The home health industry is on high alert as it awaits the Home Health Calendar Year (CY) 2026 Final Rule. The proposed rule's severe rate cuts to the Patient-Driven Grouping Model (PDGM) sparked an unprecedented response, with Home Health Care News reporting that CMS received over 952,000 comments before the August 29th deadline.
As the industry awaits CMS's final decision, we felt it would be a good time to review a few key insights obtained by analyzing data from the SHP National Database since the start of PDGM in CY 2020.
Visits: A Declining Trend
Since PDGM's implementation, the number of non-LUPA visits per FFS 30-day period has consistently declined. This trend, which reflects a direct lever that agencies use to manage costs when Medicare rates fail to keep pace with expenses, has occurred even as patient outcomes have generally improved.
| Clinical Group | CY 2020 SHP ALL |
CY 2021 SHP ALL |
CY 2022 SHP ALL |
CY 2023 SHP ALL |
CY 2024 SHP ALL |
CY '24 vs. CY '20 % Var. |
|---|---|---|---|---|---|---|
| MMTA - Other | 8.56 | 8.16 | 7.92 | 7.72 | 7.57 | -11.6% |
| Neuro / Stroke Rehabilitation | 10.08 | 9.45 | 9.10 | 8.85 | 8.62 | -14.5% |
| Wounds - Post-Op Wound Aftercare | 10.24 | 9.95 | 9.71 | 9.54 | 9.36 | -8.5% |
| Complex Nursing Interventions | 6.57 | 6.40 | 6.14 | 5.97 | 5.86 | -10.9% |
| Musculoskeletal Rehabilitation | 9.74 | 9.18 | 8.86 | 8.59 | 8.39 | -13.9% |
| Behavioral Health | 7.44 | 7.22 | 6.97 | 6.83 | 6.73 | -9.6% |
| MMTA - Surgical Aftercare | 9.41 | 8.89 | 8.57 | 8.25 | 8.09 | -14.0% |
| MMTA - Cardiac / Circulatory | 8.35 | 8.04 | 7.85 | 7.73 | 7.58 | -9.2% |
| MMTA - Endocrine | 10.39 | 10.10 | 9.97 | 9.77 | 9.77 | -6.0% |
| MMTA - GI / GU | 8.72 | 8.29 | 8.08 | 7.98 | 7.78 | -10.8% |
| MMTA - Infectious Disease | 8.33 | 8.02 | 7.87 | 7.76 | 7.66 | -8.0% |
| MMTA - Respiratory | 8.88 | 8.64 | 8.47 | 8.22 | 8.03 | -9.5% |
| All Clinical Groups | 9.23 | 8.85 | 8.60 | 8.40 | 8.23 | -10.8% |
Discipline Breakdown: When analyzed by discipline, visits for Physical Therapy (PT) have remained relatively flat. This highlights the crucial role of function and mobility in home-based care and suggests that agencies are prioritizing these essential services.
| Discipline | CY 2020 SHP |
CY 2021 SHP |
CY 2022 SHP |
CY 2023 SHP |
CY 2024 SHP |
CY 24 vs. CY 20 % Var |
|---|---|---|---|---|---|---|
| RN | 4.35 | 4.02 | 3.85 | 3.71 | 3.65 | -16.1% |
| PT | 3.11 | 3.15 | 3.15 | 3.15 | 3.10 | -0.3% |
| OT | 1.00 | 0.99 | 0.97 | 0.95 | 0.92 | -7.6% |
| ST | 0.21 | 0.20 | 0.18 | 0.17 | 0.16 | -20.9% |
| MSW | 0.08 | 0.07 | 0.07 | 0.06 | 0.06 | -23.7% |
| HHA | 0.48 | 0.42 | 0.38 | 0.36 | 0.33 | -31.4% |
| Total | 9.23 | 8.85 | 8.60 | 8.40 | 8.23 | -10.8% |
LUPA Rates: Managing the Inevitable
CMS expected LUPA rates to fall below 6.0% under PDGM, but this projection has not fully materialized. Other than a temporary surge in March 2020 due to the COVID-19 pandemic, LUPA trends have remained consistent.
- LUPA Thresholds: Due to the trend of declining visits, CMS lowered the thresholds to 2 to 5 visits in CY 2023 compared to the original 2 to 6 visits, lowering the rate just under one percentage point as observed in the graph.
- Annual Trends: As shown in the chart below, a "holiday bump" in November and December LUPA rates has consistently been present each year under PDGM. Agencies with double-digit LUPA rates have a significant opportunity to optimize these cases and increase their revenue by reducing avoidable LUPAs.
Clinical Groups: Minimal Change
Contrary to initial CMS concerns, the distribution of Medicare FFS 30-day periods across clinical groups have remained largely stable over the last five years. Agencies did not engage in widespread "upcoding" to receive higher case-mix weights for categories like Wounds and Neuro/Stroke Rehab, as these rates have remained relatively flat.
