Medicare and Medicaid Programs; Calendar Year 2026 Home Health Prospective Payment System (HH PPS) Rate Update; Requirements for the HH Quality Reporting Program and the HH Value-Based Purchasing Expanded Model; Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program Updates; DMEPOS Accreditation Requirements; Provider Enrollment; and Other Medicare and Medicaid Policies

DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 405, 414, 424, 455, 484, and 498 [CMS-1828-P] RIN 0938-AV53 Medicare and Medicaid Programs; Calendar Year 2026 Home Health Prospective Payment System (HH PPS) Rate Update; Requirements for the HH Quality Reporting Program and the HH Value-Based Purchasing Expanded Model; Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program Updates; DMEPOS Accreditation Requirements; Provider Enrollment; and Other Medicare and Medicaid Policies AGENCY:

Centers for Medicare & Medicaid Services (CMS), Department of Health and Human Services (HHS).

ACTION:

Proposed rule.

SUMMARY:

This proposed rule would set forth routine updates to the Medicare home health payment rates in accordance with existing statutory and regulatory requirements. In addition, this proposed rule proposes permanent and temporary behavior adjustments and proposes to recalibrate the case-mix weights and update the functional impairment levels; comorbidity subgroups; and low-utilization payment adjustment (LUPA) thresholds for CY 2026. Lastly, this proposed rule proposes policy changes to the face-to-face encounter policy. It also proposes changes to the Home Health Quality Reporting Program (HH QRP) and the expanded Health Value-Based Purchasing (HHVBP) Model requirements. In addition, it would update the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP). Lastly it proposes: a technical change to the HH conditions of participation; updates to DMEPOS supplier conditions of payment; updates to provider and supplier enrollment requirements; and changes to DMEPOS accreditation requirements.

DATES:

To be assured consideration, comments must be received at one of the addresses provided in the ADDRESSES section, no later than 5 p.m. EDT on September 2, 2025.

ADDRESSES:

In commenting, please refer to file code CMS-1828-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed):

1. Electronically. You may (and we encourage you to) submit electronic comments on this regulation to https://www.regulations.gov . Follow the instructions under the “submit a comment” tab.

2. By regular mail. You may mail written comments to the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1828-P, P.O. Box 8013, Baltimore, MD 21244-8013.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

3. By express or overnight mail. You may send written comments via express or overnight mail to the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1828-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

For information on viewing public comments, we refer readers to the beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:

For general information about the Home Health Prospective Payment System (HH PPS), send your inquiry via email to HomeHealthPolicy@cms.hhs.gov .

For information about the Home Health Quality Reporting Program (HH QRP), send your inquiry via email to HHQRPquestions@cms.hhs.gov .

For more information about the expanded Home Health Value-Based Purchasing Model, please visit the Expanded HHVBP Model web page at https://www.cms.gov/priorities/innovation/innovation-models/expanded-home-health-value-based-purchasing-model or send your inquiry via email to HHVBPquestions@cms.hhs.gov .

Frank Whelan (410) 786-1302, for Medicare provider and supplier enrollment and DMEPOS accreditation inquiries.

Katie Parker (410) 786-0537, Emily Calvert (410) 786-4277, or Jessica Martindale (410) 786-1558 for DMEPOS Prior Authorization inquiries.

Alexander Ullman at (410) 786-9671 or DMEPOS@cms.hhs.gov , for DMEPOS Competitive Bidding Program inquiries.

For information about the Home Health Conditions of Participation, send your inquiry via email to healthandsafetyinquiries@cms.hhs.gov.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received: https://www.regulations.gov/ . Follow the search instructions on that website to view public comments.

Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a plain language summary of this rule may be found at https://www.regulations.gov/ .

Deregulation Request for Information (RFI): On January 31, 2025, President Trump issued Executive Order (E.O.) 14192 “Unleashing Prosperity Through Deregulation,” which states the Administration policy to significantly reduce the private expenditures required to comply with Federal regulations to secure America's economic prosperity and national security and the highest possible quality of life for each citizen. We would like public input on approaches and opportunities to streamline regulations and reduce administrative burdens on providers, suppliers, beneficiaries, and other stakeholders participating in the Medicare program. CMS has made available a Request for Information (RFI) at: ( https://www.cms.gov/medicare-regulatory-relief-rfi ). Please submit all comments in response to this request for information through the provided weblink.

Table of Contents

I. Executive Summary A. Purpose and Legal Authority B. Summary of the Provisions of This Proposed Rule C. Summary of the Regulatory Impact Analysis II. Home Health Prospective Payment System A. Overview of the Home Health Prospective Payment System B. Monitoring the Effects of the Implementation of the PDGM C. Proposed CY 2026 Payment Adjustments Under the HH PPS D. Proposed CY 2026 Home Health Low Utilization Payment Adjustment (LUPA) Thresholds, Functional Impairment Levels, Comorbidity Sub-Groups, and Case-Mix Weights E. Proposed CY 2026 Home Health Payment Rate Updates F. Proposed Regulation Change to Face-to-Face Encounter III. Home Health Quality Reporting Program (HH QRP) A. Background and Statutory Authority B. Summary of the Provisions of This Proposed Rule C. Quality Measures Currently Adopted for the CY 2026 HH QRP D. Proposed Removal of the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date (Patient/Resident COVID-19 Vaccine) Measure Beginning With the CY 2026 HH QRP E. Proposed Removal of Four Standardized Patient Assessment Data Elements Beginning With the CY 2027 HH QRP F. Amending the Data Non-Compliance Reconsideration Request Policy and Process Beginning With the FY 2027 HH QRP G. Updates to Requirements for OASIS All-Payer Data Submission H. Proposed HHCAHPS Survey Updates I. HH QRP Quality Measure Concepts Under Consideration for Future Years—Request for Information J. Potential Revision of the Final Data Submission Deadline Period From 4.5 Months to 45 Days—Request for Information (RFI) K. Advancing Digital Quality Measurement in the HH QRP—Request for Information L. Form, Manner, and Timing of Data Submission Under the HH QRP M. Policies Regarding Public Display of Measure Data for the HH QRP IV. The Expanded Home Health Value-Based Purchasing (HHVBP) Model A. Background B. Proposed Changes to HHVBP Measure Removal Factors C. Proposed Changes to the Expanded HHVBP Model's Applicable Measure Set D. HHVBP Quality Measure Concepts Under Consideration for Future Years—Request for Information V. Updates to the Home Health Agency CoPs To Align With the OASIS All-Payer Submission Requirements A. Statutory Authority and Background B. Updates to the Home Health Agency CoPs To Align With the OASIS All-Payer Submission Requirements (§§ 484.45(a) and 484.55(d)(1)(i)) VI. Provider Enrollment, Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Accreditation Policies, and DMEPOS Prior Authorization A. Provider Enrollment B. DMEPOS Supplier Accreditation Process C. Proposed Exemption Process for Prior Authorization of Certain DMEPOS Items (§ 414.234(c)(1) and (c)(1)(ii)) VII. DMEPOS Competitive Bidding Program A. Background B. Determining Payment Amounts and the Number of Contracts Awarded for the DMEPOS CBP C. Adjustments to SPAs D. Bid Limits and Conditions for Awarding Contracts if Savings Are Not Expected E. Revising the Definition of Item Related to Medical Supplies F. Remote Item Delivery (RID) CBP G. Payment for Continuous Glucose Monitors and Insulin Infusion Pumps H. Revising the Submission of Financial Document Requirements for the DMEPOS CBP I. Revising the CDRD Evaluation and Notification Process for the DMEPOS CBP J. Bid Surety Bond Review Process K. Tribal Exemption From Participating in the DMEPOS CBP L. Addition of a Termination Clause for the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP) Supplier Contracts M. Technical Change to § 414.408(h)(8) N. Definitions of Competition and Adjusted and Unadjusted Fee Schedule Amounts Under § 414.402 VIII. Collection of Information Requirements A. Statutory Requirement for Solicitation of Comments B. Information Collection Requirements (ICRs) IX. Regulatory Impact Analysis A. Statement of Need B. Overall Impact C. Detailed Economic Analysis D. Regulatory Review Cost Estimation E. Alternatives Considered F. Accounting Statements and Tables G. Regulatory Flexibility Act (RFA) H. Unfunded Mandates Reform Act (UMRA) I. Federalism J. Unleashing Prosperity Through Deregulation K. Conclusion X. Response to Comments I. Executive Summary

A. Purpose and Legal Authority

1. Home Health Prospective Payment System (HH PPS)

As required under section 1895(b) of the Social Security Act (the Act), this proposed rule would update the CY 2026 Medicare payment rates for home health agencies (HHAs). In this proposed rule, we include an analysis of home health utilization, as well as analysis of the difference between assumed versus actual behavior change on estimated aggregate expenditures for home health payments as a result of the change in the unit of payment to 30 days and the implementation of the Patient Driven Groupings Model (PDGM) case-mix adjustment methodology. This rule analyzes the difference between assumed versus actual behavior change on estimated aggregate expenditures and proposes permanent and temporary adjustments to the CY 2026 home health base payment rate. In addition, this rule proposes to recalibrate the PDGM case-mix weights and to update the low-utilization payment adjustment (LUPA) thresholds, functional impairment levels, and comorbidity adjustment subgroups under sections 1895(b)(4)(A)(i) and (b)(4)(B) of the Act for 30-day periods of care in CY 2026. This proposed rule proposes to update the CY 2026 fixed-dollar loss (FDL) ratio for outlier payments (so that outlier payments as a percentage of estimated total payments are projected not to exceed 2.5 percent, as required by section 1895(b)(5)(A) of the Act). Additionally, this rule proposes changes to the face-to-face encounter policy at 42 CFR 424.22(a)(1)(v) to align with section 3708 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

2. Home Health (HH) Quality Reporting Program (QRP)

In accordance with the statutory authority at section 1895(b)(3)(B)(v) of the Act, we are proposing updated quality reporting policies. We are proposing to remove the COVID-19 Vaccine: Percent of Patients Who Are Up to Date measure and the item related to the measure and corresponding data element. CMS is proposing the removal of four assessment items: one Living Situation item, two Food items, and one Utilities item. We are also proposing to revise the policy to allow for providers to submit a request for reconsideration of an initial determination of noncompliance if they can demonstrate full compliance. In very limited circumstances, HHAs can request an extension to file a reconsideration request if the HHA was affected by an extraordinary circumstance beyond the control of the HHA (that is, a natural or man-made disaster such as a cyber-attack, hurricane, tornado, or earthquake) during the 30-day reconsideration period. CMS is also proposing to implement a revised Home Health Consumer Assessment of Healthcare Providers and Systems (HHCAHPS) Survey beginning with the April 2026 sample month. This rule would also update regulatory text to account for all-payer data submission of OASIS data. We are seeking information on a change to the final data submission deadline period from 4.5 months to 45 days. We are also seeking feedback on the digital quality measurement (dQM) transition for HHAs. We aim to solicit feedback from the public on the current adoption of health information technology (IT) and standards including Fast Healthcare Interoperability Resources (FHIR), including related challenges or barriers HHAs are facing. Finally, we are seeking input on future HH QRP quality measure (QM) concepts of interoperability, cognitive function, nutrition, and patient well-being.

3. Expanded Home Health Value-Based Purchasing (HHVBP) Model

In accordance with the statutory authority at section 1115A of the Act, we are doing the following for the expanded HHVBP Model: (1) proposing a new measure removal factor for the expanded HHVBP Model applicable measure set; (2) proposing changes to the expanded HHVBP Model applicable measure set; and (3) including a request for information (RFI) related to potential future performance measure concepts.

We propose to add a new measure removal factor for the expanded HHVBP Model applicable measure set for measures that are not feasible to implement. We propose to remove three HHCAHPS Survey-based measures, to align with proposed changes to the HHCAHPS survey. We also propose the addition of four new measures. These additions include the claims-based Medicare Spending Per Beneficiary Post-Acute Care (MSPB-PAC) measure, and three OASIS-based function measures: Improvement in Bathing, Improvement in Upper Body Dressing, and Improvement in Lower Body Dressing. Due to these proposed changes to the applicable measure set, we also propose to revise the weights of the individual HHVBP measures as well as the measure categories. We also include an RFI related to potential future measure concepts for the expanded HHVBP Model.

4. Updates to the Home Health Agency CoPs To Align With the OASIS All-Payer Submission Requirements

We propose technical regulation text changes to the Home Health Conditions of Participation (CoP). These technical changes update terminology in the Home Health CoPs to further clarify that the requirement for reporting OASIS information applies to all HHA patients receiving skilled services.

5. Medicare and Medicaid Provider Enrollment

Consistent with section 1866(j) of the Act, we are proposing several Medicare provider enrollment provisions to strengthen and clarify certain aspects of the provider enrollment process. These include but are not limited to: (1) modifying grounds for denying, revoking, or deactivating a provider's or supplier's Medicare enrollment; and (2) expanding the reasons for which CMS can apply a retroactive effective date for provider and supplier revocations. These changes are necessary to help ensure that payments are made only to qualified providers and suppliers, which we believe would assist in protecting the Trust Funds and Medicare beneficiaries.

We are also proposing a technical correction to one of our Medicaid provider enrollment provisions in 42 CFR 455.416 to further clarify the scope of § 455.416(c).

6. DMEPOS Supplier Accreditation Organizations

Consistent with provisions in section 1834(a)(20) of the Act, we are proposing to revise and supplement a number of our regulations regarding DMEPOS supplier accreditation and, in particular, requirements that an organization must meet to become and remain a CMS-approved DMEPOS accrediting organization (AO). Our proposed revisions include but are not limited to: (1) requiring DMEPOS suppliers to be surveyed and reaccredited every year (as opposed to the current 3-year cycle); (2) eliminating inconsistencies among AOs in how they oversee DMEPOS suppliers; and (3) strengthening our ability to take action against poorly performing DMEPOS AOs. We believe these changes would help better ensure that DMEPOS AOs closely oversee DMEPOS suppliers for compliance with the DMEPOS quality standards.

7. DMEPOS Prior Authorization

Consistent with provisions in section 1834(a)(15) of the Act and final rule provisions published in the November 8, 2019 Federal Register titled “Medicare Program; End-Stage Renal Disease Prospective Payment System, Payment for Renal Dialysis Services Furnished to Individuals with Acute Kidney Injury, End-Stage Renal Disease Quality Incentive Program, Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Fee Schedule Amounts, DMEPOS Competitive Bidding Program (CBP) Proposed Amendments, Standard Elements for a DMEPOS Order, and Master List of DMEPOS Items Potentially Subject to a Face-to-Face Encounter and Written Order Prior to Delivery and/or Prior Authorization Requirements” (84 FR 60648), hereinafter referred to as the “2019 ESRD PPS & DMEPOS final rule,” we propose to clarify authority at § 414.234(c)(1)(ii) to exempt compliant suppliers, while also establishing notice guidelines for establishing an exemption and withdrawal of an exemption. The 2019 ERSD PPS & DMEPOS final rule created the authority at § 414.234(c)(1)(ii) to exempt suppliers from required prior authorization of DMEPOS items upon compliance with Medicare coverage, coding, and payment requirements. However, to clarify this process for exemption from prior authorization requirements, CMS is proposing to establish guidelines for granting and withdrawing exemptions. Furthermore, we are proposing to establish notification requirements to put suppliers on notice that the exemption has either been granted or withdrawn.

