CMS Is Becoming Value-Based Care's "New Engine" as MA Plans Pull Back : What It Means for Home Health Owners

CMS is becoming a more direct force in value based care through HHVBP and TEAM, while Medicare Advantage plans reassess reimbursement, utilization, and per member support. For home health or hospice owners, the change makes payer level profitability and quality performance more important than revenue growth alone. This article explains how to protect EBITDA, prepare for buyer underwriting, and strengthen exit readiness in a changing reimbursement environment.

8/18/20268 min read

This article explains why CMS is becoming a stronger driver of value based care while Medicare Advantage plans reassess costs, utilization, and per member support. It also shows what the shift means for home health or hospice payer strategy, operating metrics, buyer underwriting, and exit value.

Quick Scan Summary

Who this is for

Home health or hospice owners generating $2M to $10M in annual revenue
Operators managing Medicare Advantage contracts or considering new payer arrangements
Owners preparing for succession, a sale, or a strategic partnership
Leaders who need to understand how payer mix affects EBITDA and buyer underwriting

Key takeaways

CMS is driving value based care growth through national models such as HHVBP and TEAM.
Medicare Advantage remains important, but rising utilization and cost pressure are reducing some plans’ willingness to fund broader value based arrangements.
Home health owners should evaluate contracts by net reimbursement, administrative burden, outcomes, and payer concentration.
Hospice and palliative operators should prove that per member funding supports the full interdisciplinary care model.
Buyers will increasingly underwrite payer mix by quality and durability, not revenue percentage alone.

Why CMS is becoming the new engine

For years, home health or hospice providers looked to both CMS and Medicare Advantage to expand value based care. That balance is now shifting.

As reported by Home Health Care News after a PAYER Summit panel, CMS is creating clearer pathways through federal models, while some Medicare Advantage and managed Medicaid arrangements are becoming less attractive to providers.

Devin Woodley, vice president of managed care contracting at VNS Health, summarized the shift this way:

> “It’s a combination of increasing outcomes, creating value and partnerships. That’s really seen in the CMS space. When it comes to Medicare Advantage and managed Medicaid, we’ve actually seen the opposite.”

CMS is driving this change through structured programs with defined measures, national participation rules, and payment consequences.

The expanded Home Health Value Based Purchasing Model, or HHVBP, applies nationwide to Medicare certified home health agencies. Agencies are evaluated against peers on clinical, claims based, and patient experience measures. Payment adjustments can range from negative 5% to positive 5% on Medicare fee for service payments.

For the 2026 performance year, CMS includes measures related to:

Functional improvement in bathing and dressing
Medicare spending per beneficiary after acute care
Potentially preventable hospitalizations
Discharge to community
Overall home health rating
Willingness to recommend the agency

That matters because CMS is no longer treating value based care as a narrow quality initiative. It is connecting functional outcomes, spending, patient experience, and payment.

TEAM creates a similar direction in another part of the system. The Transforming Episode Accountability Model requires selected acute care hospitals to coordinate care for certain surgical episodes through 30 days after discharge. The model includes procedures such as joint replacement, spinal fusion, coronary artery bypass grafting, and major bowel procedures.

Home health agencies may not be direct TEAM participants, but they can become important partners in the post hospital episode. Agencies that can demonstrate reliable transitions, low avoidable utilization, and strong functional outcomes may be better positioned when hospitals and other participants evaluate post acute relationships.

The Medicare Advantage pullback reality

Medicare Advantage is not disappearing from home based care. It remains a major source of patients, referrals, and revenue. The issue is that the financial case for value based arrangements has become harder for some plans and providers.

Woodley said MA organizations are facing higher costs and utilization. In some cases, reimbursement increases and per member, per month models have not kept pace with the cost of care. Higher utilization can also affect medical loss ratios, giving plans an incentive to examine every contract more closely.

The financial pressure on MA organizations also became visible through significant declines in stock prices last year. As plans work to recover, they may offer fewer expansive value based opportunities, narrower performance incentives, or more conservative payment terms.

For home health owners, this can appear as:

Lower or stagnant rates
More authorization requirements
Greater scrutiny of visit patterns
Delayed payment
More contract language tied to utilization
Reduced bonus pools
Higher administrative work per episode

That does not mean owners should walk away from Medicare Advantage. It means every MA relationship needs to be measured by its actual contribution.

A contract that produces $500,000 in annual revenue may not be attractive if it requires significant authorization labor, creates frequent denials, and produces lower EBITDA than the headline revenue suggests.

What this means for home health owners

The first priority is to separate payer volume from payer value.

Track the following metrics monthly by payer:

Net reimbursement per completed visit
Authorized visits compared with clinically ordered visits
Denials and appeal overturn rates
Authorization labor hours per 100 MA episodes
Days in accounts receivable by payer
EBITDA margin by payer
Revenue concentration by individual MA plan
Referral volume by payer and referral source

These metrics support better contract decisions and make your agency easier for a buyer to underwrite.

For example, suppose a home health agency generates $5 million in revenue and $800,000 in adjusted EBITDA. One MA plan represents 35% of revenue, but that payer produces a 10% EBITDA margin after authorization and billing costs. A second payer represents 20% of revenue and produces a 19% EBITDA margin.

The first plan may look more important by volume. The second may be more valuable operationally.

