The CY 2027 Home Health Proposed Rule Is Almost Here — What Owners Should Brace For, and Do Now

If you own or run a home health agency, late June has become a date you watch. That’s when CMS typically drops the next year’s proposed payment rule — last year’s CY 2026 proposal landed on June 30 — and the CY 2027 version is expected any day now. Going in, every operator is asking the same question: how much more are they going to cut?

Here’s an honest read of where things stand, why the cuts keep coming, and — more usefully — what you can actually do about it before January.

Where 2026 left us

The CY 2026 final rule, effective January 1, 2026, ended up at a net 1.3% decrease (about $220 million) versus 2025. That was a relief only in contrast to the proposal, which had floated a 6.4% cut. The final number is the sum of several moving parts:

• +2.4% payment update (≈ $405M)
• −0.9% permanent behavioral adjustment (≈ $150M)
• −2.7% temporary adjustment (≈ $460M)
• −0.1% outlier / fixed-dollar-loss tweak (≈ $15M)

Notice what that means: the modest market-basket raise was more than erased by the behavioral adjustments. That’s the pattern, and it’s the thing to understand.

Why the cuts keep happening: the behavioral adjustment fight

When CMS moved to PDGM in 2020, the model was supposed to be budget-neutral — pay the same in aggregate as the old system would have. CMS’s methodology compares actual spending under PDGM to what it estimates spending would have been, and when the actual comes in higher, it concludes agencies changed coding and documentation behavior to land in higher-paying groups. Its remedy is two-fold:

1. Permanent adjustments that lower the base rate going forward. CMS has now taken roughly −10% in permanent reductions since CY 2023.
2. Temporary adjustments that claw back what CMS considers prior overpayments. A large balance — on the order of $4.5 billion — remains to be recouped, and CMS has been clear it intends to collect it through future temporary cuts.

The industry strongly disputes the methodology behind those calculations. But disputing it hasn’t stopped it. That’s the backdrop for CY 2027.

What to expect in the CY 2027 proposed rule

Nobody outside CMS has the numbers yet, but the shape is predictable. Watch for:

• Another temporary adjustment chipping at that remaining ~$4.5B balance — this is the single biggest swing factor, and it can wipe out the market-basket increase again.
• The net rate after the market-basket update is netted against permanent and temporary cuts. The headline market-basket number will look fine; the net is what hits your bank account.
• Quality and value-based purchasing updates (HHVBP), OASIS/quality-reporting changes, and the usual wage-index and outlier recalibrations.
• The legislative wildcard. A bipartisan bill — the Medicare Beneficiary Home Health Access Protection Act of 2025 (H.R. 5142) — would require CMS to offset the CY 2026 and CY 2027 behavioral cuts. If it moves, the math changes. If it doesn’t, plan around the rule as written.

When the proposed rule drops, read past the market-basket headline straight to the net impact table and the temporary-adjustment line. Then model it against your payer mix and case mix — a national average percentage tells you very little about your agency.

The part you control

You can’t set the rate. You can comment on the rule (and you should — comment periods matter, and CMS softened the CY 2026 cut after stakeholder pushback). But while the policy fight plays out in Washington, the margin fight plays out in your own operations. When the rate is flat-to-down, the agencies that stay healthy are the ones that collect every dollar they’re legitimately owed and leak the fewest. Five levers:

1. Code PDGM accurately — in both directions

Under PDGM your entire 30-day payment rides on the HIPPS code, and most of it is determined by clinical data: the primary diagnosis (clinical group), OASIS functional items (impairment level), and secondary diagnoses (comorbidity adjustment). Under-coding leaves money on the table; over-coding invites a downcode on review. The goal is accuracy that matches the documentation — captured the first time, not reconstructed at billing. (We went deep on this in how automatic HIPPS coding protects your revenue.)

2. Get audit-ready, because audits are rising

Operators are reporting more frequent documentation requests, longer review cycles, and heavier use of prior authorization, concurrent review, and retrospective audits. Thin margins make a denied or downcoded claim hurt more. The defense is boring and effective: face-to-face encounters documented and on time, notes that actually support the coverage criteria (LCD-driven documentation helps here), and a clean audit trail showing who changed what and when.

3. Tighten the revenue cycle

When you’re being cut a few points at the top, small leaks at the bottom matter more. Watch RAP/NOA timing, denial root-causes, and AR aging by payer. A claim that goes out late, wrong, or duplicated is margin you already earned and then lost.

4. Know your margin by clinical group and payer

“We’re profitable overall” hides a lot. Some clinical groups and some payers may be underwater once you load in real visit costs. You can’t fix what you don’t measure — episode-level margin visibility lets you make referral, staffing, and contracting decisions on data instead of vibes.

5. Protect clinician capacity

Staffing is still the number-one operational challenge in the industry, and every hour a nurse spends fighting the EMR is an hour not spent on a billable, revenue-generating visit. Documentation that’s fast in the field — including offline — directly affects how many visits each clinician can actually complete.

The bottom line

The CY 2027 proposed rule will almost certainly continue the squeeze, and the ~$4.5B clawback isn’t going away on its own. You don’t control the rate — but you fully control how cleanly you code, document, and bill against it. In a flat-to-down payment environment, that operational discipline is the strategy.

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Sources: CMS CY 2026 HH PPS Final Rule fact sheet; Applied Policy and Forvis Mazars CY 2026 rule analyses; McKnight’s Home Care reporting on CY 2027 advocacy; H.R. 5142 (119th Congress). Figures are CMS estimates and industry analysis as of June 2026; confirm against the proposed rule when it publishes.