8. DMEPOS Competitive Bidding Program

We are proposing changes to regulations at subpart C of 42 CFR 414 we believe are necessary for the effective implementation of the DMEPOS Competitive Bidding Program (CBP) mandated by section 1847(a) of the Act.

a. Determining Payment Amounts and the Number of Contracts Awarded for the DMEPOS CBP

The purpose of this proposal is to revise both how single payment amounts (SPAs) are calculated and how CMS determines the number of contracts to award in each “competition,” which is a term that we use under the DMEPOS CBP to refer to a competitive bidding area (CBA) and product category combination.

b. Adjustments to SPAs

The purpose of this proposal is to acknowledge the challenge and uncertainty a bidder may face when factoring inflation into its bid. We believe that adding an annual increase to the SPAs to account for inflation would be consistent with Medicare making annual covered item updates for other DMEPOS items and services. This would account for inflation in the cost of doing business for suppliers submitting bids for furnishing items under a multiyear contract.

c. Bid Limits and Conditions for Awarding Contracts if Savings Are Not Expected

The purpose of this proposal is to revise the methodology used to establish bid limits and establish the conditions for determining when contracts cannot be awarded in accordance with section 1847(b)(2)(A)(iii) of the Act because the total amounts to be paid to contract suppliers in a CBA are expected to be less than the total amounts that would otherwise be paid. We believe these proposed changes would better ensure the DMEPOS CBP is responsive to rising costs over time while still ensuring alignment with the statutory requirement for achieving savings.

d. Revising the Definition of “Item” Related to Medical Supplies

The purpose of this proposal is to specify that ostomy, tracheostomy, and urological supplies are medical equipment items mandated for inclusion under the DMEPOS CBP by section 1847(a)(2)(A) of the Act.

e. Remote Item Delivery (RID) CBP

The purpose of this proposal is to create two new definitions under § 414.402 for “Remote item delivery CBP” and “Remote item delivery item” for the purpose of establishing one or more RID CBPs wherein contract suppliers would be responsible for furnishing the items and services under the product category primarily on a mail order basis to all Medicare beneficiaries regardless of where they live in the CBA, but could also furnish the items on a non-mail order basis. Any competitively bid item furnished on a non-mail order basis would also need to be furnished by a contract supplier. We are proposing that for a given product category, we could implement one nationwide RID CBP that would include all areas (all States, territories, and the District of Columbia) or we could implement multiple RID CBPs covering different regions of the country. Items included in a nationwide or regional RID CBP would be those that are typically furnished to beneficiaries from remote supplier locations that are hundreds of miles on average from the beneficiary residence where the items are delivered.

f. Payment for Continuous Glucose Monitors and Insulin Infusion Pumps

The purpose of this proposal is to make payment under the DMEPOS CBP for certain continuous glucose monitors and insulin infusion pumps and all necessary supplies and accessories on a bundled monthly rental basis. The technology of products used by beneficiaries to help manage diabetes continues to change rapidly, and without frequent and substantial servicing to ensure that the devices continue to function correctly, the beneficiary might not receive information they need to make correct diabetes treatment decisions or the dosage of insulin administered by the insulin pump could be incorrect, putting the beneficiary in imminent danger. This proposal would eliminate the need to wait 5 years to replace equipment, allowing beneficiaries to use the latest technologically updated items. Payment for continuous glucose monitors and insulin infusion pumps and all necessary supplies and accessories that are not furnished under the DMEPOS CBP would also be made on a bundled monthly rental basis in the same amounts established for continuous glucose monitors and insulin infusion pumps under the DMEPOS CBP.

g. Revising the Submission of Financial Documents for the DMEPOS CBP

The purpose of this proposal is to streamline the requirements and evaluation of the DMEPOS CBP financial standards, while still ensuring that suppliers that are offered contracts are financially stable enough to participate in the Medicare DMEPOS CBP for the duration of the contract performance period.

h. Revising the Covered Document Review Date Evaluation and Notification Process for the DMEPOS CBP

The purpose of this proposal is to streamline the process for evaluating and notifying a bidder who submitted a covered document by the covered document review date if a covered document(s) is missing.

i. Bid Surety Bond Review Process

The purpose of this proposal is to codify the bid surety bond rider process that occurred during the DMEPOS CBP round in 2021 and to correct a regulatory citation error from previous rulemaking.

j. Tribal Exemption From Participating in the DMEPOS CBP

The purpose of this proposal is to add a Tribal exception to the DMEPOS CBP regulations.

k. Addition of a Termination Clause for the DMEPOS CBP Supplier Contracts

The purpose of this proposal is to add a termination clause to the DMEPOS CBP contracts that could be utilized during a public health emergency (PHE), when CMS determines that credible evidence exists of an access problem for beneficiaries, and when CMS believes the termination of an entire DMEPOS CBP contract, the termination of a competition on a DMEPOS CBP contract, or the termination of a defined area(s) within a CBA could improve the situation for the applicable competition(s) or defined areas (for example, ZIP codes) within a CBA.

l. Technical Change to § 414.408(h)(8)

The purpose of this proposal is to make a technical change to § 414.408(h)(8) so that it correctly refers to paragraph (h)(8)(ii) instead of paragraph (h)(7)(ii).

m. Adding Definitions of Adjusted Fee Schedule, Amount Competition, and Unadjusted Fee Schedule Amount to § 414.402

The purpose of this proposal is to add definitions of “Adjusted fee schedule amount,” “Competition,” and “Unadjusted fee schedule amount” to § 414.402 for the purpose of simplifying the regulation text for subpart F.

B. Summary of the Provisions of This Proposed Rule

1. Home Health Prospective Payment System (HH PPS)

In section II.B.1. of this proposed rule, we provide monitoring and data analysis on the PDGM utilization.

In section II.C.1. of this proposed rule, we propose a permanent adjustment and a temporary adjustment to the base payment rate under the HH PPS.

In section II.D. of this proposed rule, we propose to recalibrate the CY 2026 PDGM case-mix weights and to update the low-utilization payment adjustment (LUPA) thresholds, functional impairment levels, and comorbidity adjustment subgroups.

In section II.E. of this proposed rule, we propose to update the home health wage index. We also propose to update the CY 2026 national, standardized 30-day period payment rates and the CY 2026 national per-visit payment amounts by the home health payment update percentage. The proposed home health payment update percentage for CY 2026 is 2.4 percent. Additionally, this rule proposes the CY 2026 fixed dollar loss (FDL) ratio to ensure that aggregate outlier payments are projected not to exceed 2.5 percent of the total aggregate payments, as required by section 1895(b)(5)(A) of the Act.

In section II.F. of this proposed rule, we propose changes to the face-to-face encounter policy at 42 CFR 424.22(a)(1)(v).

2. Home Health Quality Reporting Program (HH QRP)

In section III. of this proposed rule, we are proposing to remove the COVID-19 Vaccine: Percent of Patients Who Are Up to Date measure and the item related to the measure. CMS is proposing the removal of four assessment items: one Living Situation item, two Food items, and one Utilities item. CMS is also proposing to implement a revised HHCAHPS Survey beginning with the April 2026 sample month. We are also proposing to revise the policy to allow for providers to submit a request for reconsideration of an initial determination of non-compliance with the HH QRP data submission

3. Expanded Home Health Value Based Purchasing (HHVBP) Model

In section IV. of this proposed rule, we propose to add a new measure removal factor for the expanded HHVBP Model applicable measure set. This ninth measure removal factor would allow CMS to propose removal of a measure when it is no longer feasible to implement the measure specifications. We also propose changes to the expanded HHVBP Model applicable measure set and changes to measure weights. We propose to remove three HHCAHPS Survey-based measures, to align with proposed changes to the HHCAHPS survey. We also propose the addition of four new measures. These additions include the claims-based Medicare Spending Per Beneficiary Post-Acute Care (MSPB-PAC) measure, and three OASIS-based function measures: Improvement in Bathing, Improvement in Upper Body Dressing, and Improvement in Lower Body Dressing. Due to these proposed changes to the applicable measure set, we also propose to revise the weights of the individual HHVBP measures and the measure categories.

We also include an RFI related to potential future measure concepts for the expanded HHVBP Model.

4. Updates to the Home Health Agency CoPs To Align With the OASIS All-Payer Submission Requirements

In section V. of this proposed rule, we propose technical regulation text changes to the Home Health Conditions of Participation (CoP) to align with the OASIS all-payer submission requirements. These technical changes update terminology in the Home Health CoPs to further clarify that the requirement for reporting OASIS information applies to all HHA patients receiving skilled services.

5. Medicare and Medicaid Provider Enrollment

We are proposing several Medicare provider enrollment provisions to strengthen and clarify certain aspects of the provider enrollment process. These include, but are not limited to, the following:

• Modifying grounds for denying, revoking, or deactivating a provider's or supplier's Medicare enrollment.

• Expanding the reasons for which CMS can apply a retroactive effective date for provider and supplier revocations.

• Expanding the reasons for which CMS can apply a stay of enrollment.

• Requiring providers and suppliers to report any adverse legal actions imposed against them, their owners, their managers, etc. within 30 days instead of the current 90 days.

We believe these revisions would help keep unqualified providers and suppliers out of the Medicare program, which, in turn would prevent improper Medicare payments to such parties.

6. DMEPOS Supplier Accreditation Organizations

DMEPOS suppliers are required to be accredited by a CMS-approved accrediting organization to enroll in and bill Medicare. The purpose of accreditation is to confirm, typically through an on-site survey of the supplier, that the supplier meets the DMEPOS quality standards. Regulations promulgating our accreditation requirements were enacted in 2006 but have not been updated since then. We are concerned there may be instances where: (1) AOs are accrediting DMEPOS suppliers that do not meet the quality standards; and (2) DMEPOS suppliers are falling out of compliance with the quality standards (sometimes for extended periods) after becoming accredited. To enhance our ability to ensure that AOs are performing DMEPOS accreditation functions effectively and thoroughly, including verifying suppliers' compliance with the quality standards, we are proposing to add a number of provisions to our DMEPOS accreditation regulations. Among our proposed provisions are:

• Requiring DMEPOS suppliers to be surveyed and reaccredited every year (as opposed to the current 3-year cycle).

• Reducing inconsistencies among AOs in how they oversee DMEPOS suppliers.

• Requiring AOs to furnish more detailed information to CMS when applying or reapplying for approval to become or remain a DMEPOS AO.

• Facilitating greater CMS oversight of the DMEPOS AOs.

We believe these and other changes to the DMEPOS accreditation process would help ensure that unqualified DMEPOS suppliers are not accredited and do not, in turn, receive Medicare payments.

7. DMEPOS Prior Authorization

In section V.C. of this proposed rule, we propose to establish guidelines for granting and withdrawing exemptions from mandatory prior authorization requirements for certain DMEPOS suppliers.

8. DMEPOS Competitive Bidding

a. Determining Payment Amounts and the Number of Contracts Awarded for the DMEPOS CBP

Currently SPAs for the lead item (defined under § 414.402 as the item in the product category with the highest total allowed charges nationwide) are calculated using the maximum winning bid submitted by bidders whose composite bids for the product category that includes the lead item are equal to or below the pivotal bid for that product category. We are proposing to revise this calculation to use the 75th percentile of winning bids for the lead item by bidders whose composite bids for the product category that includes the lead item are equal to or below the pivotal bid for that product category. We are also proposing to change the way the SPAs are calculated for the non-lead items in a product category in certain CBAs. Currently, the ratio multiplied by the SPA for the lead item to calculate the SPA for the non-lead item is based on the average of the 2015 fee schedule amounts for all areas (that is, all states, the District of Columbia, Puerto Rico, and the United States Virgin Islands) for the non-lead item divided by the average of the 2015 fee schedule amounts for all areas for the lead item. This formula uses average fee schedule amounts rather than fee schedule amounts for specific areas, which results in cases where the SPA for a

b. Adjustments to SPAs

We are proposing to apply an annual update factor to SPAs, starting with year two of the DMEPOS CBP contracts.

c. Bid Limits and Conditions for Awarding Contracts if Savings Are Not Expected

We are proposing to amend 42 CFR 414.414(f) so contracts could be awarded in a CBA if the amounts to be paid are no greater than 110 percent of the amounts that would otherwise be paid for the items. This rule clarifies that the amounts that would otherwise be paid include payment amounts adjusted in accordance with § 414.210(g). This rule also proposes to modify 42 CFR 414.412(b) to establish bid limits both for items included in the CBP for the first time and for items that have previously been included in the CBP. For items included in the CBP for the first time, the bid limits would be the amounts otherwise paid for the items. For items that have previously been included in the CBP, the bid limits would be the most recent SPA for the items plus 10 percent, or if it has been more than a year since the SPA was last in effect, the inflation-adjusted SPA plus 10 percent. However, we are proposing that in no event would the bid limit be allowed to exceed the unadjusted fee schedule amount. In addition, this rule proposes a technical correction to add reference to subpart Q (“Payment for Lymphedema Compression Treatment Items”) to 42 CFR 414.414(f).

d. Payment for Continuous Glucose Monitors and Insulin Infusion Pumps

We are proposing to make payment under the DMEPOS CBP for certain continuous glucose monitors and insulin infusion pumps and all necessary supplies and accessories on a bundled monthly rental basis. We are proposing that payment for continuous glucose monitors and insulin infusion pumps and all necessary supplies and accessories that are not furnished under the DMEPOS CBP would also be made on a bundled monthly rental basis with payments limited to the amounts established for continuous glucose monitors and insulin infusion pumps under the DMEPOS CBP.

e. Revising the Definition of “Item” as Related to Medical Supplies

We are proposing to revise the definition of “item” at § 414.402 to clarify that section 1847(a)(2) of the Act includes ostomy, tracheostomy, and urological supplies as “items” subject to the DMEPOS CBP. We are proposing that “medical supplies” under this section is a category of items separate from durable medical equipment that includes ostomy, tracheostomy, and urological supplies.

f. Remote Item Delivery (RID) CBP

We are proposing to create two new definitions under § 414.402 for the purpose of establishing a RID CBP(s) wherein contract suppliers would be required to furnish the items primarily on a mail order basis under the product category to all Medicare beneficiaries regardless of where they live in the CBA. While we expect that the majority of items would be furnished on a mail order basis, a RID competition would not exclude items in the product category that are furnished on a non-mail order basis. Items included in a RID CBP would be those that are typically furnished to beneficiaries from remote supplier locations that are hundreds of miles on average from the beneficiary residence where the items are delivered.

g. Revising the Submission of Financial Document Requirements for the DMEPOS CBP

We are proposing to no longer require the submission of a tax return extract, income statement, balance sheet, or statement of cash flows for the purpose of implementing the financial standards mandated by section 1847(b)(2)(A)(ii) of the Act. This proposal would reduce burden for suppliers submitting bids under the DMEPOS CBP. However, we are proposing to continue requiring suppliers to submit a credit report with a numerical credit score and/or rating from one of the four approved credit reporting agencies during the bid window, and by the CDRD if the supplier wants to be eligible for the process for reviewing covered documents. Additionally, we are proposing to continue using a five-tier scoring system in the evaluation of the credit report with a numerical credit score and/or rating, which will be utilized to establish a financial score that will indicate if a supplier is financially stable enough to participate in the Medicare DMEPOS CBP for the duration of the contract performance period. We are also proposing to no longer use a supplier's financial score to assist in determining the capacity to assign to each supplier to meet projected beneficiary demand. Furthermore, we are proposing to have suppliers attest to the fact that they meet the small supplier threshold in the DMEPOS Bidding System (DBidS), or any successor system, if applicable.

h. Revising the CDRD Evaluation and Notification Process for the DMEPOS CBP

Since the inception of the DMEPOS CBP, when a bidder has submitted at least one covered document by the CDRD, CMS has notified the bidder within 90 days after the CDRD if they were missing a covered document by the close of the bid window or if a covered document was missing by the CDRD. We are proposing that when a bidder has submitted at least one covered document by the CDRD, CMS will notify the bidder within 90 days after the CDRD if they have any missing covered document(s) by the close of the bid window. The supplier would have 10 days after such notification to provide the missing covered document(s).

i. Bid Surety Bond Review Process

CMS applied a bid surety bond rider process during bid evaluation for the DMEPOS CBP round in 2021, and we are now proposing to codify this process in regulation for all future rounds. Additionally, we are proposing to correct a technical error in 42 CFR 414.412(g) that happened as a result of a paragraph redesignation in 83 FR 57072.

j. Tribal Exemption From Participating in the DMEPOS CBP

We are proposing to add an exception to the DMEPOS CBP that would allow Medicare payment to Indian Health Service (IHS) and tribally operated facilities and suppliers as noncontract suppliers to furnish competitively bid items and services to American Indian/Alaska Native (AI/AN) Medicare beneficiaries who reside in a CBA during a round of the DMEPOS CBP.

k. Addition of a Termination Clause for the DMEPOS CBP Supplier Contracts

We are proposing in § 414.422 to have the option to unilaterally terminate or modify each applicable DMEPOS CBP supplier contract to allow any Medicare enrolled DMEPOS supplier to furnish the applicable items and services to Medicare beneficiaries if CMS determines that due to a PHE, contract suppliers are unable to furnish certain items and services to beneficiaries in certain areas impacted by a PHE (PHE-impacted area) as required under their respective DMEPOS CBP supplier contracts.

