Typically, each year, the Centers for Medicare & Medicaid Services (CMS) Home Health Prospective Payment System (HH PPS) proposed rule brings expected discussions around payment updates, wage indexes, and Patient-Driven Groupings Model (PDGM) refinements.
While those financial provisions continued to remain important in the proposed rule, another topic area of program integrity and provider accountability really continued to be the center stage in this proposal.
Putting this in the context with the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) 2025 audit, with a very little sample size, reported a big financial opportunity of $1.2 billion. Fast forward to May of this year, and CMS announces a six-month nationwide moratorium on new Medicare enrollment for home health agencies and hospices, along with intensified investigations, advanced data analytics, and faster removal of providers suspected of fraud.
The CY 2027 proposal serves as another reminder that documentation, enrollment compliance, and clinical decision-making remain under increased scrutiny.
CMS is proposing several changes designed to strengthen its ability to identify non-compliant providers and recover improper payments. Among the most notable proposals are the following:
- Retroactive application of all Medicare enrollment revocations, allowing CMS to recover payments back to the date noncompliance began rather than only prospectively.
- New denial and revocation authorities related to changes in majority ownership for home health agencies that fail to comply with required reenrollment and survey requirements.
- Expanded authority to deny or revoke enrollment when owners, managing employees, or managing organizations have experienced licensure suspensions or exclusions from Medicaid or other federal healthcare programs.
From the acute care perspective, these proposals have implications well beyond the home health industry itself. Hospitals continue to experience limited post-acute capacity with delayed transitions of care, while simultaneously caring for an aging population whose demand for home-based services continues to grow. Case management teams have increasingly relied on home health as a critical component of safe transitions from hospital to home, recognizing its role in reducing avoidable readmissions.
However, increased regulatory oversight may create additional challenges for agencies already operating on narrow financial margins. While there is little debate that fraud and abuse must be addressed, many of the payment suspensions and recoupments currently identified seem to be more associated with insufficient documentation supporting Medicare coverage requirements. These appear to include the following:
- Failure to adequately support homebound status;
- Insufficient documentation demonstrating medical necessity for skilled services;
- Incomplete or delayed physician certifications and plans of care; and
- Lack of documentation showing continued skilled need throughout the episode of care.
As enforcement activities are expected to continue, documentation quality becomes increasingly important. The referral process, certification, and initiation of home health services will need to demonstrate medical need that the patient qualifies as homebound, that the ordered skilled services are medically necessary and aligned with the patient’s clinical condition, and that the care plan has measurable clinical goals. Additionally, there must be clear involvement from the physician/provider throughout the episode of care with appropriate reassessment of ongoing skilled need.
For reference CMS defines homebound as home health services are or were required because the individual is or was confined to the home per the criteria below (as defined in sections 1835(a) and 1814(a) of the Social Security Act).
- a. Criteria-One: The patient must– – Because of illness or injury, need the aid of supportive devices such as crutches, canes, wheelchairs, and walkers; the use of special transportation; or the assistance of another person in order to leave their place of residence OR – Have a condition such that leaving his or her home is medically contraindicated. If the patient meets one of the Criteria-One conditions, then the patient must ALSO meet two additional requirements defined in Criteria-Two below.
- b. Criteria-Two: – AND – There must exist a normal inability to leave home; Leaving home must require a considerable and taxing effort. In determining whether the patient meets criterion two of the homebound definition, the clinician needs to take into account the illness or injury for which the patient met criterion one and consider the illness or injury in the context of the patient’s overall condition.
For hospitals and healthcare organizations, this proposed rule serves as an important reminder that compliance does not begin when the home health agency admits the patient but rather during the discharge planning process. Case management teams should ensure referrals demonstrate the medical necessity requirements for homebound status, skilled need, physician involvement, and clearly defined goals of care. Likewise, healthcare organizations should consider evaluating their own transition-of-care processes and partnerships with home health agencies to identify potential compliance risks before they result in payment denials or delays in patient care.
It may be time for a good refresher with case management (CM), physician advisors, and high-volume referring providers such as hospitalists, to understand the requirements for home health services. Particularly going beyond the requirements for patient choice and discharge disposition documentation of ‘home with home health’.
If you are a healthcare organization that also has its own home health division, an internal audit is likely a good idea at this time. Finally, this is also a great opportunity to strengthen partnerships between hospitals and their preferred home health providers.
Regular meetings to review denial trends, documentation deficiencies, referral turnaround times, and regulatory updates can improve both compliance and patient outcomes.
As more home health agencies operate under increased regulatory scrutiny, they will likely become more selective in accepting referrals that lack sufficient documentation or present elevated compliance risk; straining patient home based care options.
