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Everyone in the home-based care industry is trying to catch their breath after what appears to be a significant blow to the American health care system, including the release of the CY 2026 home health proposed payment rule by CMS on June 30 and the passage of the “One Big Beautiful Bill” (OBBB) last Friday.
The CMS payment rule forecasts a 6.4% reduction in Medicare payments to home health agencies in 2026, totaling an estimated $1.135 billion decrease compared to 2025. Meanwhile, the OBBB included more than $1 trillion in Medicaid cuts, which almost certainly will cause reverberations among home- and community-based care providers.
While we’re still sorting out the implications of the proposed Medicare rule and the OBBB, reactions over the last week have distilled concerns in a few areas – and while industry leaders have used terms like “life and death” and “death knell” to describe the severity of the risk that providers face, we’ve also tried to find reasons for tentative optimism, or at least areas to focus on as agencies seek to move forward.
In this week’s exclusive, members-only HHCN+ Update, I’ll break down some of these key areas of concern and focus, offering analysis and key takeaways including:
Threats to the accessibility of at-home care
Implications for M&A – including the UnitedHealth, Amedisys deal
Potential effects on the delivery of behavioral health services in the home
Where to go from here
Increased alarm, access threatened
When reporting on news like payment rules, HHCN always solicits comments from providers and experts to learn about the anticipated on-the-ground impacts. This year’s reactions feel different.
Turning to last year’s coverage of proposed Medicare payment cuts, the reactions were dramatic. Providers and industry experts used words like “unsustainable,” “undermine,” “jeopardize,” and “suffer.” Consequently, people did not mince words about the idea of a third straight year of permanent home health payment cuts.
The phrasing escalated even further this year, demonstrating the rising stakes.
Dr. Steve Landers, the CEO of the National Alliance for Care at Home, called the cuts a “life and death safety issue” and a “systematic dismantling of the home health safety net.” Katie Smith Sloan, president and CEO of LeadingAge, an association of over 5,400 nonprofit aging services providers, said the proposed cut indicated a “bleak” outlook for home-based care and that it would be a “death knell for many quality agencies.”
The increasing alarm aligns neatly with the increasingly dire rate cuts, and should demonstrate to providers the depth of the issue.
These spending cuts lead to significant changes, which concern home health providers and advocacy groups, especially since this is the fourth consecutive year that CMS has implemented permanent cuts to home health payments. Perhaps the foremost concern is that home health providers will have to scale back or shut down, resulting in a crisis of access.
“CMS since CY2023 has slashed payments by nearly 9%; add (this) more than 6% reduction, and for many agencies, especially the 7% of all who are nonprofit, the administration’s announcement is essentially pushing them to exit the business, close or severely limit services,” Sloan said in a statement.
It looks like previous years’ cuts are making it harder for adults and families in need of care to access services. Between 2019 and 2023, the number of skilled home health agencies treating more than 10 fee-for-service patients annually declined or remained unchanged in 94.1% of U.S. counties, according to Trella Health. Half of U.S. counties have five or fewer home health agencies per 1,000 square miles, with many rural areas having access to only one agency serving more than 10 patients.
“Now consider that on top of this significantly lower Medicare fee-for-service payment rate and inadequate reimbursements from Medicare Advantage, the financial landscape that providers will be navigating when the CY2026 rate goes live will almost certainly include reduced federal reimbursement for Medicaid services,” Sloan said. Sloan concluded by saying that agencies offering Medicaid home health benefits will be “squeezed on both ends”: cuts from state Medicaid funds and reductions in federal Medicaid fee-for-service rates.
The Texas Association for Home Care & Hospice (TAHC&H) also raised the alarm over the proposed rule, saying that it “threatens access to home health care” in the state.
“As the unified voice for over 1,200 home care and hospice providers across Texas, TAHC&H is gravely concerned that this proposal will accelerate the ongoing decline in Medicare-certified home health agencies,” the association said in a statement. “Since the codification of the PDGM, Texas has seen a more than 20% decrease in these agencies – a trend that threatens to leave thousands of vulnerable Texans without essential care.”
TAHC&H urged CMS to reconsider and withdraw the proposal, saying the consequences of moving forward would be “diminished access to home-based care, increased strain on hospitals and long-term care facilities, and a devastating impact on the health and well-being of Texas’ most vulnerable residents.”
M&A concerns and the future of the Amedisys mega-deal
Industry experts also predict that dealmaking could take a hit. John Ransom, managing director and director of health care research at Raymond James, said in an analyst note that the proposed home health Medicare payment cut could be the straw that breaks the camel’s back for the UnitedHealth/Amedisys merger.
“We wonder if this could mean the AMED/UNH deal is off, given it has faced a two-year legal battle with the Department of Justice, and the deal is currently set to go to mediation in August,” Ransom said, according to MSN. “We wonder if UNH would be willing to walk away given their current situation and to avoid more heartache with regulators.”
If the rate adjustments are steep enough to fell a critical deal among industry giants, smaller players looking to sell may also encounter muted interest from investors.