CMS is proposing in § 414.422 to have the option to remove items and services furnished in a PHE-impacted areas from the DMEPOS CBP when all of the following qualifying criteria are met: (1) he Secretary declares a PHE; (2) CMS determines that verifiable evidence exists of a DMEPOS access problem for beneficiaries for a certain competition or defined area(s) within the competition's CBA; (3) CMS determines that awarding additional DMEPOS CBP supplier contracts, per § 414.414(i), would not address the access concerns; and (4) CMS determines terminating or modifying each impacted DMEPOS CBP supplier contract to exclude certain competition(s) or defined area(s) within the competition's CBA from the DMEPOS CBP would alleviate access concerns.

After termination and/or modification of all applicable DMEPOS CBP supplier contracts, CMS is proposing in § 414.422 to revert back to the general fee-for-service program requirements set forth in 42 CFR part 414 Subpart D for the applicable competition(s) or defined area(s) within a CBA.

l. Technical Change to § 414.408(h)(8)

We are proposing to make a technical change to § 414.408(h)(8) so that it correctly refers to paragraph (h)(8)(ii) instead of paragraph (h)(7)(ii).

m. Adding Definitions of Adjusted Fee Schedule Amount, Competition, and Unadjusted Fee Schedule Amount to § 414.402

The purpose of this proposal is to add definitions of “Adjusted fee schedule amount,” “Competition,” and “Unadjusted fee schedule amount” to § 414.402 for the purpose of simplifying the regulation text for subpart F.

C. Summary of the Regulatory Impact Analysis

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BILLING CODE 4120-01-C II. Home Health Prospective Payment System

A. Overview of the Home Health Prospective Payment System

1. Statutory Background

Section 1895(b)(1) of the Act requires the Secretary to establish a Home Health Prospective Payment System (HH PPS) for all costs of home health services paid under Medicare. Section 1895(b)(2)(A) of the Act requires that, in defining a prospective payment amount, the Secretary shall consider an appropriate unit of service and the number, type, and duration of visits provided within that unit, potential changes in the mix of services provided within that unit and their cost, and a general system design that provides for continued access to quality services. In accordance with the statute, as amended by the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), we issued a final rule which appeared in the July 3, 2000, Federal Register (65 FR 41128) to implement the HH PPS legislation.

Section 5201(c) of the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171, enacted February 8, 2006) added new section 1895(b)(3)(B)(v) to the Act, requiring home health agencies (HHAs) to submit data for purposes of measuring health care quality, and linking the quality data submission to the annual applicable home health payment update percentage increase. This data submission requirement is applicable for CY 2007 and each subsequent year. Pursuant to section 1895(b)(3)(B)(v)(I) of the Act, if an HHA does not submit quality data, the home health market basket percentage increase is reduced by 2 percentage points. In the November 9, 2006, Federal Register (71 FR 65935), we issued a final rule to implement the pay-for-reporting requirement of the DRA, which was codified at § 484.225(h) and (i) in accordance with the statute. The pay-for-reporting requirement was implemented on January 1, 2007.

Section 51001(a)(1)(B) of the Bipartisan Budget Act of 2018 (BBA of 2018) (Pub. L. 115-123) amended section 1895(b) of the Act to require a change to the home health unit of payment to 30-day periods beginning January 1, 2020. Section 51001(a)(2)(A) of the BBA of 2018 added a new subclause (iv) under section 1895(b)(3)(A) of the Act, requiring the Secretary to calculate a standard prospective payment amount (or amounts) for 30-day units of service furnished that end during the 12-month period beginning January 1, 2020, in a budget neutral manner, such that estimated aggregate expenditures under the HH PPS during CY 2020 are equal to the estimated aggregate expenditures that otherwise would have been made under the HH PPS during CY 2020 in the absence of the change to a 30-day unit of service. Section 1895(b)(3)(A)(iv) of the Act requires that the calculation of the standard prospective payment amount (or amounts) for CY 2020 be made before the application of the annual update to the standard prospective payment amount as required by section 1895(b)(3)(B) of the Act.

Additionally, section 1895(b)(3)(A)(iv) of the Act requires that in calculating the standard prospective payment amount (or amounts), the Secretary must make assumptions about behavior changes that could occur as a result of the implementation of the 30-day unit of service under section 1895(b)(2)(B) of the Act and case-mix adjustment factors established under section 1895(b)(4)(B) of the Act. Section 1895(b)(3)(A)(iv) of the Act further requires the Secretary to provide a description of the behavior assumptions made in notice and comment rulemaking. CMS finalized these behavior assumptions in the CY 2019 HH PPS final rule with comment period (83 FR 56461).

Section 51001(a)(2)(B) of the BBA of 2018 also added a new subparagraph (D) to section 1895(b)(3) of the Act. Section 1895(b)(3)(D)(i) of the Act requires the Secretary annually to determine the impact of differences between assumed behavior changes, as described in section 1895(b)(3)(A)(iv) of the Act, and actual behavior changes on estimated aggregate expenditures under the HH PPS with respect to years beginning with 2020 and ending with 2026. Section 1895(b)(3)(D)(ii) of the Act requires the Secretary, at a time and in a manner determined appropriate, through notice and comment rulemaking, to provide for one or more permanent increases or decreases to the standard prospective payment amount (or amounts) for applicable years, on a prospective basis, to offset for such increases or decreases in estimated aggregate expenditures, as determined under section 1895(b)(3)(D)(i) of the Act. Additionally, section 1895(b)(3)(D)(iii) of the Act requires the Secretary, at a time and in a manner determined appropriate, through notice and comment rulemaking, to provide for one or more temporary increases or decreases to the payment amount for a unit of home health services for applicable years, on a prospective basis, to offset for such increases or decreases in estimated aggregate expenditures, as determined under section 1895(b)(3)(D)(i) of the Act. Such a temporary increase or decrease shall apply only with respect to the year for which such temporary increase or decrease is made, and the Secretary shall not take into account such a temporary increase or decrease in computing the payment amount for a unit of home health services for a subsequent year. Finally, section 51001(a)(3) of the BBA of 2018 amends section 1895(b)(4)(B) of the Act by adding a new clause (ii) to require the Secretary to eliminate the use of therapy thresholds in the case-mix system for CY 2020 and subsequent years.

Division FF, section 4136 of the Consolidated Appropriations Act, 2023 (CAA, 2023) (Pub. L. 117-328) amended section 1834(s)(3)(A) of the Act to require that, beginning with 2024, the separate payment for furnishing negative pressure wound therapy (NPWT) be for just the device and not for nursing and therapy services. Payment for nursing and therapy services are to be included as part of payments under the HH PPS. The separate payment for 2024 was required to be equal to the supply price used to determine the relative value for the service under the Medicare Physician Fee Schedule (as of January 1, 2022) for the applicable disposable device updated by the percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U). The separate payment for 2025 and each subsequent year is to be the payment amount for the previous year updated by the percentage increase in the CPI-U (United States city average) for the 12-month period ending in June of the previous year reduced by the productivity adjustment as described in section 1886(b)(3)(B)(xi)(II) of the Act for such year. The CAA, 2023 also added section 1834(s)(4) of the Act to require that beginning with 2024, as part of submitting claims for the separate payment, the Secretary shall accept, and process claims submitted using the type of bill that is most commonly used by home health agencies to bill services under a home health plan of care.

2. Current System for Payment of Home Health Services

For home health periods of care beginning on or after January 1, 2020, Medicare makes payment under the HH PPS on the basis of a national, standardized 30-day period payment rate that is adjusted for case-mix and area wage differences in accordance with section 51001(a)(1)(B) of the BBA of 2018. The national, standardized 30-day period payment rate includes

To better align payment with patient care needs and to better ensure that clinically complex and ill beneficiaries have adequate access to home health care, in the CY 2019 HH PPS final rule with comment period (83 FR 56406), we finalized case-mix methodology refinements, including the removal of therapy thresholds, through the Patient-Driven Groupings Model (PDGM) for home health periods of care beginning on or after January 1, 2020. The PDGM did not change eligibility or coverage criteria for Medicare home health services, and as long as the individual meets the criteria for home health services as described at 42 CFR 409.42, the individual can receive Medicare home health services, including therapy services. For more information about the role of therapy services under the PDGM, we refer readers to the Medicare Learning Network (MLN) Matters article SE20005 available at https://www.cms.gov/regulations-and-guidanceguidancetransmittals2020-transmittals/se20005 . To adjust for case-mix for 30-day periods of care beginning on and after January 1, 2020, the HH PPS uses a 432-category case-mix classification system to assign patients to a home health resource group (HHRG) using patient characteristics and other clinical information from Medicare claims and the Outcome and Assessment Information Set (OASIS) instrument. These 432 HHRGs represent the different payment groups based on five main case-mix categories under the PDGM, as shown in figure 1. Each HHRG has an associated case-mix weight that is used in calculating the payment for a 30-day period of care. For periods of care with visits less than the low-utilization payment adjustment (LUPA) threshold for the HHRG, Medicare pays national per-visit rates based on the discipline(s) providing the services. Medicare also adjusts the national standardized 30-day period payment rate for certain intervening events that are subject to a partial payment adjustment. For certain cases that exceed a specific cost threshold, an outlier adjustment may also be available.

Under this case-mix methodology, case-mix weights are generated for each of the different PDGM payment groups by regressing resource use for each of the five categories (admission source, timing, clinical grouping, functional impairment level, and comorbidity adjustment) using a fixed effects model. A detailed description of each of the case-mix variables under the PDGM have been described previously, and we refer readers to the CY 2021 HH PPS final rule (85 FR 70303 through 70305) for further information.

BILLING CODE 4120-01-P Figure 1: Case-Mix Variables in the PDGM

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BILLING CODE 4120-01-C B. Monitoring the Effects of the Implementation of the PDGM

1. Routine PDGM Monitoring

CMS routinely analyzes Medicare home health benefit utilization, including but not limited to, overall total 30-day periods of care and average periods of care per HHA user; distribution of the type of visits in a 30-day period of care; the percentage of periods that receive the LUPA; estimated costs; the percentage of 30-day periods of care by clinical group, comorbidity adjustment, admission source, timing, and functional impairment level; the proportion of 30-day periods of care with and without any therapy visits, nursing visits, and/or aide/social worker visits, and monitoring of home health visits using telecommunications technology and remote patient monitoring. For the monitoring included in this rule, we examine simulated data for CYs 2018 and 2019 and actual data for CYs 2020, 2021, 2022, 2023, and 2024 for 30-day periods of care. We refer readers to the CY 2022 HH PPS final rule ( 86 FR 35881 ) for discussion about simulated data for CYs 2018 and 2019.

(a) Utilization

Table 2 shows the overall utilization of home health services. This data indicates the average number of 30-day periods of care per unique HHA beneficiary is higher in CY 2024 compared to CYs 2021, 2022, and 2023. The data also indicates that the number of 30-day periods of care decreased between CY 2018 and CY 2024. Table 3 shows the average utilization of visits per 30-day period of care by home health discipline. Table 4 shows the proportion of 30-day periods of care that are LUPAs and the average number of visits per discipline of those LUPA 30-day periods of care over time. The data show a decreasing trend in the average number of visits per 30-day period and average number of visits per discipline for LUPA 30-day periods of care between CY 2018 and CY 2024.

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(b) Analysis of 2023 Cost Report Data for 30-Day Periods of Care

In the CY 2025 HH PPS proposed rule (89 FR 55320), we provided a summary of analysis on FY 2022 HHA cost report data, as this was the most recent and complete cost report data at the time of rulemaking, and CY 2023 claims to estimate 30-day period of care costs. Our analysis showed that the CY 2023 national, standardized 30-day period payment rate of $2,010.69 was approximately 32 percent more than the estimated CY 2023 estimated 30-day period cost of $1,527.23.

Using this same process in this proposed rule to compare home health payment to costs, we examined 2023 HHA Medicare cost reports (CMS Form 1728-20, OMB No. 0938-0222), as this is the most recent and complete cost report data at the time of rulemaking. We also examined CY 2024 home health claims to estimate 30-day period of care costs. We excluded LUPAs and partial payment adjustments when calculating the average number of visits. The 2023 average NRS costs per visit is $4.58. To update the estimated 30-day period of care costs, we begin with the 2023 average costs per visit with NRS for each discipline and multiply that amount by the CY 2024 home health payment update percentage of 3.0 percent (or a home health payment update factor of 1.03). That amount for

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The CY 2024 national standardized 30-day period payment rate was $2,057.35, which is approximately 33 percent more than the CY 2024 estimated 30-day period cost of $1,548.39. Moreover, as shown in table3 in this proposed rule, HHAs have reduced visits under PDGM in CY 2024.

(c) Clinical Groupings and Comorbidities

Each 30-day period of care is grouped into one of 12 clinical groups, which describes the primary reason for which a patient is receiving home health services under the Medicare home health benefit. The clinical grouping is based on the principal diagnosis reported on the home health claim. Table 6 shows the distribution of the 12 clinical groups over time.

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Thirty-day periods of care receive a comorbidity adjustment category based on certain secondary diagnoses reported on home health claims. These diagnoses are based on a home health specific list of clinically and statistically significant secondary diagnosis subgroups with similar resource use. We refer readers to section II.D. of this proposed rule and the CY 2020 HH PPS final rule with comment period ( 84 FR 60493 ) for further information on the comorbidity adjustment categories. Home health 30-day periods of care can receive a low or a high comorbidity adjustment, or no comorbidity adjustment. Table 7 shows the distribution of 30-day periods of

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(d) Admission Source and Timing

Each 30-day period of care is classified into one of two admission source categories—community or institutional, depending on what healthcare setting was utilized in the 14 days prior to receiving home health care. Thirty-day periods of care for beneficiaries with any inpatient acute care hospitalizations, inpatient psychiatric facility (IPF) stays, skilled nursing facility (SNF) stays, inpatient rehabilitation facility (IRF) stays, or long-term care hospital (LTCH) stays within 14-days prior to a home health admission are designated as institutional admissions. The institutional admission source category also includes patients that had an acute care hospital stay during a previous 30-day period of care and within 14 days prior to the subsequent, contiguous 30-day period of care and for which the patient was not discharged from home health and readmitted. All other 30-day periods of care would be designated as community admissions.

Thirty-day periods of care are classified as “early” or “late” depending on when they occur within a sequence of 30-day periods of care. The first 30-day period of care is classified as early and all subsequent 30-day periods of care in the sequence (second or later) are classified as late. A subsequent 30-day period of care would not be considered early unless there is a gap of more than 60 days between the end of one previous period of care and the start of another. Information regarding the timing of a 30-day period of care comes from Medicare home health claims data and not the OASIS assessment to determine if a 30-day period of care is “early” or “late”. Table8 shows the distribution of 30-day periods of care by admission source and period timing.

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(e) Functional Impairment Level

Each 30-day period of care is placed into one of three functional impairment levels (low, medium, or high) based on responses to certain OASIS functional items associated with grooming, bathing, dressing, ambulating, transferring, and risk for hospitalization. The specific OASIS items that are used for the functional impairment level are found in table 7 in the CY 2020 HH PPS final rule with comment period ( 84 FR 60490 ). Responses to these OASIS items are grouped together into response categories with similar resource use and each response category has associated points. A more detailed description as to how these response categories were established can be found in the technical report, “Overview of the Home Health Groupings Model” posted on the HHA web page. 1 The sum of these points results in a functional impairment score used to group 30-day periods of care into a functional impairment level with similar resource use. The scores associated with the functional impairment levels vary by clinical group to account for differences in resource utilization. A patient's functional impairment level remains the same for the first and second 30-day periods of care unless there is a significant change in condition that warrants an “other follow-up” assessment prior to the second 30-day

1 https://www.cms.gov/medicare/payment/prospective-payment-systems/home-health/home-health-patient-driven-groupings-model .

