Two Rules, One Signal: What CMS is Signaling to Post-Acute Providers

The Centers for Medicare & Medicaid Services (CMS) finalized the FY 2027 hospice final rule on July 30 and released the CY 2027 home health proposed rule on July 1. Read separately, they look like ordinary annual updates. Read together, they say something more useful about the next three years.

Hospice gets a 2.3% update effective October 1, about $755 million, built from a 3.2% market basket less a -0.9 point productivity adjustment. Hospices that miss quality reporting take a 1.7% reduction instead. The aggregate cap moves to $36,174.75. Home health is proposed at a net 2.4%, roughly $420 million, its first aggregate increase in years, with a 30-day base rate of $2,092.27.

Neither number solves anything. A 2.3% hospice update and a 2.4% home health payment update do not cover what operators are absorbing in wage, benefit, and mileage costs. This is the sixth or seventh straight year the update has trailed real cost growth, and the compounding is what is quietly reshaping the industry, not any single-year figure.

Three things matter more than the rate:

1. CMS stopped arguing about your rate and started publishing your data. For six years the conversation in home health has been about the size of the cut. CMS proposed no new permanent behavioral adjustment for CY 2027, citing difficulty separating PDGM behavior from OASIS-E and prior recalibrations after 2022, and held the temporary adjustment at 3% rather than escalating it. What replaced the rate fight is a set of provisions that put provider-level data in front of referral sources, payers, families, and enforcement contractors. The hospice Service and Spending Variation Index was finalized largely as proposed, producing a score for every Medicare-certified hospice from nine claims-based measures. A Care Compare icon will flag hospices that submit no HOPE data or less than 90% of what is required, no earlier than FY 2028 and based on CY 2026 data. In home health, all enrollment revocation grounds would become retroactive to the date noncompliance began.
2. Transparency became a commercial problem rather than a compliance one. Hospices will now hand an election statement addendum to every Medicare beneficiary at admission, not only to those who ask. That document lists what the hospice considers unrelated to the terminal illness and therefore not covered, delivered to a family at the moment they have made the hardest decision of the year. Get it right and it builds credibility. Hand over a boilerplate version the admitting nurse cannot explain and you have created a complaint, a live discharge risk, and a document a plaintiff’s attorney will enjoy reading. The SSVI compounds this, because several of its utilization triggers are things a legitimate provider hits for defensible reasons: no CHC or GIP during the year, a high share of routine home care days in nursing facilities, live discharge rates above the threshold, thin weekend coverage. The non-hospice spending component is worse, since those claims are submitted by other providers, often without the hospice knowing.
3. The benefit is widening quietly, through requests for information. Both rules carry RFIs that change nothing in 2027 but signal direction: community-based palliative care under existing Medicare authority, home health palliative services, setting-specific wage indices built on BLS data rather than the borrowed hospital index, and coverage of external infusion pumps and home infusion drugs under DME. The wage index work deserves the most attention. Replacing the hospital index would redistribute revenue across markets far more than any single-year update.

What this means for home care providers

From both an operator’s P&L perspective and an advisor’s market perspective, the implications of these rules are clear. Four key themes stand out.

The $4.9 billion is the real number in the home health rule. Everyone will lead with the 2.4% increase. The line worth circling is that CMS still claims roughly $4.9 billion in 2020 through 2025 overpayments, recoups about $500 million of it in 2027, and has made no commitment about the rest. Three percent a year for several more years is the base case, not the exception. If your five-year model assumes the temporary adjustment eventually disappears, rebuild it.

The SSVI will be used by people CMS never intended. CMS positioned the index as a way to target education and oversight. That is not how a published score behaves in a competitive market. Hospital case managers, ACOs, Medicare Advantage plans, and acquirers will pull it, and some will misread it. A rural hospice that never staffs GIP because there is no contracted bed within ninety miles will score alongside a bad actor. Your defense is not a better score. It is a credible, documented explanation of your score that fits on one page and can go in front of a referral partner.

The election addendum is an intake problem disguised as a compliance requirement. Compliance teams might treat this as a template exercise. It is not. It changes the admission conversation, which means scripting, clinician training, coverage determination logic, IDG documentation, and how fast your team answers the follow-up question a family asks fifteen minutes later. October 1 is a hard date. Organizations that build this into workflow now will be set up for success. Organizations that email a PDF to admissions in late September will spend the first quarter cleaning up.

