‘The Largest Cut Ever’: CMS Proposed Home Health Payment Rule Shakes Industry Leaders

On Monday, the U.S. Centers for Medicare & Medicaid Services (CMS) unveiled its proposal for the 2026 home health payment rule. Providers and industry advocates quickly spoke out to warn of the risks associated with “the largest cut ever proposed.”

Home health stakeholders called the proposed cuts “devastating” and “a matter of life and death.” The industry’s reactions to the rule came on the same day the Senate passed a major tax and spending bill, which would significantly cut Medicaid’s budget.

If the proposed payment rule is finalized as is, providers foresee direct implications for patients and their businesses.

“We would have to cut care,” Beau Sorensen, chief operating officer of First Choice Home Health & Hospice, told Home Health Care News in an email. “While we’ve managed to reduce our overall office costs by 50% since the start of [the patient-driven groupings model] (PDGM], we have cut all the fat that we can outside of clinical care. The only place we have to maintain our margins and ensure that patients get care in the home will be to cut what we’ve never wanted to cut — visits for patients. We hope that will be enough to maintain our business until CMS comes to their senses.”

Founded in 1996, Orem, Utah-based First Choice Home Health & Hospice serves the Wasatch Front region. In addition to its core home health and hospice offerings, the provider delivers a variety of Medicare Part B services

As part of the proposed rule, CMS is calling for a 6.4% aggregate cut to home health payments. This translates to a projected $1.135 billion decrease compared to 2025.

The rule proposal includes a 2.4% update, which is a $425 million increase. It also includes a 3.7% decrease due to behavioral adjustments, as well as a 4.6% decrease that reflects the net impact of the proposed temporary adjustment. Plus, a 3.2% market basket update.

The total impact of the proposed rule would be even greater than the 6.4% aggregate cut, according to Dr. Steve Landers, the CEO of the National Alliance for Care at Home. Following an official statement from the Alliance on Monday, Landers explained why this move from CMS amounts to “life and death.”

“The proposed payment cut is devastating and represents a fundamental failure by CMS to understand the reality facing providers and patients,” he told HHCN in an email. “The 6.4% is actually a 9% payment cut to the 30-day base payment rate – a 4% permanent cut plus a 5% temporary cut, making this the largest cut ever proposed. When you’re looking at over $1 billion in payment reductions at a time when half of all U.S. counties have already lost home health agencies, this isn’t just a policy misstep – it’s a direct assault on Medicare beneficiaries’ access to essential care. This is a life and death safety issue.”

Broad-ranging fallout from the proposed rule

Bayada Home Health Care, a company that has cultivated a strong presence in the home-based care advocacy space, expressed disappointment regarding the proposed cuts.

“Hearts for Home Care is deeply concerned by yet another proposed cut to Medicare Home Health payments,” Dave Totaro, president and executive director of Hearts for Home Care and chief government affairs officer of Bayada, told Home Health Care News in an email. “Each year, our role becomes more critical as more individuals choose to recover at home – often discharged earlier and sicker than ever before. Yet, CMS continues to undervalue this vital care by proposing reductions that threaten our ability to serve those most in need. These cuts exacerbate an already severe caregiver workforce crisis.”

Bayada provides home health, home care, hospice and behavioral health care services in 23 states. The company also has international locations, operating in Germany, India, Ireland, New Zealand and South Korea. Bayada has about 32,000 employees nationwide.

Bayada’s recent layoffs serve as an example of the connection between reimbursement challenges and staffing. Totaro further emphasized this connection and its potential to limit access to care.

“Talented professionals are being driven away from home health into hospitals and nursing facilities where pay is often higher, further weakening a system that depends on their dedication,” he said. “As inflation and service costs rise, continued cuts from CMS risk forcing vulnerable individuals into costlier and less preferred institutional care. It’s time for CMS to recognize that home health care is not just cost-effective — it is life-affirming. Rather than proposing cuts year after year, they should invest in strengthening this essential service that keeps our most medically fragile neighbors where they want to be: home.”

Though home health is a smaller segment of its business, Addus HomeCare Corporation (Nasdaq: ADUS) Chief Government Relations Officer Darby Anderson described the cuts as “devastating.” Anderson also took aim at the methodology that CMS uses to determine budget neutrality.

“CMS is continuing to base home health payment on a flawed methodology that captures neither the true cost of providing home health care, nor the impact of very low Medicare Advantage [MA] rates,” he told HHCN in an email.

Based in Frisco, Texas, Addus provides home health, home care and hospice services to over 62,000 consumers through 257 locations across 23 states.

Anderson isn’t alone in his views. Over the years, home health advocacy organizations and stakeholders have pushed back against CMS’ budget neutrality methodology.

The Alliance, then known as the National Association for Home Care & Hospice (NAHC), sued the U.S. Department of Health and Human Services (HHS) over the matter on two separate occasions.

Anderson also noted that, unlike cuts in previous years, CMS is imposing the implementation of a portion of the temporary cuts, which compounds the impact of the proposed cut for 2026.

“This clawback is recouping the entirety of this cut across the industry, meaning current providers will be paying the portion of this cut from providers that have ceased to operate, including those that have been decertified,” he said.

Landers also pointed out that CMS’s data contradicts their policy decisions regarding the proposed rule.

“Medicare home health expenditures have declined year-over-year since 2020, yet CMS continues to assert payments are too high,” he said. “This disconnect between data and policy, combined with unprecedented inflationary pressures and previous inadequate adjustments that have already forced closures, represents the latest step in systematically dismantling the home health safety net.”

Industry partners decry the proposed rule

Home health providers aren’t the only ones expressing concern about the proposed cuts. Companies like Axxess and WellSky, prominent industry partners, also weighed in.

Deborah Hoyt, senior vice president of public policy at Axxess, believes that CMS policymakers failed to factor in the larger picture.

“Appropriately considering the complete home health provider payer mix of traditional Medicare, Medicare Advantage, and Medicaid would not result in a calculation that reduces provider reimbursement in 2026 or any year under the PDGM payment system,” Hoyt told HHCN in an email. “Our advocacy has been clear and consistent that CMS must factor in MA and root out the small percentage of fraudulent players to right federal policy decision making to align with the value of health care delivery in the home.”

Axxess is a home-based care technology company that provides agencies with cloud-based software solutions. The Dallas-based company works with over 9,000 organizations that serve more than 5 million patients around the world.

Ultimately, Tim Ashe, chief clinical officer at WellSky, believes that the proposed rule threatens to “undermine” access to critical care for millions.

Overland Park, Kansas-based WellSky is a post-acute technology company that utilizes software and analytics to help providers achieve better outcomes at lower costs. The company works with roughly 20,000 home health providers.

“These proposed reductions come at a time when home health agencies are already struggling to meet the rising demand for home-based care,” he said in an email. “Further payment cuts will jeopardize their ability to recruit and retain qualified staff, invest in technology and deliver high-quality care. Home health providers are developing innovative ways to allow patients with advancing need for health care services to receive care in their homes and age in place. The needs of this population and the complexities of their conditions have grown.”