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(f) Therapy and Non-Therapy Visits

Beginning in CY 2020, section 1895(b)(4)(B)(ii) of the Act eliminated the use of therapy thresholds in calculating payments for CY 2020 and subsequent years. Prior to implementation of the PDGM, HHAs could receive an adjustment to payment based on the number of therapy visits provided during a 60-day episode of care. We examined the proportion of actual 30-day periods of care with and without therapy visits. To be covered as skilled therapy, the services must require the skills of a qualified therapist (that is, PT, OT, or SLP) or qualified therapist assistant and must be reasonable and necessary for the treatment of the patient's illness or injury. As shown in table 3, we monitor the number of visits per 30-day period of care by each home health discipline. Any 30-day period of care can include both therapy and non-therapy visits. If any 30-day period of care consisted of only visits for PT, OT, or SLP, then this 30-day period of care is considered “therapy only”. If any 30-day period of care consisted of only visits for skilled nursing, home health aide, or social worker, then this 30-day period of care is considered “no therapy”. If any 30-day period of care consisted of at least one therapy visit and one non-therapy, then this 30-day period of care is considered “therapy + non-therapy”. Table 10 shows the proportion of 30-day periods of care with only therapy visits, at least one therapy visit and one non-therapy visit, and no therapy visits. Figure 2 shows the proportion of 30-day periods of care by the number of therapy visits (excluding zero) provided during 30-day periods of care.

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Figures 2 and 3 indicate there have been changes in the distribution of both therapy and non-therapy visits in CY 2024 compared to CY 2023. For example, the proportion of 30-day periods with one through five therapy visits during a 30-day period increased in CY 2024 compared to prior years. Comparing therapy utilization from before the PDGM (CYs 2018 and 2019) to after the implementation of the PDGM (CYs 2020-2024), we also see an overall decline in therapy visits across all clinical groups, as shown in Figure 3.

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BILLING CODE 4120-01-C We also examined the proportion of 30-day periods of care with and without skilled nursing, social work, or home health aide visits. Table 11 shows the number of 30-day periods of care with only skilled nursing visits, at least one skilled nursing visit and one other visit type (therapy or non-therapy), and no skilled nursing visits. Table 12 shows the number of 30-day periods of care with and without home health aide or social worker visits.

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(g) Home Health Services Using Telecommunications Technology

As discussed in the CY 2023 final rule ( 87 FR 66858 ), we began collecting data on the use of telecommunications technology used during a home health period using three G-codes reported on home health claims. Collecting data on services furnished via telecommunications technology on claims allows CMS to analyze the characteristics of patients using services provided remotely. The monitoring discussion illustrates which services are most frequently furnished via telecommunication technology and generally how long remote patient monitoring is utilized.

We began collecting this information from HHAs on a voluntary basis on January 1, 2023, and have required this information to be reported on claims starting on July 1, 2023 ( 87 FR 66858 ). The three G-codes help identify when home health services are furnished using synchronous telemedicine rendered via a real-time two-way audio and video telecommunications system (G0320); synchronous telemedicine rendered via telephone or other real-time interactive audio-only telecommunications systems (G0321); and the collection of physiologic data digitally stored and/or transmitted by the patient to the home health agency, that is, remote patient monitoring (G0322). We capture the usage and length of remote patient monitoring using the start date of the remote patient monitoring and the number of days of monitoring indicated on the claim. We also looked at the disciplines most often providing remote patient monitoring. We examined the utilization of telecommunications technology devices during a home health period and remote patient monitoring by looking at home health claims that included the three G-codes. Tables 13 and 14 shows that the use of telecommunications services reported on CY 2024 home health claims are low (roughly 2 percent of all CY 2024 claims) and are mainly associated with skilled nursing.

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We will continue to monitor the provision of home health services, including any changes in the number and duration of home health visits, composition of the disciplines providing such services, telecommunications technology used during home health periods, and overall home health payments to determine if refinements to the case-mix adjustment methodology or other policies may be needed in the future.

C. Proposed CY 2026 Payment Adjustments Under the HH PPS

1. Proposed Behavior Adjustments Under the HH PPS

a. Background

As discussed in section II.A.1. of this proposed rule, starting in CY 2020, the Secretary was required by section 1895(b)(2)(B) of the Act to change the unit of payment under the HH PPS from a 60-day episode of care to a 30-day period of care. CMS was also required to make assumptions about behavior changes that could occur as a result of the implementation of the 30-day unit of payment and the case-mix adjustment factors that eliminated the use of therapy thresholds. In the CY 2019 HH PPS final rule with comment period (83 FR 56455), we finalized three behavior change assumptions which were also described in the CY 2022 and 2023 HH PPS rules (86 FR 35890, 87 FR 37614, and 87 FR 66795 through 66796). In the CY 2020 HH PPS final rule with comment period (84 FR 60519), we included these behavior change assumptions in the calculation of the 30-day budget neutral payment amount for CY 2020, finalizing a negative 4.36 percent behavior change assumption adjustment (“assumed behaviors”). We did not propose any changes for CYs 2021 and 2022 related to the behavior change assumptions finalized in the CY 2019 HH PPS final rule with comment period, or to the negative 4.36 percent behavior change assumption adjustment, finalized in the CY 2020 HH PPS final rule with comment period.

In the CY 2023 HH PPS final rule (87 FR 66796), we stated that we had concluded, based on our annual monitoring at that time, that the three expected behavior changes did in fact occur as a result of the implementation of the PDGM and that other behaviors, such as changes in the provision of therapy and changes in functional impairment levels, had also occurred. We also reminded readers that in the CY 2020 HH PPS final rule with comment period (84 FR 60513), we stated we interpret actual behavior changes to encompass behavior changes that were previously outlined as assumed by CMS, and other behavior changes not identified at the time we established the budget-neutral 30-day payment rate for CY 2020. In the CY 2023 HH PPS final rule (87 FR 66796), we provided supporting evidence that indicated the number of therapy visits declined in CYs 2020 and 2021, as well as a slight decline in therapy visits beginning in CY 2019 after the finalization of the removal of therapy thresholds, but prior to implementation of the PDGM. In section II.B.1. of the CY 2025 HH PPS proposed rule (89 FR 55318), our analysis continued to show the actual 30-day periods are similar overall to the simulated 30-day periods as well as a continued decline in therapy visits, indicating that HHAs changed their behavior to reduce therapy visits. Although the analysis demonstrates evidence of individual behavior changes (for example, in the volume of visits for LUPAs, therapy sessions, etc.), we use the entirety of the behaviors in order to calculate estimated aggregate expenditures. The law instructs us to ensure that estimated aggregate expenditures under the PDGM are equal to the estimated aggregate expenditures that otherwise would have been made under the prior system.

Section 4142(a) of the CAA, 2023 required CMS to present, to the extent practicable, a description of the actual behavior changes occurring under the HH PPS from CYs 2020 through 2026. This subsection of the CAA, 2023 also required CMS to provide datasets underlying the simulated 60-day episodes and discuss and provide time for stakeholders to provide input on and ask questions about the payment rate development for CY 2023. CMS complied with these requirements by posting online both the supplemental limited data set (LDS) and descriptive files and the description of actual behavior changes that affected CY 2023 payment rate development. Additionally, on March 29, 2023, CMS conducted a webinar entitled “Medicare Home Health Prospective Payment System (HH PPS) Calendar Year (CY) 2023 Behavior Change Recap, 60-Day Episode Construction Overview, and Payment Rate Development.” The webinar was open to the public and discussed the actual behavior changes that occurred upon implementation of the PDGM; our approach used to construct simulated 60-day episodes using 30-day periods; payment rate development for CY 2023; and information on the supplemental data files containing information on the simulated 60-day episodes and actual 30-day periods used in calculating the permanent adjustment to the payment rate. Materials from the webinar, including the presentation and the CY 2023 descriptive statistics from the supplemental LDS files containing information on the number of simulated https://www.cms.gov/medicare/payment/prospective-payment-systems/home-health/home-health-patient-driven-groupings-model .

b. Method to Annually Determine the Impact of Differences Between Assumed Behavior Changes and Actual Behavior Changes on Estimated Aggregate Expenditures

In the CY 2023 HH PPS final rule (87 FR 66804), we finalized the methodology to evaluate the impact of the differences between assumed and actual behavior changes on estimated aggregate expenditures. In the CY 2024 HH PPS final rule (88 FR 77687 through 77688), we provided an overview of the methodology with detailed instructions for each step.

Under the prior 153-group system (and the first three years for assessments associated with the PDGM completed prior to CY 2023), HHAs submitted the Outcome and Assessment Information Set (OASIS) instrument version D. However, OMB approved an updated version of the OASIS instrument, OASIS-E under OMB control number 0938-1279, 2 on November 30, 2022, effective January 1, 2023. Therefore, in the CY 2025 HH PPS final rule (89 FR 88364), we finalized two additional methodological assumptions related to mapping and imputation of OASIS-D responses from OASIS-E. We refer readers to the CY 2024 and CY 2025 HH PPS final rules for further information about the methodology.

2 The current expiration date for this information collection request is December 31, 2027.

c. Calculating Permanent and Temporary Payment Adjustments

To adjust the base payment rate based on increases or decreases in estimated aggregate expenditures that result from differences between assumed behavior changes and actual behavior changes for 2020 through 2026, we calculate one or more permanent prospective adjustments by calculating the percent change between the actual 30-day base payment rate and the recalculated 30-day base payment rate. This percent change is converted into an adjustment factor and applied in the annual rate update process.

To account for increases or decreases in estimated aggregate expenditures that result from differences between assumed behavior changes and actual behavior changes from 2020 through 2026, we calculate one or more temporary prospective adjustments by calculating the dollar amount difference between the estimated aggregate expenditures from all 30-day periods using the recalculated 30-day base payment rate, and the aggregate expenditures for all 30-day periods using the actual 30-day base payment rate for each of those years once data is available (87 FR 66804). In other words, when determining the dollar amount of aggregate expenditures in prior years that we must offset in future years, we use the full dataset of actual 30-day periods using both the actual and recalculated 30-day base payment rates to ensure that the utilization and distribution of claims are the same. In accordance with section 1895(b)(3)(D)(iii) of the Act, each temporary adjustment applies prospectively but, as its name suggests, only with respect to the year for which such temporary increase or decrease is made. Therefore, after we determine the dollar amount we plan to reconcile in a given year, we calculate a temporary adjustment factor to be applied to the base payment rate for that year. The temporary adjustment factor is based on an estimated number of 30-day periods in the next year using historical data trends, and as applicable, controls for any permanent adjustment factor, case-mix weight recalibration neutrality factor, wage index budget neutrality factor, and the home health payment update. The temporary adjustment factor is applied last since the adjustment applies only to the respective year. That is, the temporary adjustment is not permanently fixed into future base payment rates. We refer readers to the CY 2024 HH PPS final rule (88 FR 77689 through 77694) for analysis of CYs 2020 through 2022 claims and the CY 2025 HH PPS final rule (89 FR 88366 through 88369) for analysis of CY 2023 claims. Additionally, at the end of this section we provide a summary table for the permanent adjustment and temporary dollar amounts calculated for each year.

d. CY 2024 Preliminary Claims Results

We will continue the practice of using the most recent complete home health claims data available at the time of rulemaking. While the CY 2024 analysis presented in this proposed rule uses the most complete data available at the time, it is considered preliminary and, as more data become available from the latter half of CY 2024, we would update our analysis in the final rule. The CY 2026 final rule would use the complete CY 2024 data for determining any permanent and temporary adjustments needed to the CY 2026 payment rate. However, while the claims data and the permanent and temporary adjustments results would be considered complete for CY 2026, any adjustments to future payment rates may be subject to additional considerations such as permanent adjustments taken in previous years.

The claims data used in rulemaking is released twice each year in the HH PPS LDS file, one for the proposed and one for the final. Accordingly, the HH PPS LDS file released with this proposed rule includes two files: the actual CY 2024 30-day periods and the CY 2024 simulated 60-day episodes.

We remind readers a data use agreement (DUA) is required to purchase the CY 2026 proposed HH PPS LDS file using the CMS-R-0235A form under OMB control number 0938-0734. Access would be granted for both the 30-day periods and the simulated 60-day episodes under one DUA. Visit the HH PPS LDS web page for more information. 3 In addition, the proposed CY 2026 Home Health Descriptive Statistics from the LDS Files spreadsheet is available on the HH PPS Regulations and Notices web page, 4 does not require a DUA, and is available at no cost to interested parties. The spreadsheet contains information on the number of simulated 60-day episodes and actual 30-day periods in CY 2024 that were used to determine the adjustments. The spreadsheet also provides information such as the number of episodes and periods by case-mix group, case-mix weights, and simulated payments.

3 https://www.cms.gov/research-statistics-data-and-systems/files-for-order/limiteddatasets/home_health_pps_lds .

4 https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/Home-Health-Prospective-Payment-System-Regulations-and-Notices .

e. Applying the Methodology to CY 2024 Data To Determine the CY 2026 Permanent and Temporary Adjustments

Using the methodology finalized in the CY 2023 HH PPS final rule to apply for all the years in which an adjustment is appropriate, and described most recently in the CY 2024 HH PPS final rule (88 FR 77687 through 77688), as well as the two new assumptions related to the OASIS-E mapping in the CY 2025 HH PPS final rule (89 FR 88360 through 88365), we simulated 60-day episodes using actual CY 2024 30-day periods to

Using the preliminary CY 2024 dataset, we began with 8,118,120 30-day periods of care and dropped 446,458 30-day periods of care that had a claim occurrence code 50 date after October 31, 2024. We also excluded 842,735 30-day periods of care that had a claim occurrence code 50 date before January 1, 2025, to ensure the 30-day period will not be part of a simulated 60-day episode that began in CY 2024. Applying the additional exclusions and assumptions as described in the finalized methodology (87 FR 66804), an additional 4,017 30-day periods were excluded.

Additionally, we excluded 211,772 simulated 60-day episodes, which consist of 391,799 30-day periods of care where no OASIS information was available in the Chronic Conditions Warehouse (CCW) Virtual Research Data Center (VRDC), a recent start of care/resumption of care (SOC/ROC) OASIS was not available, a wage index was not available, or the episode could not be grouped to a Health Insurance Prospective Payment System (HIPPS) code due to a missing primary diagnosis or other reason. Our simulated 60-day episodes of care produced a distribution of two 30-day periods of care (69.5 percent) and single 30-day periods of care (30.5 percent) that was similar to what we found when we simulated two 30-day periods of care for implementation of the PDGM. After all exclusions and assumptions were applied, the final dataset for this proposed rule included 6,433,111 actual 30-day periods of care and 3,794,744 simulated 60-day episodes of care for CY 2024.

Using the preliminary dataset for CY 2024 (6,433,111 actual 30-day periods which made up the 3,794,744 simulated 60-day episodes) we determined the estimated aggregate expenditures under the pre-PDGM HH PPS were lower than the actual estimated aggregate expenditures under the PDGM HH PPS. As shown in table 15, aggregate expenditures under the PDGM were higher than if the 153-group payment system were still in place in CY 2024 and therefore, we determined the CY 2024 30-day base payment rate should have been $1,916.77 based on actual behavior changes.

As stated in the CY 2025 HH PPS final rule (89 FR 88367) we determined for CYs 2020 through CY 2023 a total of −3.95 percent permanent adjustment was needed (after accounting for the −3.925 percent applied to the CY 2023 payment rate and the −2.890 applied to the CY 2024 payment rate). In order to determine behavior changes only to CY 2024, we simulated what the CY 2024 base payment rate would have been if the −3.95 percent adjustment that we determined using CY 2023 claims data had been implemented.

To do so, we started with the recalculated CY 2023 base payment of $1,875.46 (as published in the CY 2025 HH PPS final rule (89 FR 88366)) and applied the CY 2024 case-mix weights recalibration neutrality factor (1.0124), the CY 2024 wage index budget neutrality factor (1.0012), the CY 2024 labor-related share budget neutrality factor (0.9998), and the CY 2024 home health payment update factor (1.030). We determined the CY 2024 base payment rate for assumed behavior would have been $1,957.63.

For the CY 2024 annual permanent adjustment, we calculated the percent change between the two payment rates for only CY 2024. For the CY 2024 annual temporary adjustment we calculated the difference in aggregate expenditures in dollars for all CY 2024 PDGM 30-day claims using the two payment rates. This difference is shown as the retrospective dollar amount we will need to offset payment using one or more temporary adjustments in future years. Our results for the CY 2024 annual (single year) permanent and temporary adjustment calculations using CY 2024 preliminary claims data is shown in table 15.

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As shown in table 15, a permanent prospective adjustment of −2.087 percent to the CY 2026 30-day payment rate (assuming all adjustments from prior years were applied) for CY 2024 would be required to offset for such increases in estimated aggregate expenditures in future years. We remind readers, the permanent prospective adjustment of −2.087 percent is for illustrative purposes only and the annual (single year) permanent adjustment cannot be added to previous annual adjustments.