The only notable change was a 2% increase in MS Rehab, likely attributable to the unavailability of elective hip and knee surgeries during the height of the COVID-19 pandemic.
| Clinical Group | CY 2020 SHP |
CY 2021 SHP |
CY 2022 SHP |
CY 2023 SHP |
CY 2024 SHP |
CY 2024 Δ from 2020 |
|---|---|---|---|---|---|---|
| MMTA - Other | 3.1% | 3.4% | 3.5% | 3.7% | 3.8% | 0.7% |
| Neuro / Stroke Rehab | 10.7% | 11.1% | 11.0% | 10.9% | 10.9% | 0.2% |
| Wounds | 14.9% | 14.7% | 14.6% | 14.7% | 14.9% | 0.0% |
| Complex Nursing | 4.0% | 3.7% | 3.6% | 3.5% | 3.6% | -0.4% |
| Musculoskeletal Rehab | 18.9% | 19.3% | 20.1% | 20.9% | 20.9% | 2.0% |
| Behavioral Health | 2.8% | 3.0% | 2.7% | 2.3% | 2.3% | -0.5% |
| MMTA - Surgical Aftercare | 4.1% | 4.0% | 4.0% | 4.3% | 4.3% | 0.2% |
| MMTA - Cardiac | 17.3% | 16.8% | 16.4% | 16.0% | 15.6% | -1.6% |
| MMTA - Endocrine | 5.6% | 5.4% | 5.1% | 4.8% | 4.6% | -1.0% |
| MMTA - GI / GU | 5.0% | 5.1% | 5.4% | 5.7% | 5.9% | 0.8% |
| MMTA - Infectious Disease | 5.2% | 5.0% | 5.1% | 5.3% | 5.5% | 0.3% |
| MMTA - Respiratory | 8.4% | 8.4% | 8.5% | 7.9% | 7.6% | -0.7% |
| Total | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 0.0% |
PDGM Components: Recalibration in Progress
Since CY 2022, CMS has begun its annual recalibrations of Case-Mix Weights (CMW), which has led to noticeable changes in both comorbidity adjustments and functional impairment scoring.
Comorbidity Adjustments: To refine the payment model, CMS has significantly expanded the number of comorbidity subgroups.
- Low Adjustment: The number of low-adjustment comorbidity subgroups increased from 13 in CY 2020/2021 to 22 in CY 2024.
- High Adjustment: High-adjustment comorbidity subgroup interactions saw an even larger jump, from 31 in CY 2020/2021 to 94 in CY 2024. This expansion explains some of the percentage increases observed in our data.
| Comorbidity Adjustment | CY 2020 SHP |
CY 2021 SHP |
CY 2022 SHP |
CY 2023 SHP |
CY 2024 SHP |
Δ from 2020 |
|---|---|---|---|---|---|---|
| None | 47.2% | 47.8% | 34.9% | 27.8% | 26.4% | -20.8% |
| Low | 37.9% | 37.7% | 49.2% | 54.2% | 56.9% | 18.9% |
| High | 14.8% | 14.5% | 15.9% | 18.0% | 16.7% | 1.9% |
| Total | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 0.0% |
Functional Impairment: CMS has been trying to adjust functional impairment scoring since CY 2022 to achieve a more balanced distribution across low, medium, and high categories, with a goal of 33.3% in each. Agencies receive points based on patients' clinical group and impairment thresholds, as documented by M-item responses. However, CMS's use of claim data from the prior year without anticipating changes in scoring has limited their progress toward this goal.
| Functional Impairment | CY 2020 SHP |
CY 2021 SHP |
CY 2022 SHP |
CY 2023 SHP |
CY 2024 SHP |
Δ from 2020 |
|---|---|---|---|---|---|---|
| Low | 24.0% | 21.2% | 25.3% | 25.9% | 26.1% | 2.1% |
| Med | 32.0% | 31.0% | 32.5% | 31.9% | 32.9% | 1.0% |
| High | 44.1% | 47.8% | 42.2% | 42.1% | 41.0% | -3.0% |
| Total | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 0.0% |
Source and Timing: These two components have remained relatively flat over the first five years of PDGM.
| Source & Timing | CY 2020 SHP |
CY 2021 SHP |
CY 2022 SHP |
CY 2023 SHP |
CY 2024 SHP |
Δ from 2020 |
|---|---|---|---|---|---|---|
| Community – Early | 12.0% | 11.8% | 12.2% | 12.5% | 12.3% | 0.2% |
| Institutional – Early | 23.8% | 22.5% | 23.4% | 24.3% | 23.8% | 0.0% |
| Community – Late | 59.0% | 60.5% | 59.5% | 58.3% | 59.0% | 0.1% |
| Institutional – Late | 5.2% | 5.2% | 4.8% | 4.9% | 4.9% | -0.3% |
| Total | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 0.0% |
Conclusion: Adapting to the Landscape
The first five years of the Patient-Driven Grouping Model (PDGM) have been a journey of adaptation for the home health industry. Our analysis of SHP data reveals that agencies have responded to the new payment structure by carefully managing visits and maintaining stable clinical coding practices, not by "upcoding" as CMS once feared.
These trends paint a picture of an industry that is both resilient and financially disciplined. As we await the CY 2026 Final Rule and its response to the industry's collective plea, it is clear that the future of home health care hinges on the ability of CMS and providers to find a sustainable path forward. The unprecedented volume of comments on the proposed rule is not just a protest, it's a clear signal that the industry is at a critical inflection point, where payment policy will directly impact the ability of agencies to deliver high-quality, essential care to our nation's most vulnerable patients.
The choices made in this final rule will determine whether agencies can continue to innovate and provide efficient, patient-centric care or if they will be forced to make difficult decisions that could compromise access and quality.