Program integrity will reshape M&A before it reshapes day-to-day operations. CMS has already implemented a six-month nationwide Medicare enrollment moratorium for new home health agencies and hospices, effective May 13, 2026, and it applies to initial enrollments and certain non-exempt changes in majority ownership. Existing enrolled providers can generally continue serving beneficiaries and billing Medicare, but new market entry, branch expansion, and transaction structures that trigger a new enrollment now carry materially more friction. That gets more important when you layer in the CY 2027 home health proposed rule’s broader enrollment provisions, including retroactive revocation for all revocation grounds, expanded denial and revocation bases tied to owners and managing employees, and tighter scrutiny of majority ownership changes. Clean enrollment history now becomes a valuation issue. A target’s ownership chain, PECOS record, CHOW/CIMO history, license status, and managing employee disclosures need to be diligence items, not closing checklist items. Clean sellers will command a premium; sellers with unresolved enrollment or ownership issues will increasingly be discounted or delayed.

To compress both rules into one sentence for a board: the money got slightly better, the scrutiny got materially worse, and the scrutiny is now visible to your referral sources.

What to do in the next twelve months:

Model the CY 2027 rates against your own CBSA mix, case mix, and LUPA distribution. The 2.4% national figure is close to meaningless at the agency level when 197 CBSAs rise, 281 fall or hold flat, and 71 sit at the 5% cap on decreases. For hospice, pull your SSVI score and rebuild each of the nine components from your own claims before someone else reads it for you.

Comment while you can. Home health comments close August 31. A specific, data-backed comment on the temporary adjustment methodology or the wage index RFI carries more weight than a form letter.

Rebuild the hospice admission conversation ahead of October 1, and audit HOPE submission completeness this quarter, since the Care Compare icon runs off CY 2026 data that you are generating right now.

Clean the enrollment file. Verify ownership records, managing employee disclosures, CHOW and CIMO history, branch and practice-location records, state licensure status, and 36-month rule exposure across every CCN. If CMS finalizes the proposed retroactive revocation policy, an old enrollment gap could become a current-year repayment exposure.

Then look further out. Model your markets against a BLS-based, setting-specific wage index, and decide whether community palliative care, home-based palliative services, or home infusion belong in your portfolio. The providers who move first will define the referral relationships before the payment mechanism is finalized.

Where outside help usually pays for itself:

Most of this can be done internally by an organization with a strong finance function, a mature compliance program, and clinical leadership with time to spare. In practice the constraint is almost always the third one. Where we most often get pulled in: rebuilding the proposed and final rates into a defensible agency-by-agency impact number; decomposing an SSVI score into the components that are structural versus correctable, and tracing non-hospice spending back to the provider relationships generating it; audit readiness, pre-bill review, ADR and appeals support at a time when more than half of hospices are managing multiple simultaneous audits; HOPE and OASIS accuracy work that audits the assessment itself rather than the submission log; intake and admission redesign; and benchmarking through HealthPivots, our proprietary analytics platform, which maps referral relationships across acute, post-acute, SNF, and Medicare Advantage.

McBee has supported home health and hospice providers for more than fifty years and serves over 3,800 provider clients nationwide. Our senior advisory team has run these P&Ls, not only studied them.

If you want to talk through what these rules mean for your organization specifically, or you would like your agency-level impact modeled before the home health final rule lands, McBee is here to help. Click here to connect with a McBee representative.

This blog is for informational and educational purposes only and does not constitute legal, compliance, regulatory, business, financial or professional advice. The information contained herein is general in nature and may not address the specific facts, circumstances, laws, regulations, or contractual obligations applicable to any particular organization or situation. While reasonable efforts have been made to ensure the accuracy of the information as of the date of publication, laws, regulations, industry standards, guidance, and best practices may change over time. Nothing in this blog should be interpreted as a promise, commitment, guarantee, or assurance regarding legal compliance, regulatory approval, risk reduction, operational performance, security, business outcomes, or any other result. Actual outcomes will depend on numerous factors, including an organization’s specific circumstances, implementation decisions, technical environment, governance practices, and applicable legal and regulatory requirements. Readers should consult their own advisors regarding their specific circumstances before making decisions or taking actions based on the information provided.

Sources: CMS-1851-F, FY 2027 Hospice Wage Index and Payment Rate Update and Hospice Quality Reporting Program Requirements final rule and CMS fact sheet (July 30, 2026). CMS-1844-P, CY 2027 Home Health Prospective Payment System proposed rule and CMS fact sheet (July 1, 2026). Home health provisions are proposed and subject to change in the final rule.