As shown in table 15, we determined that our initial estimate of the CY 2024 base payment rate ($2,038.13) resulted in excess expenditures of approximately $840 million in CY 2024.

Section 1895(b)(3)(D)(ii) of the Act requires us to annually analyze data from CY 2020 through CY 2026. We now have five years of claims data (CYs 2020 through 2024) under the PDGM,

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f. CY 2026 Proposed Permanent Adjustment and Temporary Adjustment Calculations

In the preceding section we describe how we annually analyzed CY 2024 preliminary claims data to determine the effects of actual behavior change on estimated aggregate expenditures. Again, that analysis included simulations that assumed the full −3.95 percent payment adjustment was already taken. We note that CMS implemented a payment adjustment of −1.975 percent for CY 2024, rather than the −3.95 percent we calculated (89 FR 88373), so the calculations set forth later in this section reflect the remaining adjustments that are still needed.

Therefore, the calculation in this section includes any of the remaining adjustments not applied in previous years (that is, CYs 2020 through 2023 claims data), as well as the adjustment needed to account for CY 2024 claims. In calculating the full permanent adjustment needed to the CY 2026 30-day payment rate, we compare estimated aggregate expenditures under the PDGM and the prior system. Unlike the annual adjustments described in table 16, we do not assume the full adjustment from prior years had been taken.

As discussed in section II.C.1.d. of this proposed rule, using the preliminary dataset for CY 2024 (6,433,111 actual 30-day periods which made up the 3,794,744 simulated 60-day episodes) we determined the CY 2024 30-day base payment rate should have been $1,916.77 based on actual behavior. We then compared the $1,916.77 CY 30-day base payment rate based on actual behavior to the CY 2024 30-day base payment rate of $2,038.13 we paid based on assumed behaviors. The percent change, as summarized in table 17, between the actual CY 2024 base payment rate of $2,038.13 (based on assumed behaviors) and the CY 2024 recalculated base payment rate of $1,916.77 (based on actual behaviors) is the total permanent adjustment reflecting CYs 2020 through 2024 claims.

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As shown in table 17 a permanent prospective adjustment of −5.954 percent to the CY 2026 30-day payment rate would be required to offset for such increases in estimated aggregate expenditures in future years. To illustrate this calculation:

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As we stated in the CY 2025 HH PPS final rule (89 FR 88373), applying a −1.975 percent (half of the proposed −3.95 percent) permanent adjustment to the CY 2025 30-day payment rate would not adjust the rate fully to account for differences in behavior changes on estimated aggregate expenditures in CYs 2020, 2021, 2022, and 2023. Using CY 2024 claims data, as shown in table 17, a permanent prospective adjustment of −5.954 percent to the CY 2026 30-day payment rate would be required to offset for such increases in estimated aggregate expenditures for CYs 2020 through 2024. We remind readers adjustment factors are multiplied in this payment system and, individual numbers (that is, percentages) cannot be added or subtracted together to determine the final adjustment. Therefore, we cannot determine the CY 2026 proposed permanent adjustment, which would include estimated aggregate expenditures in CY 2024, by simply subtracting the −1.975 percent applied in CY 2025 from the total permanent adjustment of −5.954 percent as shown in table 17.

Instead, we account for the permanent adjustment applied in CY 2025 of −1.975 percent when we calculate the CY 2026 permanent adjustment by solving the following equation (1−0.01975) × (1 × −) = (1−0.05954). To illustrate this calculation we used the following approach.

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x = 1−0.95941 x = 0.04059 (that is, 4.059 percent) Accounting for the previous permanent adjustments applied to the 30-day payment rate in CYs 2023, 2024, and 2025, we can simulate the permanent adjustment calculation with the simulated annual permanent adjustment percentage shown previously for CY 2026:

Annual Permanent Adjustments Calculated: 5 5 The annual permanent adjustments are for illustrative purposes only and the annual (single year) permanent adjustments cannot be combined to calculate the total permanent adjustment proposed and finalized in rulemaking.

CY 2020 Claims = −6.52% (87 FR 66805) CY 2021 Claims = −1.42% (87 FR 66806) CY 2022 Claims = −1.767% (88 FR 77692) CY 2023 Claims = −1.004% (89 FR 88366) CY 2024 Claims = −2.087% (Table 16) Permanent Adjustments Applied: CY 2023 Rate = −3.925% (88 FR 66808) CY 2024 Rate = −2.890% (88 FR 77697) CY 2025 Rate = −1.975% (89 FR 88373) Illustrative equation. (1−0.0652)(1−0.0142)(1−0.01767)(1−0.01004)(1−0.02087) = (1−0.03925)(1−0.0289)(1−0.01975)(1−x) Solving, x = 4.059%. In table 18, we provide the base payment rate for assumed behaviors (what CMS actually paid), the recalculated base payment rate for actual behaviors (what CMS should have paid), the total permanent adjustments calculated from the base payment rates (accounts for any adjustments taken prior), and the permanent adjustment applied.

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In the CY 2023, 2024, and 2025 HH PPS final rules (87 FR 66790, 88 FR 77696, 89 FR 88373), we acknowledged that the full permanent adjustment in a single year may be burdensome for some providers. As shown in table 18, we finalized only half of the permanent adjustment percentages in CYs 2023 through 2025 final rules. However, we explained in the CY 2023, 2024, and 2025 HH PPS final rules (87 FR 66808, 88 FR 77697, 89 FR 88373) that when we apply a reduced permanent adjustment, we may need to continue to implement a reduction in future years to satisfy the statutory requirements. However, we recognize that only applying half of the calculated permanent adjustments in previous years has contributed to the significant growth of the temporary adjustment. Therefore, we believe it to be appropriate to propose the full permanent adjustment to help mitigate

As described previously in this proposed rule, to account for such increases or decreases in estimated aggregate expenditures as a result of the impact of differences between assumed behavior changes and actual behavior changes in any given year from 2020 to 2026, we calculate one or more temporary prospective adjustments by calculating the dollar amount difference between the estimated aggregate expenditures from all 30-day periods using the recalculated 30-day base payment rate, and the aggregate expenditures for all 30-day periods using the actual 30-day base payment rate for that year. In other words, when determining the temporary retrospective dollar amount, we used the full dataset of actual 30-day periods using both the actual and recalculated 30-day base payment rates to ensure that the utilization and distribution of claims are the same. We refer readers to the CY 2024 HH PPS final rule (88 FR 77689 through 77694) for analysis of CYs 2020 through 2022 claims, the CY 2025 HH PPS final rule (89 FR 88366 through 88369) for analysis of CY 2023 claims, and section II.C.1.d. of this proposed rule for the analysis of CY 2024 claims. Table 19 provides a summary of the temporary adjustment dollar amount for CYs 2020 through 2026.

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Our analysis continues to show estimated aggregate expenditures are higher under the PDGM than if those same claims were paid under the prior 153-group system, though the data also show that the behavioral adjustment we implemented in CY 2023 and CY 2024 successfully brought estimated aggregate expenditures closer to the statutorily required budget neutrality. In the CY 2022 HH PPS proposed rule (86 FR 65884), the CY 2023 HH PPS proposed rule (87 FR 37608), the CY 2024 HH PPS proposed rule (88 FR 43664), the CY 2025 HH PPS proposed rule (89 FR 55320), and as shown in section II.B.1.b. of this proposed rule, our analysis has shown that the annual national standardized 30-day period payment rate has exceeded the average estimated 30-day period cost. In addition, MedPAC has continued to find that FFS Medicare's payments for home health care are substantially in excess of costs. 6

6 https://www.medpac.gov/wp-content/uploads/2025/03/Mar25_Ch7_MedPAC_Report_To_Congress_SEC.pdf.

Given these facts, we believe that it is an appropriate time to begin recoupment of the temporary dollar amounts. Even though we have not yet calculated the temporary dollar amounts for CYs 2025 through 2026, we have done so for CYs 2020 through 2024, and the amounts are substantial. Beginning to adjust the base payment rate now to account for the calculated temporary dollar amount to date may help reduce the need for a larger reduction in future years. We estimate that collecting the full temporary dollar amount of $5,301,103,945 in a single year (as shown in table 19) would require an approximate 34 percent reduction to the CY 2026 base payment rate. And we anticipate that we would need to make additional adjustments for CYs 2025 and 2026, once data for those years are available.

We have stated in past rules that implementing both the permanent and temporary adjustments in the same year may be burdensome to HHAs; however, we propose only to implement a small temporary adjustment (rather than the estimated 34 percent) along with the permanent adjustment, which should lessen any hardship to HHAs, as well as reduce larger temporary adjustments in future years. Beginning to apply a

Therefore, we exercise our authority under section 1895(b)(3)(D)(iii) of the Act to apply “one or more” temporary adjustments to begin recoupment of the retrospective overpayments for CYs 2020 through 2024. Specifically, we propose to implement a 5.0 percent reduction in CY 2026, that is equivalent to a 0.9500 temporary adjustment factor, to the CY 2026 national, standardized payment rate. Using historical trends, we estimated 7,723,632 number of 30-day periods would occur in CY 2026. Using this estimated utilization, a 5.0 percent reduction to the CY 2026 30-day payment rate would begin to collect approximately $786 million of the total temporary adjustment dollar amount, equating to about 14.8 percent of the total $5.3 billion shown in table 19. In doing so, however, we would need to account for the remaining temporary adjustment dollar amount for CYs 2020 through 2024, plus any possible adjustments for CY 2025 and 2026, in future years. It is important to note that the estimated $786 million dollar amount anticipated to be collected by the implementation of the temporary adjustment factor is based on an estimate of the number of 30-day periods that would occur in CY 2026. It may not reflect the actual dollar amount to be collected if the actual number of 30-day periods and other utilization trends in CY 2026 differ from what was estimated. In other words, CMS will calculate the actual amount collected from the temporary adjustment in CY 2026 and credit it to the overall cumulative temporary dollar amount.

In accordance with section 1895(b)(3)(D)(iii) of the Act, the temporary adjustment is to be applied on a prospective basis and shall apply only with respect to the year for which such temporary increase or decrease is made. We interpret this to mean we would not include the −5.0 percent temporary adjustment applied for CY 2026 when calculating the CY 2027 base payment rates. However, to continue recoupment of the retrospective overpayments we may propose additional temporary adjustments in future rulemaking and are not proposing that the −5.0 percent temporary adjustment would be applied each year after CY 2026. Rather, we will continue to analyze the data each year through CY 2026 claims as required by law, and in a time and manner deemed appropriate we will propose one or more temporary adjustments to account for retrospective overpayments. We refer readers to section II.E.3.b. for the CY 2026 base payment rates with and without the temporary adjustment.

We solicit comments on the proposals to apply the permanent adjustment of −4.059 percent and the −5.0 percent temporary adjustment to the CY 2026 home health base payment rate.

D. Proposed CY 2026 Home Health Low Utilization Payment Adjustment (LUPA) Thresholds, Functional Impairment Levels, Comorbidity Sub-Groups, and Case-Mix Weights

1. Proposed CY 2026 PDGM LUPA Thresholds

Under the HH PPS, LUPAs are paid when a certain numerical minimum visit threshold for a payment group during a 30-day period of care is not met. In the CY 2019 HH PPS final rule with comment period (83 FR 56492), we finalized a policy setting the LUPA thresholds at the 10th percentile of visits or two visits, whichever is higher, for each payment group. This means the LUPA threshold for each 30-day period of care varies depending on the PDGM payment group to which it is assigned. If the LUPA threshold for the payment group is met under the PDGM, the 30-day period of care would be paid the full 30-day period case-mix adjusted payment amount (subject to any partial payment adjustment or outlier adjustments). If a 30-day period of care does not meet the PDGM LUPA visit threshold, then payment would be made using the per-visit payment amounts as described in section II.E.3.c. of this proposed rule. For example, if the LUPA visit threshold is four, and a 30-day period of care has four or more visits, it is paid the full 30-day period payment amount; if the period of care has three or fewer visits, payment is made using the per-visit payment amounts.

In the CY 2019 HH PPS final rule with comment period (83 FR 56492), we finalized our policy that the LUPA thresholds for each PDGM payment group will be reevaluated every year based on the most current utilization data available at the time of rulemaking. However, as CY 2020 was the first year of the new case-mix adjustment methodology, we stated in the CY 2021 HH PPS final rule (85 FR 70305, 70306) that we would maintain the LUPA thresholds that were finalized and shown in table 17 of the CY 2020 HH PPS final rule with comment period (84 FR 60522) for CY 2021 payment purposes. We stated that at that time, we did not have sufficient CY 2020 data to reevaluate the LUPA thresholds for CY 2021.

In the CY 2022 HH PPS final rule with comment period (86 FR 62249), we finalized the proposal to recalibrate the PDGM case-mix weights, functional impairment levels, and comorbidity subgroups while maintaining the LUPA thresholds for CY 2022. We stated that because there are several factors that contribute to how the case-mix weight is set for a particular case-mix group (such as the number of visits, length of visits, types of disciplines providing visits, and non-routine supplies) and the case-mix weight is derived by comparing the average resource use for the case-mix group relative to the average resource use across all groups, we believe the COVID-19 public health emergency (PHE) will have impacted utilization within all case-mix groups similarly. Therefore, the impact of any reduction in resource use caused by the PHE on the calculation of the case-mix weight will be minimized since the impact will be accounted for both in the numerator and denominator of the formula used to calculate the case-mix weight. However, in contrast, the LUPA thresholds are based on the number of overall visits in a particular case-mix group (the threshold is the 10th percentile of visits or 2 visits, whichever is greater) instead of a relative value (like what is used to generate the case-mix weight) that will control for the impacts of the COVID-19 PHE. We noted that visit patterns and some of the decrease in overall visits in CY 2020 may not be representative of visit patterns in CY 2022. Therefore, to mitigate any potential future and significant short-term variability in the LUPA thresholds due to the COVID-19 PHE, we finalized the proposal to maintain the LUPA thresholds finalized and displayed in table 17 in the CY 2020 HH PPS final rule with comment period (84 FR 60522) for CY 2022 payment purposes.

For CY 2024, we proposed to update the LUPA thresholds using CY 2022 Medicare home health claims (as of March 17, 2023) linked to OASIS assessment data. We believed that CY 2022 data would be more indicative of visit patterns in CY 2024 rather than continuing to use the LUPA thresholds derived from the CY 2018 pre-PDGM data. Therefore, we finalized a policy to update the LUPA thresholds for CY 2024 using data from CY 2022.

For CY 2026, we are proposing to update the LUPA thresholds using CY 2024 home health claims utilization data (as of March 13, 2025), in accordance with our policy to annually recalibrate the case-mix weights and update the LUPA thresholds, functional impairment levels, and comorbidity

We are soliciting public comments on the proposed updates to the LUPA thresholds for CY 2026. The proposed LUPA thresholds will be updated based on more complete CY 2024 claims data in the final rule.

2. Proposed CY 2026 Functional Impairment Levels

Under the PDGM, the functional impairment level is determined by responses to certain OASIS items associated with activities of daily living and risk of hospitalization; that is, responses to OASIS items M1800-M1860 and M1033. A home health period of care receives points based on each of the responses associated with these functional OASIS items, which are then converted into a table of points corresponding to increased resource use. The sum of all these points results in a functional impairment score which is used to group home health periods into a functional level with similar resource use. That is, the higher the points, the more the response is associated with increased resource use, or increased impairment. The three functional impairment levels of low, medium, and high were designed so that approximately one-third of home health periods from each clinical group falls within each level. This means home health periods in the low impairment level have responses for the functional OASIS items that are associated with the lowest resource use, on average. Home health periods in the high impairment level have responses for the functional OASIS items that are associated with the highest resource use on average.

For CY 2026, we are proposing to use CY 2024 claims data to update the functional points and functional impairment levels by clinical group. The CY 2018 HH PPS proposed rule (82 FR 35320) and the technical report from December 2016, posted on the Home Health PPS Archive web page, located at https://www.cms.gov/medicare/home-health-pps/home-health-pps-archive , provides a more detailed explanation as to the construction of the functional impairment levels using the OASIS items. We are proposing to use the same methodology previously finalized to update the functional impairment levels for CY 2026. The proposed updated OASIS functional points table and the table of functional impairment levels by clinical group for CY 2026 are listed in tables 20 and 21, respectively.

