On November 28, 2025, the Centers for Medicare & Medicaid Services (CMS) finalized the Calendar Year 2026 Home Health Prospective Payment System Final Rule (CMS-1828-F). While this annual update includes routine payment adjustments, several critical changes introduce substantial legal and compliance risks for home health agencies (HHAs) and their leadership. With federal enforcement increasingly targeting individual accountability, ignoring these regulatory updates could result in lost payments, Medicare enrollment revocations, or exposure to False Claims Act investigations.

Below, we highlight the four most impactful provisions of the final rule from a legal risk and defense strategy perspective.

1. Medicare Enrollment Revocations Can Now Be Retroactive

CMS finalized new grounds to revoke a provider’s Medicare enrollment status retroactively, meaning revocations can be applied to dates before the notice is issued. This change dramatically increases recoupment exposure.

New triggers include:

• Inactivity: If a provider has not certified or ordered any Medicare services for 12 consecutive months, CMS may deactivate their billing privileges.

• Patient Complaints: If a beneficiary attests that they did not receive a billed service, CMS may revoke the provider's enrollment.

Why This Matters: Retroactive revocation enables CMS to recover all Medicare payments dating back to the earliest date of noncompliance. These situations frequently escalate to audits or False Claims Act investigations, especially if CMS believes the issue was known or should have been known.

Legal Strategy: Conduct enrollment and billing privilege audits now. If a revocation notice is issued, a rapid legal response and appeal are essential to preserve Medicare revenue streams.

2. Home Health Payment Reductions Tied to Coding Behavior: A Target for Audits and Penalties

The 2026 rule finalizes a ~1% permanent reduction and an additional 3% temporary cut to home health payments. These reductions are based on CMS's belief that providers altered their coding and clinical documentation behavior after the introduction of the Patient-Driven Groupings Model (PDGM) in 2020.

PDGM was created to align reimbursement more closely with patient clinical needs. However, CMS now asserts that many home health agencies may have over-coded or changed visit patterns to maximize reimbursement.

Why This Matters: These "behavioral adjustments" are now being used as a basis for audits, payment reductions, and potentially, allegations of fraud. CMS is using retrospective claims analysis to justify the cuts and may escalate cases where patterns suggest intentional inflation or abuse.

Legal Strategy: Review historical billing and coding patterns with counsel. Ensure that documentation supports clinical groupings, comorbidity coding, and visit frequency under PDGM. This is especially important if your agency is an outlier in CMS data.

3. Recalibration of Case-Mix and Visit Thresholds Increases Risk of Underpayment and Audit Each of the 432 payment groups under the Patient-Driven Groupings Model (PDGM) has been recalibrated for 2026. CMS used data from 2024 to update:

• Case-mix weights

• Low Utilization Payment Adjustment (LUPA) thresholds

• Functional impairment levels and comorbidity subgroups

Why This Matters: These recalibrations may result in unexpected drops in reimbursement for agencies that fail to adjust their documentation practices or clinical service delivery. Improper classification or poor documentation can also increase exposure to overpayment audits or pre-payment claim denials. Legal Strategy: Collaborate with legal and compliance teams to audit patient intake, OASIS data, and visit planning. Legal review should focus on identifying coding errors or under-documentation that could trigger CMS scrutiny.

4. Broader Eligibility for Face-to-Face Encounters: More Flexibility, but More Legal Risk CMS updated its face-to-face encounter policy to better align with the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The final rule now permits nurse practitioners, clinical nurse specialists, physician assistants, and physicians (regardless of whether they are the certifying practitioner) to conduct the required face-to-face encounter before initiating home health services. Why This Matters: While this flexibility eases scheduling and access, it also creates increased legal risk if the practitioner conducting the encounter is not properly documented or is ineligible to do so. Claims can be denied if this requirement is not met and widespread failures could lead to broader compliance investigations. Legal Strategy: HHAs should implement updated policies and training for intake coordinators, ensure eligible practitioners are clearly identified, and include specific encounter documentation in every patient file.

Final Thoughts

The CY 2026 Medicare Home Health Final Rule introduces significant changes that require careful attention from home health providers. From retroactive enrollment revocations to payment reductions tied to coding behavior and recalibrated clinical thresholds, the regulatory landscape is shifting in ways that directly affect operational and financial stability. Now is the time for agencies to review their compliance programs, documentation practices, and risk exposure. Early legal guidance can help avoid costly setbacks and ensure long-term resilience.

We advise home health agencies on compliance, reimbursement strategy, and operational planning in response to evolving regulations from the Centers for Medicare & Medicaid Services (CMS). For project-specific analysis or regulatory guidance related to the CY 2026 Home Health Final Rule, contact our team at (212) 668-0200 or email us at info@mdrxlaw.com.