These cuts may also eliminate inefficient home care businesses or lead to consolidation, with larger companies acquiring smaller ones, given that payment pressures could increase the need for economies of scale. While this isn’t always good news for smaller organizations, consolidation might help keep services available for those in need of care.
I think the payment pressures, particularly the Medicaid cuts in the OBBB, could also further entrench the strategy of M&A to create market density rather than scale across more dispersed locations. Already, this trend can be seen in moves like Addus HomeCare’s exit from New York state and expansion in key strongholds like Texas.
“Every new state you enter is essentially creating a new business, and having to manage the dynamics state by state is a struggle in terms of business scalability, certainly,” Joe Widmar, director at West Monroe, recently told HHCN. “If a platform is expanding acquisitively into new states, that presents even more challenges. Not only do they have to learn the dynamics of that state from a payer, regulatory and labor standpoint, they have to then determine how to integrate acquisitions in new states.”
Insofar as the Medicaid policies in the OBBB will lead states to reconsider how they run their Medicaid programs, including in how they distribute funds to different types of providers, that will deepen uncertainty about what the future holds and the variability that might exist from one state to another. And if this comes to pass, I could see potential buyers hitting pause on expanding into new states until they see a new normal prevailing.
At-home behavioral health in jeopardy
The OBBB cuts around $1 trillion from federal Medicaid spending between 2025 and 2034, resulting in 11.8 million more people being uninsured. The White House’s website touts that over 1,000 organizations supported the bill. From an unscientific review of the page, only two of the organizations represent health care interests.
Cynthia Cox, vice president and director of the program on the ACA at KFF, estimates that, due to the BBB Act and other policy changes, the total number of people without health insurance is expected to rise by about 17 million. If this occurs, it would mark the “biggest rollback of health insurance coverage ever” caused by federal policy changes. The effects felt by people with behavioral health needs could be especially dire.
The need for more robust at-home care for this population is great, as are the impediments to providing that care, HHCN recently reported. This situation has become even thornier.
“We hoped the Senate’s reconciliation bill would retreat from the devastating Medicaid cuts passed by the House,” an Ancor representative said in a statement. “What we got instead was a bill that increased harmful reductions that will devastate people with intellectual and developmental disabilities.”
Ancor is a Washington, D.C.-based advocacy group that works to shape policy and share solutions to help community-based providers support individuals with intellectual and developmental disabilities.
When federal Medicaid funding decreases, states tend to cut optional programs first, according to the Ancor statement and several other HHCN sources. Under federal law, the Medicaid home- and community-based services (HCBS) program is considered optional, meaning that services that help people with intellectual and developmental disabilities stay in their communities rather than in institutions will be cut first.
“The human cost is perhaps more staggering than the financial costs,” the Ancor statement continued. “Over 500,000 people with intellectual and developmental disabilities are already trapped on states’ waiting lists to receive HCBS services, unable to access what they need to live independently. These proposed cuts will make that crisis exponentially worse.”
Moving forward
Yet, there may be a couple of bright spots in this chaos.
Rate cuts proposed in CMS’ proposed final rule don’t usually translate as aggressively in the final rule. We often see only half of the proposed cuts implemented. While it is still a decrease, it may not be as severe.
Brian Harris, vice president of financial consulting at SimiTree, said, regardless of the final rule, the cuts are “disheartening” in a SimiTree webinar on Tuesday.
“CMS has proposed these permanent adjustments every year in the proposed rule, and then, ultimately, especially in the last three rulemaking years, cut it in half come time for the final rule,” Harris said. “It’s important to note that even if they take a similar approach this year, it’s likely still going to result in an overall decrease in spending. We’re looking at just a 4.059% rate reduction specifically to this permanent adjustment factor. That doesn’t even count in some of the other pieces that we are looking at here.”
Additionally, Medicaid’s funding changes under the new law are not scheduled to take effect until 2028, which is well past the upcoming midterm elections. There is still time for the American people to take action with their votes and help steer the ship in the right direction.
Providers can take actions now to prepare for the impact, while hoping for a more lenient final rule and for voters to take action.
Companies should ensure they optimize their reimbursement and outcomes by prioritizing coding and OASIS, including considering outsourcing some of these tasks, according to Harris. They should also analyze the true financial impact of the proposed cuts, Harris said. While the 6.4% reduction is universal, each agency must study the actual financial impact of each of its branches.
“(I) really recommend, now more than ever, perform an organizational assessment, identify both revenue and expense opportunities,” Harris said. “You want to start that now. Again, assume that CMS might dial back a little bit on some of these cuts come the final rule. It’s not a given, but that’s what history has shown us. But even if they do that, we’re probably seeing at best a break-even with the spending and the base rates heading into the next year. So you need to make sure you prepare accordingly.”
Even with all the preparation in the world, I fear that even companies that work aggressively to prepare for these changes may not remain unscathed if such deep cuts are implemented, coupled with sweeping Medicaid budget cuts. We have already seen layoffs due to a tough regulatory environment on a large player in the at-home care space – I can’t help but anticipate that lower margins may increasingly force the industry to make similarly difficult decisions.