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BILLING CODE 4120-01-C We are soliciting public comments on the proposed updates to functional points and the functional impairment levels by clinical group.

3. Proposed CY 2026 Comorbidity Subgroups

Thirty-day periods of care receive a comorbidity adjustment category based on the presence of certain secondary diagnoses reported on home health claims. These diagnoses are based on a home-health specific list of clinically and statistically significant secondary diagnosis subgroups with similar resource use, meaning the diagnoses have at least as high as the median resource use and are reported in more than 0.1 percent of 30-day periods of care. Home health 30-day periods of care can receive a comorbidity adjustment under the following circumstances:

• High comorbidity adjustment: There are two or more secondary diagnoses on the home health-specific comorbidity subgroup interaction list that are associated with higher resource use when both are reported together compared to when they are reported separately. That is, the two diagnoses may interact with one another, resulting in higher resource use.

• Low comorbidity adjustment: There is a reported secondary diagnosis on the

• No comorbidity adjustment: A 30-day period of care receives no comorbidity adjustment if no secondary diagnoses exist or do not meet the criteria for a low or high comorbidity adjustment.

In the CY 2019 HH PPS final rule with comment period (83 FR 56406), we stated that we will continue to examine the relationship of reported comorbidities on resource utilization and make the appropriate payment refinements to help ensure that payment is in alignment with the actual costs of providing care. For CY 2026, we are proposing to use the same methodology used to establish the comorbidity subgroups to update the comorbidity subgroups using CY 2024 home health data with linked OASIS data (as of March 13, 2025).

For CY 2026, we are proposing to update the comorbidity subgroups to include 20 low comorbidity adjustment subgroups and 100 high comorbidity adjustment interaction subgroups. The proposed CY 2026 low comorbidity adjustment subgroups and the high comorbidity adjustment interaction subgroups including those diagnoses within each of these comorbidity adjustments are shown in tables 22 and 23. The proposed CY 2026 low comorbidity adjustment subgroups and the high comorbidity adjustment interaction subgroups including those diagnoses within each of these comorbidity adjustments will also be posted on the HHA Center web page at https://www.cms.gov/medicare/enrollment-renewal/providers-suppliers/home-health-agency-center .

We invite comments on the proposed updates to the low comorbidity adjustment subgroups and the high comorbidity adjustment interactions for CY 2026.

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BILLING CODE 4120-01-C 4. Proposed CY 2026 PDGM Case-Mix Weights

As finalized in the CY 2019 HH PPS final rule with comment period (83 FR 56502), the PDGM places patients into meaningful payment categories based on patient and other characteristics, such as timing, admission source, clinical grouping using the reported principal diagnosis, functional impairment level, and comorbid conditions. The PDGM case-mix methodology results in 432 unique case-mix groups called home health resource groups (HHRGs). We also finalized a policy in the CY 2019 HH PPS final rule with comment period (83 FR 56515) to annually recalibrate the PDGM case-mix weights using a fixed effects model with the most recent

The claims data provide visit-level data and data on whether non-routine supplies (NRS) were provided during the period and the total charges of NRS. We determine the case-mix weight for each of the 432 different PDGM payment groups by regressing resource use on a series of indicator variables for each of the categories using a fixed effects model as described in the following steps:

Step 1: Estimate a regression model to assign a functional impairment level to each 30-day period. The regression model estimates the relationship between a 30-day period's resource use and the functional status and risk of hospitalization items included in the PDGM, which are obtained from certain OASIS items. We refer readers to table 20 for further information on the OASIS items used for the functional impairment level under the PDGM. We measure resource use with the cost-per-minute + NRS approach that uses information from 2023 home health cost reports. We use 2023 home health cost report data because it is the most complete cost report data available at the time of rulemaking. Other variables in the regression model include the 30-day period's admission source, clinical group, and 30-day period timing. We also include home health agency level fixed effects in the regression model. After estimating the regression model using 30-day periods, we divide the coefficients that correspond to the functional status and risk of hospitalization items by 10 and round to the nearest whole number. Those rounded numbers are used to compute a functional score for each 30-day period by summing together the rounded numbers for the functional status and risk of hospitalization items that are applicable to each 30-day period. Next, each 30-day period is assigned to a functional impairment level (low, medium, or high) depending on the 30-day period's total functional score. Each clinical group has a separate set of functional thresholds used to assign 30-day periods into a low, medium or high functional impairment level. We set those thresholds so that we assign roughly a third of 30-day periods within each clinical group to each functional impairment level (low, medium, or high).

Step 2: A second regression model estimates the relationship between a 30-day period's resource use and indicator variables for the presence of any of the comorbidities and comorbidity interactions that were originally examined for inclusion in the PDGM. Like the first regression model, this model also includes home health agency level fixed effects and includes control variables for each 30-day period's admission source, clinical group, timing, and functional impairment level. After we estimate the model, we assign comorbidities to the low comorbidity adjustment if any comorbidities have a coefficient that is statistically significant (p-value of 0.05 or less) and which have a coefficient that is larger than the 50th percentile of positive and statistically significant comorbidity coefficients. If two comorbidities in the model and their interaction term have coefficients that sum together to exceed $150 and the interaction term is statistically significant (p-value of 0.05 or less), we assign the two comorbidities together to the high comorbidity adjustment.

Step 3: After Step 2, each 30-day period is assigned to a clinical group, admission source category, episode timing category, functional impairment level, and comorbidity adjustment category. For each combination of those variables (which represent the 432 different payment groups that comprise the PDGM), we then calculate the 10th percentile of visits across all 30-day periods within a particular payment group. If a 30-day period's number of visits is less than the 10th percentile for their payment group, the 30-day period is classified as a Low Utilization Payment Adjustment (LUPA). If a payment group has a 10th percentile of visits that is less than two, we set the LUPA threshold for that payment group to be equal to two. That means if a 30-day period has one visit, it is classified as a LUPA and if it has two or more visits, it is not classified as a LUPA.

Step 4: Take all non-LUPA 30-day periods and regress resource use on the 30-day period's clinical group, admission source category, episode timing category, functional impairment level, and comorbidity adjustment category. The regression includes fixed effects at the level of the home health agency. After we estimate the model, the model coefficients are used to predict each 30-day period's resource use. To create the case-mix weight for each 30-day period, the predicted resource use is divided by the overall resource use of the 30-day periods used to estimate the regression.

The case-mix weight is then used to adjust the base payment rate to determine each 30-day period's payment. Table 24 shows the coefficients of the payment regression used to generate the weights, and the coefficients divided by average resource use.

BILLING CODE 4120-01-P EP02JY25.041

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The proposed case-mix weights for CY 2026 are listed in table 25 and will also be posted on the HHA Center web page 7 upon display of this proposed rule.

7 HHA Center web page: https://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center .

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BILLING CODE 4120-01-C Changes to the PDGM case-mix weights are implemented in a budget neutral manner by multiplying the CY 2026 national standardized 30-day

We invite public comments on the CY 2026 proposed case-mix weights and proposed case-mix weight budget neutrality factor.

E. Proposed CY 2026 Home Health Payment Rate Updates

1. Proposed CY 2026 Home Health Market Basket Update for HHAs

Section 1895(b)(3)(B) of the Act requires that the standard prospective payment amounts for home health be increased by a factor equal to the applicable home health market basket update for those HHAs that submit quality data as required by the Secretary. In the CY 2024 HH PPS final rule (88 FR 77726), we finalized a rebasing of the home health market basket to reflect 2021 cost report data. We also finalized a policy for CY 2024 and subsequent years that the labor-related share will be 74.9 percent, and the non-labor-related share will be 25.1 percent. A detailed description of how we rebased the home health market basket and labor-related share is available in the CY 2024 HH PPS final rule (88 FR 77726 through 77742).

In the CY 2015 HH PPS final rule (79 FR 38384), we finalized our methodology for calculating and applying the multifactor productivity adjustment. As we explained in that rule, section 1895(b)(3)(B)(vi) of the Act, requires that, in CY 2015 (and in subsequent calendar years, except CY 2018 (under section 411(c) of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10, enacted April 16, 2015)), the market basket percentage under the HH PPS as described in section 1895(b)(3)(B) of the Act be annually adjusted by changes in economy-wide productivity. Section 1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment as equal to the 10-year moving average of change in annual economy-wide private nonfarm business multifactor productivity (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, calendar year, cost reporting period, or other annual period). The Bureau of Labor Statistics (BLS) publishes the official measures of productivity for the United States economy. We note that previously the productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the Act was published by BLS as private nonfarm business multifactor productivity. Beginning with the November 18, 2021, release of productivity data, BLS replaced the term “multifactor productivity” with “total factor productivity” (TFP). BLS noted that this is a change in terminology only and will not affect the data or methodology. As a result of the BLS name change, the productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the Act is now published by BLS as “private nonfarm business total factor productivity”. We refer readers to https://www.bls.gov for the BLS historical published TFP data. A complete description of IHS Global Inc.'s (IGI) TFP projection methodology is available on the CMS website at https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information .

The proposed home health update percentage for CY 2026 is based on the estimated home health market basket percentage increase, specified at section 1895(b)(3)(B)(iii) of the Act, of 3.2 percent (based on IHS Global Inc.'s first quarter 2025 forecast with historical data through fourth quarter 2024). The estimated CY 2026 proposed home health market basket percentage increase of 3.2 percent would then be reduced by a productivity adjustment, in accordance with section 1895(b)(3)(B)(vi) of the Act. Based on IGI's first quarter 2025 forecast, the proposed productivity adjustment is currently estimated to be 0.8 percentage point for CY 2026. Therefore, the proposed productivity-adjusted CY 2026 home health market basket update is 2.4 percent (3.2 percent market basket percentage increase, reduced by a 0.8 percentage point productivity adjustment). Furthermore, we are proposing that if more recent data become available (for example, a more recent estimate of the market basket percentage increase and/or productivity adjustment), we would use such data, if appropriate, to determine the CY 2026 market basket percentage increase and productivity adjustment in the final rule.

Section 1895(b)(3)(B)(v) of the Act requires that the home health percentage update be decreased by 2 percentage points for those HHAs that do not submit quality data as required by the Secretary. For HHAs that do not submit the required quality data for CY 2026, the proposed home health payment update percentage is 0.4 percent (2.4 percent minus 2 percentage points).

We invite public comments on the proposed CY 2026 home health market basket percentage increase and productivity adjustment.

2. Proposed CY 2026 Home Health Wage Index

a. Background

Sections 1895(b)(4)(A)(ii) and (b)(4)(C) of the Act require the Secretary to provide appropriate adjustments to the proportion of the payment amount under the HH PPS that account for area wage differences, using adjustment factors that reflect the relative level of wages and wage-related costs applicable to the furnishing of home health services. Since the inception of the HH PPS, we have used inpatient hospital wage data in developing a wage index to be applied to home health payments. We are proposing to continue this practice for CY 2026, as it is our belief that, in the absence of home health-specific wage data that accounts for area differences, using inpatient hospital wage data, including any changes made by the Office of Management and Budget (OMB) to Metropolitan Statistical Area (MSA) definitions, is appropriate and reasonable for the HH PPS.

In general, OMB issues major revisions to statistical areas every 10 years, based on the results of the decennial census. However, OMB occasionally issues minor updates and revisions to statistical areas in the years between the decennial censuses. On April 10, 2018, OMB issued OMB Bulletin No. 18-03, which superseded the August 15, 2017, OMB Bulletin No. 17-01. On September 14, 2018, OMB issued OMB Bulletin No. 18-04 which superseded the April 10, 2018, OMB Bulletin No. 18-03. These bulletins established revised delineations for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the use of the delineations of these statistical areas. A https://www.bls.gov/bls/omb-bulletin-18-04-revised-delineations-of-metropolitan-statistical-areas.pdf . In the CY 2021 HH PPS final rule (85 FR 70298), we finalized our proposal to adopt the revised OMB delineations with a 5 percent cap on wage index decreases in CY 2021.

On July 21, 2023, OMB issued Bulletin No. 23-01, which updates and supersedes OMB Bulletin No. 20-01, issued on March 6, 2020. OMB Bulletin No. 23-01 establishes revised delineations for the MSAs, Micropolitan Statistical Areas, Combined Statistical Areas, and Metropolitan Divisions, collectively referred to as Core Based Statistical Areas (CBSAs). According to OMB, the delineations reflect the 2020 Standards for Delineating Core Based Statistical Areas (CBSAs) (the “2020 Standards”), which appeared in the Federal Register (86 FR 37770 through 37778) on July 16, 2021, and application of those standards to Census Bureau population and journey-to-work data (for example, 2020 Decennial Census, American Community Survey, and Census Population Estimates Program data). A copy of OMB Bulletin No. 23-01 is available online at https://www.bls.gov/bls/omb-bulletin-23-01-revised-delineations-of-metropolitan-statistical-areas.pdf .

In the CY 2025 HH PPS final rule (89 FR 88354), we finalized our proposal to adopt the revised OMB delineations from OMB Bulletin 23-01 with a 5 percent cap on wage index decreases at the CBSA level as well as at the county level. In that final rule we stated that we believe it is important for the HH PPS wage index to use the latest OMB delineations available in order to maintain a more accurate and up-to-date payment system that reflects the reality of population shifts and labor market conditions. We also stated that we believe using the most current OMB delineations will increase the integrity of the HH PPS wage index by creating a more accurate representation of geographic variation in wage levels.

b. Five Percent Cap on Wage Index Decreases

In the CY 2023 HH PPS final rule (87 FR 66851 through 66853), we finalized a policy that the CY HH PPS wage index will include a permanent 5 percent cap on wage index decreases for CY 2023 and each subsequent year. Specifically, we finalized, for CY 2023 and subsequent years, the application of a permanent 5 percent cap on any decrease to a geographic area's wage index from its wage index in the prior year, regardless of the circumstances causing the decline. That is, we finalized a policy requiring that a geographic area's wage index for CY 2023 will not be less than 95 percent of its final wage index for CY 2022, regardless of whether the geographic area is part of an updated CBSA, and that for subsequent years, a geographic area's wage index will not be less than 95 percent of its wage index calculated in the prior CY.

Previously this methodology was applied to all counties that make up a CBSA or statewide rural area. However, in the CY 2025 HH PPS final rule (89 FR 88418 through 88421), because of the adoption of the revised OMB delineations from OMB Bulletin 23-01, we finalized a policy applying this methodology to individual counties. Specifically, we finalized a policy applying the 5 percent cap to counties that moved from a CBSA or statewide rural area with a higher wage index value into a new CBSA or rural area with a lower wage index value, so that the county's CY 2025 wage index would not be less than 95 percent of the county's CY 2024 wage index value under the old delineation despite moving into a new delineation with a lower wage index.

Due to the way that we proposed calculating the 5 percent cap for counties that experienced an OMB designation change, some CBSAs and statewide rural areas could have had more than one wage index value. Specifically, some counties that changed OMB designations had a wage index value that was different than the wage index value assigned to the other constituent counties that made up that CBSA or statewide rural area that they moved into after the application of the 5 percent cap. However, for home health claims processing, each CBSA or statewide rural area can have only one wage index value assigned to that CBSA or statewide rural area. Therefore, we finalized a policy, beginning in CY 2025, that counties that have a different wage index value than the CBSA or rural area into which they are designated after the application of the 5 percent cap will use a wage index transition code. These special codes are five digits in length and begin with “50” and the remaining digits are unique for that code. The 50XXX wage index transition codes are used only in specific counties; counties located in CBSAs and rural areas that do not correspond to a different transition wage index value will still use the CBSA number.

We also finalized a policy applying the 5 percent cap to these specific counties that correspond to a different wage index value due to a delineation change until the county's new wage index is more than 95 percent of the wage index from the previous calendar year. In order to capture the correct wage index value, an HHA will continue to use the assigned 50XXX transition code on home health claims for services in these counties until the county's wage index value calculated for that calendar year using the new OMB delineations is not less than 95 percent of the county's capped wage index from the previous calendar year.

