cut aggregate payments by 1.3%, CMS is proposing to move the other direction for 2027 — modestly.

Component	Proposed CY 2027 impact	Source
Net aggregate payment change	+2.4% (+$420 million)	CMS-1844-P
Home health payment update	+2.1% (+$370 million)	CMS-1844-P
Outlier / fixed-dollar-loss (FDL) adjustment	~+0.3% (~+$50 million)	CMS-1844-P
Prior year for comparison (CY 2026 final)	-1.3% (-$220 million)	CMS-1828-F
Proposed CY 2027 FDL ratio	0.29	CMS-1844-P

The swing from -1.3% to +2.4% is real, but read it against costs: MedPAC's most recent data still puts the freestanding FFS Medicare margin at 21.2% for 2024, and MedPAC has asked Congress to cut the base rate 7% in 2027. In that context, a 2.4% bump is CMS applying the statutory market-basket formula, not a signal that margin pressure is easing.

2. Behavioral Adjustments: No New Permanent Cut, but the -3% Clawback Stays

The most consequential change is what CMS did not propose. For the first time since the permanent PDGM behavioral adjustments began, CMS is proposing no additional permanent reduction — arguing recent behavior changes may stem from factors other than PDGM (OASIS-E, prior rate cuts, case-mix recalibration).

The permanent adjustment history

Rate year	Permanent adjustment applied	Source
CY 2023	-3.925% (half of -7.85% estimated)	CMS-1844-P
CY 2024	-2.890% (half of -5.779%)	CMS-1844-P
CY 2025	-1.975% (half of -3.95%)	CMS-1844-P
CY 2026	-1.023% (remainder for 2020-2022)	CMS-1844-P
CY 2027 (proposed)	None proposed	CMS-1844-P

The temporary adjustment continues

The temporary adjustment — CMS's recoupment of retrospective overpayments from CY 2020 through CY 2025 — stays at -3.0% in the proposed rule. CMS frames the incremental approach as a way to avoid a larger single-year reduction later, signaling more recoupment is coming in future years. The takeaway for agencies: the "increase" for 2027 is a gross market-basket update partly offset by a clawback that isn't going away.

3. Case-Mix, LUPA, and Outlier Recalibration

Routine but material: CMS proposes to re-weight the model using the newest claims data, which shifts payment among clinical groups even when the base rate rises.

Metric	Proposed CY 2027	Source
PDGM payment groups	432	CMS-1844-P
Case-mix / LUPA recalibration data	CY 2025 claims	CMS-1844-P
Items recalibrated	Case-mix weights, functional levels, comorbidity subgroups, LUPA thresholds	CMS-1844-P
Outlier cap (statutory)	2.5% of total payments	CMS-1844-P

Recalibration is where two agencies with the same volume can see different real-world effects: your patient mix determines whether the re-weighting helps or hurts, regardless of the headline +2.4%. This is exactly what a well-maintained cost report and case-mix tracking make visible before the year closes.

4. A Program-Integrity Crackdown on Enrollment

CMS pairs the payment update with some of the most aggressive Medicare enrollment proposals in years — aimed at fraud, but with real compliance exposure for legitimate agencies.

Proposed provision	What it does	Source
Retroactive revocations	Makes all revocation grounds effective back to when noncompliance began	CMS-1844-P
Change in majority ownership	Denial/revocation if an HHA (or hospice/DMEPOS) skips required reenrollment and survey after an ownership change	CMS-1844-P
Expanded suspension/termination grounds	Extends denial/revocation to a provider's owners and managing employees/organizations	CMS-1844-P

Retroactive revocation matters because it lets CMS recover payments back to the start of noncompliance — turning a paperwork lapse into a potentially large clawback. Ownership changes are a specific trap: agencies buying or selling should confirm reenrollment and survey obligations before closing.

5. New Home-Infusion DME Benefit and Other Provisions

Several non-rate provisions round out the rule.

Provision	Detail	Source
DME infusion expansion	Coverage for certain external infusion pumps + home infusion drugs; effective April 1, 2027	CMS-1844-P; CAA 2026 §6222
Home health-specific wage index	RFI on building a wage index from an alternate source (e.g., BLS)	CMS-1844-P
Palliative care	RFI on promoting community-based palliative care under the home health benefit	CMS-1844-P
HH QRP	Revised data-submission deadlines; calendar-year reporting; Advanced Care Planning measure RFI	CMS-1844-P
Expanded HHVBP	No model-specific policy changes proposed for CY 2027	CMS-1844-P

6. What It Means for Your Cost Report, Margins, and Timeline

The payment picture and the cost report are linked: CMS and MedPAC use agency cost data to justify the behavioral adjustments and future cuts, so the accuracy of your Medicare cost report filing and case-mix documentation directly shapes both your settlement and the policy environment. With a 21.2% published margin and a standing MedPAC recommendation to cut rates 7%, agencies should treat 2027's +2.4% as temporary breathing room, not a trend — and keep bookkeeping and cost allocation tight enough to defend margins under scrutiny.

Key dates

Milestone	Date	Source
Proposed rule issued	July 1, 2026	CMS-1844-P
Final rule expected	~November 2026	Historical CMS timing
Rate year begins	January 1, 2027	CMS-1844-P
DME infusion provision effective	April 1, 2027	CMS-1844-P

Because this is a proposed rule, the net +2.4%, the FDL ratio, and case-mix weights can all shift in the final rule. We will update this page when CMS finalizes CY 2027.

Methodology and Sources

This analysis draws on CMS's official CY 2027 Home Health PPS proposed rule fact sheet and supporting documents; margin and cost context comes from MedPAC's March 2026 Report to Congress. Figures labeled "proposed" are subject to change in the final rule expected around November 2026. Dollar and percentage impacts are CMS estimates.

Sources used:

Centers for Medicare & Medicaid Services (CMS), Calendar Year (CY) 2027 Home Health Prospective Payment System Proposed Rule (CMS-1844-P), July 1, 2026
CMS, CY 2026 Home Health PPS Final Rule (CMS-1828-F), November 2025 (prior-year comparison)
Consolidated Appropriations Act, 2026, §6222 (home infusion DME)
Medicare Payment Advisory Commission (MedPAC), Report to the Congress: Medicare Payment Policy, Chapter 8, March 2026 (margin context)

Last updated: September 2026. This page reflects the CY 2027 proposed rule; we will update it when CMS issues the final rule.

Soriaga & Associates, LLC is a CPA firm with 25+ years of specialized experience in home health, hospice, and home care accounting and Medicare cost report preparation. If you want help modeling the CY 2027 impact on your agency, schedule a free consultation.