CY 2027 Home Health Proposed Rule: What Actually Changes

CMS released the CY 2027 Home Health Prospective Payment System proposed rule on July 6, 2026. The headline number is a 2.4% payment increase — roughly $420 million more flowing to home health agencies next year.

That is the first genuinely positive headline home health has gotten in years. It is also incomplete in a way that matters.

Inside that 2.4% is a 3% cut. And behind that 3% cut is a $4.9 billion balance CMS says the industry owes. This article walks through the actual arithmetic, what else is in the 112-page rule, and what to do before the comment period closes.

Source: Calendar Year 2027 Home Health Prospective Payment System Rate Update proposed rule (CMS-1844-P), published in the Federal Register July 6, 2026 (91 FR 41216, Document 2026-13602). All figures below are quoted from the proposed rule text.

How the 2.4% Is Actually Built

The net figure is the sum of two things going up and one thing going down:

The two increases outrun the cut, so the net is positive. But the 3% is not a rounding detail — it is a deliberate clawback, and CMS is explicit that it is only the beginning.

The $4.9 Billion Number

This is the part most coverage skips.

CMS states plainly that the temporary adjustment is expected to collect "approximately $500 million of the total temporary adjustment dollar amount, equating to about 10 percent of the total $4.9 billion."

Then it says what comes next:

"To continue recoupment of the retrospective overpayments, we may propose additional temporary adjustments in future rulemaking and are not proposing that the -3.0 percent temporary adjustment would be applied each year after CY 2027."

Read that carefully, because it cuts both ways. The 3% does not automatically repeat in 2028 — the statute requires temporary adjustments to apply only to the year they're made, and CMS confirms it will not carry the 3% into the CY 2028 base rate. But CMS also says it intends to keep proposing new temporary adjustments until the balance is recovered.

So: 90% of the bill is still outstanding, and the mechanism to collect it is now established practice. Plan your next three years around that, not around this year's positive headline.

The Permanent Cut That Didn't Happen

For the first time since CY 2022, CMS is not proposing a new permanent behavior adjustment.

That is real relief. It is also worth knowing what CMS calculated before deciding not to apply it. Using CY 2025 data, the rule shows that a full permanent prospective adjustment of −5.043% would be required to bring rates in line with actual behavior.

CMS chose not to apply it this year. It did not withdraw the finding.

Treat CY 2027 as a reprieve rather than a resolution. The analysis that produces permanent adjustments runs annually by law, and the number it produced this year was worse than the cut you actually received.

Who Wins and Who Loses

The 2.4% is an aggregate. Individual agencies land differently, and — unusually — the split favors smaller agencies:

CMS estimates roughly 36% of all 9,975 home health agencies would see an increase of at least 3.0%. The agency describes the rule as having "a significant positive economic impact on a substantial number of small entities."

If you run a small agency in the Mid-Atlantic, this rule is good news. If you run a large agency in Texas or Alabama, you are getting 1.7% against real wage inflation, and the clawback is still coming.

What Else Is In the Rule

The payment rate gets the attention, but four other pieces will change how you operate.

PDGM recalibration. CMS proposes to recalibrate case-mix weights and update LUPA thresholds, functional impairment levels, and comorbidity subgroups using CY 2025 claims data. The functional scoring that drives your case-mix comes from eight OASIS items, and the points attached to them are being re-derived. We break that down in PDGM Functional Points for 2027.

OASIS submission deadlines move. The window to submit and correct OASIS data shrinks from 4.5 months to the 15th day of the second month after quarter close. The annual payment update reporting period also shifts to a calendar year — and the transition period is running right now. Details in The OASIS Submission Deadline Is Moving.

Provider enrollment tightens. The rule proposes changes to Medicare provider and supplier enrollment requirements, including expanded grounds for denial and revocation. This lands in the same season as new Congressional interest in home health fraud screening.

Wage index request for information. CMS is asking whether home health should have its own wage index rather than borrowing the hospital one. No proposal yet — but an RFI is how CMS starts. If your wage index has been punishing you, this is the year to say so on the record.

Also in the rule: a discussion of home health palliative care services, clarified DMEPOS face-to-face requirements for identical replacement items, and a proposed DME benefit expansion covering certain external infusion pumps and drugs.

Two of those deserve more than a line, and neither is a payment change — which is exactly why they will be under-covered:

• Palliative care under the home health benefit — CMS states that skilled need is judged "without regard to whether the illness or injury is acute, chronic, terminal, or expected to extend over a long period." If your intake screens out terminal diagnoses, that screen is not grounded in the coverage rules.
• The wage index request for information — home health's geographic adjustment is borrowed from a hospital index that contains no home health labor costs. CMS is asking whether it should have its own.

What To Do Monday

Nothing here requires a compliance department. Five things, in order:

1. Model the 3%, not the 2.4%. Take your CY 2026 Medicare revenue from case-mix adjusted 30-day periods and apply −3%, then add the 2.1% update. Your LUPA revenue does not take the temporary cut. That two-line split is your real 2027 picture.
2. Find your region in the table above. The aggregate is not your number. A West South Central agency budgeting on 2.4% is budgeting on someone else's rate.
3. Look at your LUPA rate. With thresholds being recalibrated and the temporary cut sparing per-visit payments, the economics of short periods shift. Know your current LUPA percentage before the final rule lands.
4. Audit the eight functional OASIS items. Case-mix weights are being re-derived from CY 2025 claims. Accuracy on those items is the highest-leverage documentation work available to you, and it costs nothing to improve.
5. Put November on the calendar. The final rule typically publishes in early November, effective January 1. Whatever it says, you will have about eight weeks to absorb it.

How to Comment Before August 31

Most agencies never file a comment, which is exactly why the ones that do carry weight. CMS reads them, and the final rule's preamble responds to them by name.

You have until 5 p.m. EDT on August 31, 2026. Reference file code CMS-1844-P.

The simplest route is electronic submission through Regulations.gov — search for CMS-1844-P and follow the "submit a comment" instructions. You can also mail comments to CMS, Attention: CMS-1844-P, P.O. Box 8013, Baltimore, MD 21244-8013, though allow time for delivery before the deadline.

CMS specifically solicited comment on:

• The proposal to apply the −3.0% temporary adjustment and to not apply a permanent adjustment
• The proposed CY 2027 30-day and per-visit payment rates
• The proposed LUPA threshold updates
• The proposed functional points and functional impairment levels by clinical group
• The OASIS data submission deadline change
• The regulatory impact analysis on small agencies
• The home health wage index RFI

A useful comment is short and specific. One paragraph on who you are, one on the concrete operational effect on your agency, one on what you want changed. Numbers from your own books beat adjectives every time. If the wage index has cost you clinicians, say how many. If a 45-day OASIS correction window breaks your QA process, describe the process.

The Bottom Line

CY 2027 is the best home health rate year in recent memory and it still contains a 3% cut. Both things are true.

The number to carry into your 2027 budget is not 2.4%. It is your region's impact, split between case-mix adjusted periods and LUPA periods, with the understanding that the large majority of the clawback is still outstanding and CMS has told you how it plans to collect it.

(How much is still outstanding is genuinely not knowable from this rule. CMS notes the $4.9 billion figure does not account for anything recouped during CY 2026, because it didn't have that number at the time of this rulemaking. It has committed to showing a running balance in future rulemaking. What is certain is that CY 2027's $500 million covers about a tenth of it.)

The reprieve on the permanent adjustment is genuine. The −5.043% that CMS calculated and set aside is also genuine. Budget for the second one.