For CY 2026, the 5 percent cap on wage index decreases will continue to be calculated at the county level as well as the CBSA and statewide rural area level. While some counties that required a transition code for CY 2025 will continue to use the same transition code for CY 2026, other counties that required a transition code in CY 2025 will no longer require a transition code in CY 2026. In the counties that will no longer require a transition code beginning in CY 2026 wage index, the CY 2026 wage index of the CBSA or rural area that the county was redesignated into has a wage index value higher than 95 percent of the county's CY 2025 wage index. Therefore, these counties will use the CBSA or rural county code of the area they were redesignated into based on OMB Bulletin No. 23-01.

The complete list of counties and corresponding transition codes can be found as a separate tab in the calendar year's wage index file located on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/home-health-pps/home-health-pps-wage-index .

c. Proposed CY 2026 HH PPS Wage index

The appropriate wage index value is applied to the labor portion of the HH PPS rates based on the site of service for the beneficiary (defined in section 1861(m) of the Act as the beneficiary's place of residence). For CY 2026, we are proposing to base the HH PPS wage index on the FY 2026 hospital pre-floor, pre-reclassified wage index for hospital cost reporting periods beginning on or after October 1, 2021, and before October 1, 2022 (FY 2022 cost report data). The proposed CY 2026 HH PPS wage index would not take into account any geographic reclassification of hospitals, including those in accordance with sections 1886(d)(8)(B) or 1886(d)(10) of the Act but would include the 5 percent cap on wage index decreases as discussed previously.

There exist some geographic areas where there are no hospitals, and thus,

For urban areas without inpatient hospitals, we use the average wage index of all urban areas within the State as a reasonable proxy for the wage index for that CBSA. For CY 2026, the only urban area without inpatient hospital wage data is Hinesville, GA (CBSA 25980). Using the average wage index of all urban areas in Georgia as a proxy, we are proposing the CY 2026 wage index value for Hinesville, GA, would be 0.8800.

For rural areas that do not have inpatient hospitals, we use the average wage index from all contiguous Core Based Statistical Areas (CBSAs) as a reasonable proxy. The term “contiguous” means sharing a border (72 FR 49859). In the CY 2025 HH PPS final rule (89 FR 88422), we finalized a policy that rural North Dakota would become a rural area without a hospital from which hospital wage data can be derived. Therefore, in order to calculate the wage index for rural area 99935, North Dakota, we finalized using as a proxy, the average pre-floor, pre-reclassified hospital wage data from the contiguous CBSAs: CBSA 13900-Bismark, ND, CBSA 22020-Fargo, ND-MN, CBSA 24220-Grand Forks, ND-MN, and CBSA 33500, Minot, ND. Using this methodology, we are proposing that the CY 2026 HH PPS wage index for rural North Dakota would be 0.8346.

Previously, the only rural area without a hospital from which hospital wage data could be derived was rural Puerto Rico. However, for rural Puerto Rico, we did not apply this methodology due to the distinct economic circumstances that exist there (for example, due to the proximity of almost all of Puerto Rico's various urban and non-urban areas to one another, this methodology would produce a wage index for rural Puerto Rico that is higher than that in half of its urban areas). Instead, we used the most recent wage index previously available for that area, which was 0.4047. Beginning in CY 2025, due to the adoption of the revised OMB delineations, there is now a hospital in rural Puerto Rico from which hospital wage data can be derived. Therefore, we finalized a policy that the wage index for rural Puerto Rico would now be based on the hospital wage data for the area instead of the previously available wage index of 0.4047. The CY 2025 final unadjusted wage index value for rural Puerto Rico was 0.2510. However, because 0.2510 is more than a 5 percent decline in the area's CY 2024 wage index, the 5 percent cap was applied and the final CY 2025 5 percent cap adjusted wage index for rural Puerto Rico was set equal to 95 percent of the CY 2024 wage index, which resulted in a final wage index value of 0.3845.

The unadjusted CY 2026 proposed wage index for rural Puerto Rico is 0.2452. However, because 0.2452 is more than a 5 percent decline in the CY 2025 wage index, we are proposing that the CY 2026 5 percent cap adjusted wage index for rural Puerto Rico be set equal to 95 percent of the CY 2025 wage index, which would result in a proposed wage index value of 0.3653.

Additionally, due to the adoption of the revised OMB delineations in the CY 2025 HH PPS final rule, Delaware, which was previously an all-urban state, now has one rural area with a hospital from which hospital wage data can be derived. As such, we are proposing that the CY 2026 wage index for rural Delaware would be 1.0133.

Finally, the Northern Mariana Islands and American Samoa are rural areas with no hospital data from which a wage index can be calculated. Consistent with our established methodology, we compute an appropriate wage index for rural areas with no hospital using the average wage index values from contiguous CBSAs, to represent a reasonable proxy. Therefore, we are proposing that HHAs that provide services in the Northern Mariana Islands and American Samoa would use CBSA 99965 (Guam) and receive the wage index assigned to CBSA 99965 (Guam) of 0.9611. While we appreciate that the islands of the Pacific Rim are not actually contiguous, we believe that same principle applies here, and that Guam is a reasonable proxy for American Samoa and the Northern Mariana Islands. We believe that CBSA 99965 (Guam) represents a reasonable proxy because the islands are located within the Pacific Rim and share a common status as United States Territories.

The proposed HH PPS wage index file applicable for CY 2026 (January 1, 2026, through December 31, 2026) is available on the CMS website at https://www.cms.gov/medicare/enrollment-renewal/providers-suppliers/home-health-agency-center .

3. Proposed CY 2026 Home Health Payment Update

a. Background

The HH PPS has been in effect since October 1, 2000. As set forth in the July 3, 2000, final rule (65 FR 41128), the base unit of payment under the HH PPS was a national, standardized 60-day episode payment rate. As finalized in the CY 2019 HH PPS final rule with comment period (83 FR 56406), and as described in the CY 2020 HH PPS final rule with comment period (84 FR 60478), the unit of home health payment changed from a 60-day episode to a 30-day period effective for those 30-day periods beginning on or after January 1, 2020.

As set forth in § 484.220, we adjust the national, standardized prospective payment rates by a case-mix relative weight and a wage index value based on the site of service for the beneficiary. To provide appropriate adjustments to the proportion of the payment amount under the HH PPS to account for area wage differences, we apply the appropriate wage index value to the labor portion of the HH PPS rates. In the CY 2024 HH PPS final rule (88 FR 77676), we finalized the rebasing of the home health market basket to reflect 2021 Medicare cost report data. We also finalized a policy that, for CY 2024 and subsequent years, the labor-related share will be 74.9 percent, and the non-labor-related share will be 25.1 percent. The following are the steps we take to compute the case-mix and wage-adjusted 30-day period payment amount for CY 2026:

• Multiply the national, standardized 30-day period rate by the patient's applicable case-mix weight.

• Divide the case-mix adjusted amount into a labor (74.9 percent) and a non-labor portion (25.1 percent).

• Multiply the labor portion by the applicable wage index based on the site of service of the beneficiary.

• Add the wage-adjusted portion to the non-labor portion, yielding the case-mix and wage adjusted 30-day period payment amount, subject to any additional applicable adjustments.

We provide annual updates of the HH PPS rate in accordance with section 1895(b)(3)(B) of the Act. Section 484.225 sets forth the specific annual percentage update methodology. In accordance with section 1895(b)(3)(B)(v) of the Act and § 484.225(i), for an HHA that does not submit home health quality data, as specified by the Secretary, the unadjusted national prospective 30-day period rate is equal to the rate for the previous calendar year increased by the applicable home health payment update

The final claim that the HHA submits for payment determines the total payment amount for the period and whether we make an applicable adjustment to the 30-day case-mix and wage-adjusted payment amount. The end date of the 30-day period, as reported on the claim, determines which calendar year rates Medicare would use to pay the claim.

We may adjust a 30-day case-mix and wage-adjusted payment based on the information submitted on the claim to reflect the following:

• A LUPA is provided on a per-visit basis as set forth in §§ 484.205(d)(1) and 484.230.

• A partial payment adjustment as set forth in §§ 484.205(d)(2) and 484.235.

• An outlier payment as set forth in §§ 484.205(d)(3) and 484.240.

b. Proposed CY 2026 National, Standardized 30-Day Period Payment Amount

Section 1895(b)(3)(A)(i) of the Act requires that the standard prospective payment rate and other applicable amounts be standardized in a manner that eliminates the effects of variations in relative case-mix and area wage adjustments among different home health agencies in a budget-neutral manner. To determine the CY 2026 national, standardized 30-day period payment rate, we would continue our practice of using the most recent, complete utilization data at the time of rulemaking; that is, we are using CY 2024 claims data for CY 2026 payment rate updates. We apply a permanent adjustment factor, a case-mix weights recalibration budget neutrality factor, a wage index budget neutrality factor, the home health payment update percentage, and a temporary adjustment factor to update the CY 2026 payment rate. As discussed in section II.C.1. of this proposed rule, we are proposing the implementation of a permanent adjustment of −4.059 percent to ensure that estimated aggregate expenditures under the PDGM are equal to the estimated aggregate expenditures that otherwise would have been under the 153-group payment system as required by law. The proposed permanent adjustment factor is 0.95941. As discussed previously, to ensure the changes to the PDGM case-mix weights are implemented in a budget neutral manner, we apply a case-mix weight budget neutrality factor to the CY 2026 national, standardized 30-day period payment rate. The proposed case-mix weight budget neutrality factor for CY 2026 is 1.0051.

Additionally, we apply a wage index budget neutrality factor to ensure that wage index updates and revisions are implemented in a budget neutral manner. To calculate the wage index budget neutrality factor, we first determine the payment rate needed for non-LUPA 30-day periods using the CY 2026 wage index (with the 5 percent cap) so those total payments are equivalent to the total payments for non-LUPA 30-day periods using the CY 2025 wage index (with the 5 percent cap) and the CY 2025 national standardized 30-day period payment rate adjusted by the case-mix weights recalibration neutrality factor. Then, by dividing the payment rate for non-LUPA 30-day periods using the CY 2026 wage index with the 5 percent cap on wage index decreases) by the payment rate for non-LUPA 30-day periods using the CY 2025 wage index (with the 5 percent cap on wage index decreases), we obtain a wage index budget neutrality factor of 1.0019. We then apply the wage index budget neutrality factor of 1.0019 to the 30-day period payment rate.

Next, we update the 30-day period payment rate by the proposed CY 2026 home health payment update percentage of 2.4 percent. As discussed in section II.C.1. of this proposed rule, we are also proposing the implementation of a temporary 5.0 percent reduction to the CY 2026 base payment rate. The proposed temporary adjustment factor is 0.95000. Per section 1895(b)(3)(D)(iii) of the Act a temporary adjustment is to be applied for the applicable year and not included when computing a payment rate for a subsequent year. In other words, the temporary adjustment factor for CY 2026 should not be included in the starting payment rate for CY 2027. Therefore, we have calculated the CY 2026 national, standardized 30-day period payment with and without the temporary adjustment factor. The CY 2026 national standardized 30-day period payment rate without a temporary adjustment is only for illustrative purposes. The actual CY 2026 national standardized 30-day period payment rate includes the proposed temporary adjustment and is calculated in table 26.

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The CY 2026 national standardized 30-day period payment rate for an HHA that does not submit the required quality data would be updated by 0.4 percent (the proposed CY 2026 home health payment update percentage of 2.4 percent minus 2 percentage points) and is shown in table 27.

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c. Proposed CY 2026 National Per-Visit Rates for 30-Day Periods of Care

The national per-visit rates are used to pay LUPAs and are also used to compute imputed costs in outlier calculations. The per-visit rates are paid by type of visit or home health discipline. The six home health disciplines are as follows:

• Home health aide (HH aide).

• Medical Social Services (MSS).

• Occupational therapy (OT).

• Physical therapy (PT).

• Skilled nursing (SN).

• Speech-language pathology (SLP).

To calculate the proposed CY 2026 national per-visit rates, we started with the CY 2025 national per-visit rates. Then we applied a wage index budget neutrality factor to ensure budget neutrality for LUPA per-visit payments. We calculated the wage index budget neutrality factor by simulating total payments for LUPA 30-day periods of care using the CY 2026 wage index with the 5 percent cap on wage index decreases and comparing it to simulated total payments for LUPA 30-day periods of care using the CY 2025 wage index with the 5 percent cap. By dividing the total payments for LUPA 30-day periods of care using the CY 2026 wage index by the total payments for LUPA 30-day periods of care using the CY 2025 wage index, we obtained a wage index budget neutrality factor of 1.0004. As a reminder, the wage index budget neutrality factors for the national, standardized 30-day period amount and the national LUPA per-visit rates are not equal because they are calculated differently. The wage index budget neutrality factor for the LUPA per-visit payments is calculated by simulating total payments for LUPA 30-day periods while the 30-day period budget neutrality factor is calculated by simulating payments for non-LUPA 30-day periods.

The LUPA per-visit rates are not calculated using case-mix weights. Therefore, no case-mix weight budget neutrality factor is needed to ensure budget neutrality for LUPA payments. Additionally, we are not applying the permanent adjustment or the temporary adjustment to the per-visit payment rates but only to the case-mix adjusted 30-day payment rate. Lastly, the per-visit rates for each discipline are updated by the proposed CY 2026 home health payment update percentage of 2.4 percent. The national per-visit rates are adjusted by the wage index based on the site of service of the beneficiary. The per-visit payments for LUPAs are separate from the LUPA add-on payment amount, which is paid for periods that occur as the only period or initial period in a sequence of adjacent periods. The proposed CY 2026 national per-visit rates for HHAs that submit the required quality data are updated by the proposed CY 2026 home health payment update percentage of 2.4 percent and are shown in table 28.

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The CY 2026 per-visit payment rates for HHAs that do not submit the required quality data would be updated by 0.4 percent, which is the proposed CY 2026 home health payment update percentage of 2.4 percent minus 2 percentage points and are shown in table 29.

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We are soliciting comments on the proposed CY 2026 30-day home health payment rates and the per-visit payment rates.

d. LUPA Add-On Factors

Prior to the implementation of the 30-day unit of payment, LUPA episodes were eligible for a LUPA add-on payment if the episode of care was the first or only episode in a sequence of adjacent episodes. As described in the CY 2008 HH PPS final rule, the average visit lengths in these initial LUPAs are 16 to 18 percent higher than the average visit lengths in initial non-LUPA episodes (72 FR 49848). LUPA episodes that occur as the only episode or as an initial episode in a sequence of adjacent episodes are adjusted by applying an additional amount to the LUPA payment before adjusting for area wage differences.

In the CY 2014 HH PPS final rule (78 FR 72305), we changed the methodology for calculating the LUPA add-on amount, whereby we finalized the approach of multiplying the per-visit payment amount for the first skilled nursing (SN), physical therapy (PT), or speech language pathology (SLP) visit in LUPA episodes that occur as the only episode or an initial episode in a sequence of adjacent episodes by 1 + the proportional increase in minutes for an initial visit over non-initial visits. Specifically, we updated the analysis using 100 percent of LUPA episodes and a 20 percent sample of non-LUPA first episodes from CY 2012 claims data. At that time, we finalized add-on factors: 1.8451 for SN; 1.6700 for PT; and 1.6266 for SLP. In the CY 2019 HH PPS final rule with comment period (83 FR 56440), in addition to finalizing a 30-day unit of payment, we finalized our policy of continuing to multiply the per-visit payment amount for the first SN, PT, or SLP visit in LUPA periods that occur as the only period of care or the initial 30-day period of care in a sequence of adjacent 30-day periods of care by the appropriate add-on factor (using the already established LUPA add-on factors of 1.8451 for SN, 1.6700 for PT, and 1.6266 for SLP) to determine the LUPA add-on payment amount for 30-day periods of care under the PDGM.

In the CY 2025 HH PPS final rule (89 FR 88426 through 88427), in an effort to enhance the accuracy and relevance of LUPA add-on factors to reflect current healthcare practices and costs, we finalized updates to the LUPA add-on factors for PT, SN, and SLP, which had not been revised since the CY 2014 HH PPS final rule (using CY 2012 claims data). We finalized the proposal to use the same methodology to establish the LUPA add-on amount for CY 2014, using updated claims data.

