Scrutinizing The Bundled Enforcement Risks In CMS’ 2027 Home Health Payment Rule

“Out of touch.”

That’s what Katie Smith Sloan, president and CEO of LeadingAge, had to say about the Centers for Medicare & Medicaid Services (CMS) after the release of the CY2027 home health payment rule.

While specific takes varied, I’d say that theme cut across many responses from industry insiders HHCN polled about the news this week.

Providers welcomed the projected 2.4% increase in aggregate Medicare payments. But they also pointed to the 3% temporary reduction to the national standardized base payment rate and new fraud-fighting tools as sources of concern for compliant providers.

Those reactions aren’t contradictory. The payment outlook can be better than providers feared while the broader regulatory outlook becomes more challenging. And the headline increase tells us less about what any individual agency will experience than it might first appear to.

HHCN is still unpacking all the details of the home health payment rule, but early reporting suggests that the payment relief is real, though insufficient — and so are the concerns about the rule’s broader operational consequences.

It also offers a window into CMS’ priorities, even if one rule does not establish how the agency will handle every future payment update.

In this week’s exclusive, members-only HHCN+ Update, I’ll address the final rule, offering insights and analysis, including:

— Why CMS’ decision to bundle broader Medicare enrollment changes into the home health payment rule deserves scrutiny

— Why the 2.4% payment increase does not settle providers’ concerns about compliance costs, retroactive revocations and future payment adjustments

The lump-sum technique

If you win the lottery, you should likely consider taking the lump sum.

This year, CMS took a kind of lump-sum approach of its own, packaging changes to Medicare enrollment provisions into the annual home health payment rule.

According to Sloan, it would have been preferable for CMS to make those changes in a separate rule, rather than constrain the process to the calendar-year rulemaking cycle. CMS’ choice to go the lump-sum route matters because the enrollment changes reach far beyond home health. CMS says most of the provisions apply to all Medicare-enrolled provider types, even though they arrived in a rule many readers may have associated primarily with home health payment rates.

Specifically, CMS added grounds for denying or revoking a provider’s or supplier’s Medicare enrollment and expanded the reasons for which CMS can apply a retroactive effective date for provider and supplier revocations. Previously, some revocations took effect prospectively, while others were already retroactive.

“These changes are necessary to help ensure that payments are made only to qualified providers and suppliers, which we believe will assist in protecting the trust funds and Medicare beneficiaries,” the final rule reads.

CMS has a legitimate interest in preventing improper payments and keeping bad actors out of Medicare. But including broad enrollment changes in an annual payment rule creates a practical challenge for advocates: They have to respond to consequential, programwide enforcement policies while also weighing in on the payment and operational provisions that directly affect their own sectors.

A separate rule might have allowed for a more focused debate. I don’t know why CMS chose to combine these policies, and bundling them did not eliminate the public comment process. The agency may have viewed it as an efficient way to advance its priorities. Still, the packaging matters: A favorable payment headline can draw attention away from provisions whose effects may be harder to assess — and potentially longer lasting.

That doesn’t mean the industry’s objections went unheard. Several elements of the proposed rule that advocates questioned were withdrawn or narrowed in the final version. But the industry remains concerned about several elements in the final rule.

Experts told HHCN that the changes could increase administrative demands and put legitimate providers at risk of enrollment denial or revocation. Depending on how the policies are applied, that could involve unrelated third-party conduct, a shared building, vendor relationships or administrative errors, according to Patrick Harrison, vice president of policy and legislative affairs at the National Alliance for Care at Home (the Alliance).

“This presents some risk, as CMS now treats clinical leadership titles as presumptively reportable managing employees, and a missed or late disclosure can support a revocation retroactive to the reporting deadline,” Harrison said.

The retroactivity issue raises the stakes. CMS says making all revocation grounds retroactive to the start of noncompliance will help it recover money paid to noncompliant providers. From a compliant operator’s perspective, though, the concern is that a disclosure error could carry consequences reaching back well before the agency receives notice of a problem.

The test will be how precisely CMS and its contractors use those authorities. Fraud prevention and provider access are not mutually exclusive goals, but broad enforcement can undermine access if legitimate agencies face disproportionate disruption.

A better payment headline, a more complicated reality

I want to connect the final rule news to something that Kim Brandt, CMS deputy administrator and chief operating officer, said at the Alliance’s Annual Meeting & Expo in Washington last week.

Brandt attributed a more favorable proposed payment rate to sharp declines in billing in certain areas following the home health and hospice moratoria.

This offers insight into CMS’ thought process. In Brandt’s telling, cracking down on questionable billing helped make a more favorable proposed payment rate possible. But it also exposes the tension providers see in the final rule. If the industry is told that stronger enforcement supports a better payment outlook, it’s fair to ask how much of that benefit compliant agencies can retain after accounting for the work and risk associated with that enforcement.

And while offering that 2.4% aggregate payment bump, CMS also continued a 3% temporary reduction to the national standardized base payment rate to recoup what it calculates were past overpayments under the Patient-Driven Groupings Model. Advocates, including the Alliance, have disputed the data behind the adjustment.

CMS did not propose an additional permanent adjustment for 2027, but it says it will continue analyzing claims to determine whether further permanent adjustments are needed.

In other words, this is a better year-over-year payment outlook, not a clean break from the payment disputes that have shaped the industry’s recent past.

Nor does the aggregate estimate account for every cost of operating an agency. LiveWell Partners CEO Stacie Bratcher told HHCN that providers should expect increased audit costs and that the update does not keep pace with what the company pays to recruit and retain clinical staff. She also described compliance infrastructure as a core operating cost rather than overhead.

An agency can welcome the increase and still find that more staff time, legal review or administrative attention is needed to navigate heightened scrutiny. Those costs will not necessarily be distributed evenly. Providers with fewer resources to devote to compliance may have less room to absorb them.

Current operating conditions are already causing home health agencies to reduce services or close, according to Sloan. Against that backdrop, a payment increase matters, but it should not be mistaken for full financial relief.

Another reason to resist declaring the payment fight settled is that CMS has left the door open to future permanent adjustments after further claims analysis. A year without a new permanent adjustment provides breathing room, but it does not resolve the underlying debate over the agency’s methodology.

The projected aggregate payment increase seemed to spark a genuine sigh of relief among providers. But the 2.4% aggregate increase should not become the spoonful of sugar that makes the rest of the rule easier to swallow without scrutiny.