The Home Health and Hospice Dual Regulatory Mandate: More Scrutiny, Less Payment Uncertainty

CMS Is Sending Two Very Different Signals to the Market

Recent CMS actions have created a paradox for home health and hospice investors and operators.

On one hand, CMS has taken some of the most aggressive program integrity actions the sectors have seen in years, including a nationwide enrollment moratorium for new home health agencies and hospices and proposals to strengthen provider enrollment enforcement authorities.

On the other hand, the recently proposed CY 2027 Home Health and FY 2027 Hospice rules suggest a relatively stable reimbursement environment, with no major rebasing initiatives, no new cuts to hospice payment methodology and increasing clarity around key home health payment policies, including the final phase of implementation of the patient-driven groupings model (PDGM). Further, CMS has unanimously signaled its support for end-of-life care across its 2027 proposed payment rules, particularly for community-based palliative care, a possible growth vector for existing post-acute care providers.

The result is a dual mandate in home health and hospice between enforcement and stability, with positive signals likely outweighing the negative for scaled, sophisticated operators.

Mandate #1: Reduce Fraud, Waste and Abuse through Enforcement

CMS implements a first-ever nationwide moratorium

In May 2026, CMS implemented a temporary nationwide enrollment moratorium on new home health and hospice providers. The moratorium applies not only to new enrollments but also to how providers expand their existing footprint within a given geography. CMS has stated that, similar to prior moratoria, the moratorium may be extended in six-month increments. The moratorium represents a clear signal that CMS believes fraud, waste and abuse concerns warrant extraordinary intervention.

For investors, the significance extends beyond the immediate operational impact.

CMS is also adding new enforcement tools

The CY 2027 Home Health proposed rule includes several provider enrollment proposals designed to strengthen CMS's ability to deny or revoke participation, recover payments and address ownership-related concerns. Proposed policies include expanded denial and revocation authorities and broader use of retroactive revocations.

Meanwhile, CMS continues to build additional hospice oversight infrastructure, including the proposed Service and Spending Variation Index (SSVI) in the FY 2027 Hospice , designed to identify hospices with potentially concerning utilization and spending patterns. The proposed composite measure will include a score of the level of spending occurring outside the hospice benefit and a utilization score assessing eight service-delivery indicators such as live discharge rates, length of stay and weekend visit rates.

The regulatory risk in home health and hospice is increasingly shifting from payment policy to compliance and program integrity.

Mandate #2: Return to an Environment of Payment Stability to Maintain Access

Despite the enforcement headlines, the proposed payment rules were notably less disruptive in comparison.

Home health: predictability is improving

The most important takeaway from the CY 2027 Home Health proposed rule is perhaps the lack of surprises: we saw a payment update largely in line with expectations, no permanent adjustment and an identical temporary adjustment to last year’s rule as PDGM implementation runs its course. Taken together, the policies resulted in a 2.4% proposed payment update.

Specifically, CMS proposes to continue a temporary -3.0% adjustment related to retrospective PDGM recoupment but does not propose an additional permanent behavioral adjustment for CY 2027. CMS explicitly acknowledges that more recent utilization and coding trends may be influenced by factors beyond PDGM implementation and therefore has determined that no additional permanent adjustments will be necessary. While did not propose a long-term recoupment schedule for prior overpayments, the stability of the -3% temporary adjustment two years in a row suggests CMS is likely to continue on this path, which will ensure positive annual updates throughout the recoupment window.  

For investors, the challenge in recent years has been uncertainty more than the ultimate rate level.

The industry has spent years debating:

• permanent behavioral adjustments;
• temporary recoupment methodology;
• PDGM recalibrations; and
• the scale of future payment reductions.

The CY 2027 proposal suggests much of that uncertainty may now be behind the sector.

Hospice: reimbursement remains fundamentally intact

The hospice proposed rule similarly reinforces payment stability.

CMS proposes a 2.4% payment update for FY 2027 and does not advance any major reimbursement restructuring proposals. This is primarily by design, as CMS has very limited statutory authority to propose payment changes to hospice in the absence of a congressional mandate.

While the agency continues to increase transparency and quality oversight—including new reporting requirements and the SSVI framework—the core hospice payment architecture remains largely unchanged. The SSVI seems to target outliers rather than establish benchmarks or ceilings across proposed metrics.

New opportunities may emerge

Outside of pure-play hospice and home health services, a clear theme across regulatory promulgation this year is that CMS is interested in expanding patient-centered, end-of-life care, especially palliative care.

• The FY 2027 Inpatient Prospective Payment System proposed rule includes a proposal to add an electronically specified Advance Care Planning (ACP) quality measure to inpatient settings (including PPS-exempt cancer hospitals) beginning in FY 2028, with the goal of increasing the frequency of conversations around end-of-life care.
• The CY 2027 Home Health proposed rule clarifies that palliative care may be offered and billed through the existing home health benefit for eligible patients, plans to share subregulatory examples of how this would work in practice and seeks input on how existing Medicare authorities can better support community-based palliative care.
• The CY 2027 Hospice proposed rule included a request for information (RFI) on enhancing community palliative care services outside of the hospice benefit but in the context of other existing Medicare benefits;
• The CY 2027 Medicare Physician Fee Schedule proposed rule also included a on palliative care furnished outside the hospice benefit, specifically ways in which Medicare payment policies could better support palliative care delivery (e.g., eligibility via diagnoses vs. functional status) while ensuring appropriate safeguards to ensure quality care and prevent fraud, waste and abuse.

While still in the information collection phase, CMS could eventually create incremental opportunities for clinically sophisticated providers caring for seriously ill populations.

Bottom Line

In an environment of payment stability, the bifurcation between winners and losers across the sector will be more centered around who can withstand the increased compliance scrutiny and grow outside of de novo growth. The beneficiaries of this evolving paradigm are likely to be organizations that can translate scale into compliance excellence, with regulatory sophistication becoming a source for enterprise value.

The winners are likely to be organizations that can demonstrate:

• Strong compliance and audit capabilities;
• Sophisticated revenue cycle, documentation and quality reporting infrastructure;
• High-quality clinical operations;
• Established Medicare Advantage relationships (for home health providers);
• The ability to grow organically within existing markets; and
• Governance structures capable of withstanding heightened scrutiny.

We continue to see strong interest from the investor community in both sectors because the most important message from the last several months is not that CMS is becoming more hostile to home health and hospice. Rather, CMS is signaling that these sectors remain valuable, cost-effective components of the care continuum—but only for organizations capable of operating under a significantly more demanding oversight regime.