An owner should also review whether the agency can succeed under CMS measures without relying on heroic effort from the founder. HHVBP performance should be embedded into routine operations, including admission assessment, care planning, visit management, discharge planning, and quality review.

Owner vignette: the high volume contract

Consider an anonymized home health owner in the Southeast with approximately $4 million in annual revenue. The agency increased its MA census quickly through two contracts, but authorization work expanded faster than clinical revenue. The owner initially viewed the growth as a success.

After reviewing payer level EBITDA, the owner found that one contract produced almost no operating contribution. The agency began renegotiating terms, tracking authorized versus ordered visits, and assigning responsibility for appeals. The objective was not simply to reduce MA volume. It was to protect margin and create a payer mix that a buyer could understand.

What this means for hospice and palliative care

The same pressure is affecting hospice and palliative care, although the operating model is different.

Jennifer O’Neill, vice president of palliative care at VITAS Healthcare, said she would not have predicted the decrease in per member, per month support from some MA plans while the cost of interdisciplinary palliative care has grown.

That is a critical warning for hospice and palliative operators. A per member payment must support the full care model, including physician involvement, nursing, social work, counseling, care coordination, and other required services.

Hospice owners should examine:

Payment per enrolled patient
Average length of service by payer
Interdisciplinary labor cost per patient
Hospital and emergency department utilization
Referral conversion by source
Denials and payment delays
Payer specific contribution margin
Concentration by MA plan or state program

O’Neill also pointed to state level developments that may create more sustainable reimbursement for seriously ill patient populations. This suggests that the future may not be a simple choice between traditional Medicare and MA. State programming, CMS models, hospital relationships, and carefully structured MA contracts may all have a role.

The practical lesson is to define the financial case before expanding a palliative program or accepting a new contract.

How payer mix affects valuation and sale price

Buyer underwriting is becoming more detailed. Buyers are not only asking how much revenue comes from Medicare Advantage. They are asking whether that revenue is durable, profitable, diversified, and operationally manageable.

Consider two illustrative home health agencies, each with $5 million in revenue and $800,000 in adjusted EBITDA.

The $1.2 million difference is not created by revenue alone. It reflects the buyer’s view of reimbursement risk, administrative burden, quality performance, and the likelihood that EBITDA will continue after a transition.

A hospice agency with $1 million in adjusted EBITDA could face a similar difference. At an illustrative 4.5x multiple, the value would be $4.5 million. At 5.5x, the value would be $5.5 million.

These are examples, not guaranteed market multiples. Actual pricing depends on location, compliance, growth, staff stability, clinical performance, payer contracts, referral concentration, working capital, and transaction structure.

Read more about how buyers evaluate payer mix and the valuation drivers that affect a home health or hospice agency.

From participation to accountability

Janice Thorpe, senior vice president of value based care and clinical programming at Genesis HealthCare, described the broader shift as a move from infrastructure and participation toward accountability and sustainable outcomes.

That is an important operating principle for mid sized owners. Value based care cannot remain a side project managed by one executive or a small reporting team. It must be connected to:

Clinical workflows
Staffing and retention
Referral relationships
Revenue cycle management
Quality improvement
Payer negotiations
Financial reporting

As contracts take total cost of care beyond hospital walls, buyers will expect owners to show how the agency affects the full episode of care. For home health, this may include avoidable hospital use, functional improvement, and post acute spending. For hospice, it may include timely access, interdisciplinary support, continuity, and appropriate utilization.

So what should you do now?

Build a payer level profit and loss view that includes reimbursement, denials, authorization labor, and days in accounts receivable.
Review your top three payers and identify where contract terms, patient volume, or administrative requirements create risk.
Convert HHVBP and other quality data into a monthly operating dashboard that clinical and financial leaders both use.
Prepare a buyer ready explanation of your payer mix, including why each major contract is sustainable and how your agency protects margins.

A strategic path for owners considering a transition

You do not need to be perfectly positioned to begin evaluating your options. An agency with MA exposure, uneven reporting, or developing value based capabilities may still have strong clinical relationships, committed employees, and a foundation for improvement.

Senate Healthcare is the buyer and strategic partner pursuing acquisitions of home health or hospice agencies. We are evaluating owner to buyer opportunities where operational strengths, quality care, and sustainable growth can support a responsible transition.

If you are considering a sale, succession plan, or partnership, learn more about Senate Healthcare’s acquisition approach. A confidential conversation can help clarify how payer mix, EBITDA, quality performance, and operational risk may affect your exit outcome.

Plain Language Glossary

EBITDA: A measure of operating profitability before interest, taxes, depreciation, and amortization.
HHVBP: The Home Health Value Based Purchasing Model, which adjusts Medicare fee for service payment based on agency performance.
TEAM: The Transforming Episode Accountability Model, a CMS model that holds selected hospitals accountable for certain surgical episodes through 30 days after discharge.
VBC: Value based care, where payment is connected to quality, outcomes, patient experience, or total cost rather than service volume alone.
MA: Medicare Advantage, a private health plan option for people eligible for Medicare.
Medical loss ratio: The portion of premium revenue a health plan spends on medical care and quality improvement.
Payer mix: The distribution of an agency’s revenue across Medicare, Medicare Advantage, Medicaid, private insurance, and other payers.
Buyer underwriting: The process a buyer uses to evaluate revenue durability, expenses, risk, cash flow, and future operating performance before determining a purchase price.

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