Specifically, we updated the LUPA add-on factors by using 100 percent of LUPA periods and a 100 percent sample of non-LUPA first periods from CY 2023 claims data (as of September 11, 2024). Our analysis found that the average excess of minutes for the first visit in LUPA periods that were the only period or an initial LUPA in a sequence of adjacent periods are 29.91 minutes for the first visit if SN, 28.08 minutes for the first visit if PT, and 31.57 minutes for the first visit if SLP. The average minutes for all non-first visits in non-LUPA episodes are 41.54 minutes for SN, 45.11 minutes for PT, and 47.15 minutes for SLP. To determine the LUPA add-on factors for each discipline, we calculated the ratio of the average excess minutes for the first visits in LUPA claims to the average minutes for all non-first visits in non-LUPA claims. We then added one to these ratios to obtain the final add on factors. Therefore, beginning in CY 2025 the final LUPA add on factors for SN, PT, and SLP are 1.7200 for SN; 1.6225 for PT; and 1.6696 for SLP.

Additionally, as outlined in the CY 2025 HH PPS proposed rule (89 FR 55378), in order to implement Division CC, section 115, of the Consolidation Appropriations Act (CAA), 2021, CMS finalized changes to the regulations at §  484.55(a)(2) and (b)(3) that allowed occupational therapists to conduct initial and comprehensive assessments for all Medicare beneficiaries under the home health benefit when the plan of care does not initially include skilled nursing care, but included OT, as well as either PT or SLP (86 FR 62351). This change necessitated the establishment of a LUPA add-on factor for calculating the LUPA add-on payment amount for the first skilled OT visit in LUPA periods that occur as the only period of care or the initial 30-day period of care in a sequence of adjacent 30-day periods of care. However, at the time of the implementation, we stated in the CY 2022 HH PPS final rule (86 FR 62289), there was not sufficient data regarding the average excess minutes for the first visit in LUPA periods when the initial and comprehensive assessments are conducted by occupational therapists. Therefore, we finalized a policy using the PT LUPA add-on factor as a proxy. We also stated in the CY 2022 final rule that we will use the PT LUPA add-on factor as a proxy until we have CY 2022 data to establish a more accurate OT add-on factor for the LUPA add-on payment amounts (86 FR 62289). Ultimately, we refrained from using CY 2022 data (and instead utilized the PT LUPA add-on factor as a proxy for the OT LUPA add-on factor), as we marked the first year that occupational

In the CY 2025 HH PPS final rule (89 FR 88427), we finalized a proposal to discontinue use of the PT LUPA add-on factor as a proxy and established a definitive LUPA add-on factor for occupational therapy. We used the same methodology used to establish the LUPA add-on amount for CY 2014, as described previously for the SN, PT, and SLP add-on factors. Specifically, we updated the analysis using 100 percent of LUPA periods and a 100 percent sample of non-LUPA first periods from CY 2023 claims data. Using updated analysis (as of September 11, 2024), we found that the average excess of minutes for the first OT visit in LUPA periods that were the only period or an initial LUPA in a sequence of adjacent periods is 33.28 minutes for the first visit. The average number of minutes for all non-first visits in non-LUPA periods is 45.98 minutes for OT. To determine the LUPA add-on factor for OT to account for the excess minutes during the first visit in a LUPA period, we finalized calculating the ratio of the average excess minutes for the first visits in LUPA claims to the average minutes for all non-first visits in non-LUPA claims. We then added one to this ratio to obtain the final add on factor of 1.7238 for OT. Therefore, the OT LUPA factor of 1.7238 is used when occupational therapy is the first skilled visit in a LUPA period that occurs as the only period or an initial period in a sequence of adjacent periods.

4. Payments for High-Cost Outliers Under the HH PPS

a. Background

Section 1895(b)(5) of the Act allows for the provision of an addition or adjustment to the home health payment amount otherwise made in the case of outliers because of unusual variations in the type or amount of medically necessary care. Under the HH PPS and the previous unit of payment (that is, 60-day episodes), outlier payments were made for 60-day episodes whose estimated costs exceed a threshold amount for each HHRG. The episode's estimated cost was established as the sum of the national wage-adjusted per-visit payment amounts delivered during the episode. The outlier threshold for each case-mix group or PEP adjustment is defined as the 60-day episode payment or PEP adjustment for that group plus a fixed-dollar loss (FDL) amount. For the purposes of the HH PPS, the FDL amount is calculated by multiplying the home health FDL ratio by a case's wage-adjusted national, standardized 60-day episode payment rate, which yields an FDL dollar amount for the case. The outlier threshold amount is the sum of the wage and case-mix adjusted PPS episode amount and wage-adjusted FDL amount. The outlier payment is defined as a proportion of the wage-adjusted estimated cost that surpasses the wage-adjusted threshold. The proportion of additional costs over the outlier threshold amount paid as outlier payments is referred to as the loss-sharing ratio.

As we noted in the CY 2011 HH PPS final rule (75 FR 70397 through 70399), section 3131(b)(1) of the Affordable Care Act amended section 1895(b)(3)(C) of the Act to require that the Secretary reduce the HH PPS payment rates such that aggregate HH PPS payments were reduced by 5 percent. In addition, section 3131(b)(2) of the Affordable Care Act amended section 1895(b)(5) of the Act by redesignating the existing language as section 1895(b)(5)(A) of the Act and revised the language to state that the total amount of the additional payments or payment adjustments for outlier episodes could not exceed 2.5 percent of the estimated total HH PPS payments for that year. Section 3131(b)(2)(C) of the Affordable Care Act also added section 1895(b)(5)(B) of the Act, which capped outlier payments as a percent of total payments for each HHA for each year at 10 percent.

As such, beginning in CY 2011, we reduced payment rates by 5 percent and targeted up to 2.5 percent of total estimated HH PPS payments to be paid as outliers. To do so, we first returned the 2.5 percent held for the target CY 2010 outlier pool to the national, standardized 60-day episode rates, the national per visit rates, the LUPA add-on payment amount, and the NRS conversion factor for CY 2010. We then reduced the rates by 5 percent as required by section 1895(b)(3)(C) of the Act, as amended by section 3131(b)(1) of the Affordable Care Act. For CY 2011 and subsequent calendar years we targeted up to 2.5 percent of estimated total payments to be paid as outlier payments, and apply a 10-percent agency-level outlier cap.

In the CY 2017 HH PPS proposed and final rules (81 FR 43737 through 43742 and 81 FR 76702), we described our concerns regarding patterns observed in home health outlier episodes. Specifically, we noted the methodology for calculating home health outlier payments may have created a financial incentive for providers to increase the number of visits during an episode of care in order to surpass the outlier threshold and simultaneously created a disincentive for providers to treat medically complex beneficiaries who require fewer but longer visits. Given these concerns, in the CY 2017 HH PPS final rule (81 FR 76702), we finalized changes to the methodology used to calculate outlier payments, using a cost-per-unit approach rather than a cost-per-visit approach. This change in methodology allows for more accurate payment for outlier episodes, accounting for both the number of visits during an episode of care and the length of the visits provided. Using this approach, we now convert the national per-visit rates into per 15-minute unit rates. These per 15-minute unit rates are used to calculate the estimated cost of an episode to determine whether the claim would receive an outlier payment and the amount of payment for an episode of care. In conjunction with our finalized policy to change to a cost-per-unit approach to estimate episode costs and determine whether an outlier episode should receive outlier payments, in the CY 2017 HH PPS final rule we also finalized the implementation of a cap on the amount of time per day that would be counted toward the estimation of an episode's costs for outlier calculation purposes (81 FR 76725). Specifically, we limit the amount of time per day (summed across the six disciplines of care) to 8 hours (32 units) per day when estimating the cost of an episode for outlier calculation purposes.

In the CY 2017 HH PPS final rule (81 FR 76724), we stated that we did not plan to re-estimate the average minutes per visit by discipline every year. Additionally, the per unit rates used to estimate an episode's cost were updated by the home health update percentage each year, meaning we would start with the national per visit amounts for the same calendar year when calculating the cost-per-unit used to determine the cost of an episode of care (81 FR 76727). We would continue to monitor the visit length by discipline as more recent data becomes available and may propose updating the rates as needed in the future.

In the CY 2019 HH PPS final rule with comment period (83 FR 56521), we finalized a policy to maintain the current methodology for payment of high-cost outliers upon implementation of PDGM beginning in CY 2020 and calculated payment for high-cost outliers based upon 30-day period of care. Upon implementation of the PDGM and 30-day unit of payment, we finalized the FDL ratio of 0.56 for 30-

b. Proposed FDL Ratio for CY 2026

For a given level of outlier payments, there is a trade-off between the values selected for the FDL ratio and the loss-sharing ratio. A high FDL ratio reduces the number of periods that can receive outlier payments but makes it possible to select a higher loss-sharing ratio, and therefore, increase outlier payments for qualifying outlier periods. Alternatively, a lower FDL ratio means that more periods can qualify for outlier payments, but outlier payments per period must be lower.

The FDL ratio and the loss-sharing ratio are selected so that the estimated total outlier payments do not exceed the 2.5 percent aggregate level (as required by section 1895(b)(5)(A) of the Act). Historically, we have used a value of 0.80 for the loss-sharing ratio, which we believe preserves incentives for agencies to attempt to provide care efficiently for outlier cases. With a loss-sharing ratio of 0.80, Medicare pays 80 percent of the additional estimated costs that exceed the outlier threshold amount.

Using CY 2024 claims data (as of March 13, 2025) and given the statutory requirement that total outlier payments do not exceed 2.5 percent of the total payments estimated to be made under the HH PPS, we are proposing an FDL ratio of 0.46 for CY 2026. CMS would update the FDL, if needed, in the final rule once we have more complete CY 2024 claims data.

F. Proposed Regulation Change to Face-to-Face Encounter

As a condition for payment, section 6407(a) of the Affordable Care Act (Pub. L. 111-148, March 23, 2010) requires that prior to certifying a patient's eligibility for the home health benefit, the physician must document that the physician himself or herself or a non-physician practitioner (NPP) has had a face-to-face encounter with the patient. In the Home Health Prospective Payment System Rate Update for Calendar Year 2011; Changes in Certification Requirements for Home Health Agencies and Hospices final rule (75 FR 70427) (hereinafter referred to as the CY 2011 HH PPS final rule), we established that the certifying physician must document the face-to-face encounter regardless of whether the physician himself or herself or one of the permitted NPPs performed the face-to-face encounter. Sections 6407(a)(1)(B) and 6407(a)(2)(B) of the Affordable Care Act further describes NPPs who may perform this face-to-face patient encounter.

In the Medicare Program, Home Health Prospective Payment System Rate Update for Calendar Year 2012 final rule (hereinafter referred to as the CY 2012 HH PPS final rule), we stated that the Medicare home health benefit relies on the patient's physician to determine eligibility for home health services (76 FR 68596), noting that this type of physician involvement is critical from both a quality of care and program integrity perspective. Prior to enactment of section 6407(a) of the Affordable Care Act regarding the home health face-to-face encounter provision, the patient's physician often relied on information provided by an HHA when making decisions about patient care. In the CY 2012 HH PPS final rule (76 FR 68597), we stated that, in addition to the certifying physician and allowed NPPs, the physician who cared for the patient in an acute or post-acute care facility, and who had privileges in such facility, could also perform the face-to-face encounter and inform the certifying physician, who would document the encounter as part of the certification of eligibility, and that encounter supported the patient's homebound status and need for skilled services. During the CY 2012 HH PPS rulemaking comment period, stakeholders requested that CMS allow any physician to complete the face-to-face encounter, rather than limiting it to the certifying physician or allowed NPP; however, CMS referred commenters to the CY 2011 HH PPS final rule where we stated we did not believe that we had the statutory authority to allow for this additional flexibility (76 FR 68596). The Affordable Care Act established the requirement for a physician face-to-face encounter prior to certifying a patient's eligibility for home health services, along with other program integrity provisions, to address concerns surrounding ineligible patients receiving home health services and concerns that physicians who had no firsthand knowledge of the patient's clinical condition were certifying the patient's eligibility for home health. In the CY 2011 HH PPS final rule, we described research that showed fewer re-hospitalizations when the home health patient had a recent encounter with the physician responsible for the home health care plan. As such, 42 CFR 424.22(a)(1)(v)(A) requires that a face-to-face encounter be performed by the certifying physician; the certifying allowed practitioner (for example, nurse practitioner, clinical nurse specialist, physician assistant); or a certified nurse midwife. Additionally, 42 CFR 424.22(a)(1)(v)(C) requires that a face-to-face encounter be performed by the certifying physician or allowed practitioner unless the encounter is performed by a certified nurse midwife or a physician, physician assistant, nurse practitioner, or clinical nurse specialist with privileges who cared for the patient in an acute or post-acute care facility from which the patient was directly admitted to home health and who is different from the certifying practitioner.

Section 3708 of the Coronavirus Aid, Relief, and Economic Security Act, 2020 (CARES Act) (Pub. L.116-136, March 27, 2020) amended sections 1814(a) and 1835(a) of the Act to allow nurse practitioners (NPs), clinical nurse specialists (CNSs), and physician assistants (PAs) (as those terms are defined in section 1861(aa) of the Act), to order and certify patients for eligibility under the Medicare home health benefit and establish a plan of care. Since its implementation in the March 31, 2020 COVID-19 interim final rule with comment period (85 FR 27550), CMS has received requests from stakeholders to change the current face-to-face encounter policy to allow any practitioner to perform the face-to-face encounter and not limit this regulation to the certifying practitioner, a permitted NPP, or a physician or allowed practitioner with privileges who cared for the patient in an acute or post-acute care facility from which the patient was directly admitted to home health, as set out at § 424.22(a)(1)(v)(C). Commenters have stated that the CARES Act language allows this additional flexibility. Additionally, commenters have stated, and CMS agrees, that the current regulation text at § 424.22(a)(1)(v)(A)(1) through(4) can be read to allow NPs, CNSs, and PAs to perform the face-to-face encounter regardless of whether they certify the patient for home health services, but limits the provision of the face-to-face encounter to the certifying physician or a physician, with privileges, who cared for the patient in an acute or post-acute care facility from which the patient was directly admitted to home health. Therefore, stakeholders have requested that any physician, in addition to NPs, CNSs, and PAs, be allowed to perform the face-to-face encounter regardless of whether they are the certifying practitioner or whether they cared for the patient in the acute or post-acute facility from which the patient was directly admitted to home health and who is different from the certifying practitioner. Some commenters have

We agree that it would be reasonable for the patient's PCP to certify eligibility under the Medicare home health benefit and establish the plan of care even though a different physician or allowed practitioner in the same practice conducted the face-to-face encounter. However, we note that it would not be appropriate for a practitioner who specializes in optometry to certify a patient for home health services that are needed due to orthopedic reasons. These are only a couple of examples of circumstances that could occur, and we do not plan to enumerate in this rulemaking all situations in which the certifying provider may be different than the provider who conducted the face-to-face encounter.

Regarding our original concern in limiting the face-to-face encounter to the certifying provider (or the provider who cared for the patient in the inpatient facility), we still believe physician or allowed practitioner involvement is critical from both a quality of care and program integrity perspective. However, we note that additional program integrity protections exist currently in the certification policies. To be eligible for Medicare home health services, in accordance with § 424.22(a)(1)(iv) a patient must be under the care of a physician or an allowed practitioner. Additionally, in accordance with § 424.22(a)(1)(v), the face-to-face encounter documentation must be related to the primary reason the patient requires home health services, occur in the required time frame by an allowed provider type, and the certifying practitioner must include a signature and the date of the encounter as part of the certification. Furthermore, our subregulatory guidance in the Medicare General Information, Eligibility and Entitlement Manual (Pub. 100-01, chapter 4, section 30.1) provides that physicians and allowed practitioners should complete the certification when the plan of care is established, or as soon as possible thereafter, and that it is not acceptable to wait until the end of the required time frame to complete the requirements. As such, the certification also cannot be completed after a patient is discharged from home health services.

Additionally, our subregulatory guidance in the Medicare General Information, Eligibility and Entitlement Manual (Pub. 100-01, chapter 4, section 30.1), the Medicare Benefit Policy Manual (Pub. 100-02, chapter 7, section 30.5), and the Medicare Program Integrity Manual (Pub. 100-08, chapter 6 section 6.2.1 and 6.2.3) also supports our program integrity and quality goals. Specifically, the subregulatory guidance provides additional details on requirements that include the following: specific signature and date requirements; a requirement for an actual clinical note from the certifying practitioners for the face-to-face encounter visit; specific information that must be present in face-to-face encounter documentation; a requirement that a new face-to-face encounter is required if the patient's condition has changed; a requirement that home health eligibility must be supported by o

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