Intro
Update: CMS released the CY 2026 proposed home health payment rule on June 30, 2025, projecting a 6.4% aggregate reduction to Medicare payments. For owners, this is a cash-flow and valuation event. Below we translate the rule into operational impact and outline three strategic paths forward.
Key Points at a Glance
- Aggregate change: –6.4% vs. 2025 (proposed)
- Components: +2.4% payment update; –3.7% permanent behavior adjustment; –4.6% temporary adjustment; –0.5% FDL ratio update
- Permanent reduction: –4.059% tied to PDGM
- One-time cut: –5% to the 2026 national standardized 30-day rate to claw back prior overpayments
- Other changes: recalibrated PDGM weights, updated face-to-face policy, HHVBP measure tweaks
What This Means for Owners
Margins compress; lender and buyer underwriting tightens; staffing and compliance costs don’t fall with rates. Agencies with weaker payer mix or subscale overhead face the greatest pressure, while well-positioned operators may find acquisition opportunities.
Vallexa Advisors’ Perspective
- Defend & Adapt: payer-mix tuning, episode management, LUPA risk controls, rev cycle cleanup.
- Grow Through Acquisition: expand footprint to spread fixed costs; pursue tuck-ins while multiples are favorable.
- Exit Strategically: prepare now to avoid valuation drag as the rule progresses; package clean compliance and KPIs.
Vallexa Advisors helps home health owners model reimbursement scenarios, quantify valuation impact, and run targeted buyer processes.
FAQ
FAQ
Q: Is the 6.4% cut final?
A: No. This is the proposed rule for CY 2026. CMS will finalize after the comment period.
Q: How quickly could this affect my valuation?
A: Buyers price forward risk. Even before finalization, proposed cuts can tighten multiples and diligence standards.
Q: What levers help offset reimbursement pressure?
A: Optimize visit utilization, reduce LUPA incidence, refine coding/documentation, expand non-Medicare lines, and improve rev-cycle timing.
Q: Should I pause an exit process?
A: Not necessarily. If financials and compliance are clean, moving before broader sentiment worsens can preserve value.
Q: Can Vallexa introduce qualified buyers or targets?
A: Yes. We maintain an active buyer network nationwide and source strategic tuck-ins for scale plays.
Read More: Action Plan for 2025–2026
1) Model the impact: Build a 12–18 month forecast with proposed rates and sensitivity bands (best/base/worst).
2) Shore up cash: Accelerate AR, tighten DSO, and review LOC capacity ahead of rate changes.
3) Fortify compliance: Prepare for enrollment/revocation updates and HHVBP measure shifts.
4) Consider scale: Evaluate acquisitions or partnerships to spread fixed costs and strengthen access.
5) Clarify strategy: Decide whether to defend, grow, or exit—and align your operations and messaging.
Need a confidential assessment? Vallexa can deliver a quick diagnostic covering reimbursement exposure, valuation readiness, and buyer/target fit.
Contact Vallexa Advisors: 586-623-5616
Cash equivalent to purchase price set aside to invest from currently available funds required
– Healthcare-specific industry experience required –
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