MedPAC Is Studying Whether Home Health Payments Are Actually Accurate: What Owners Should Know Before Fall 2027

MedPAC is studying whether home health payments reflect differences in the cost of caring for different patients, with results expected to begin in fall 2027. The exploratory work examines coding, patient selection, and payment accuracy, but has reached no conclusions. Owners can prepare by checking clinical support for assessment details, reviewing admission patterns, and adding human oversight to AI-enabled tools. These steps can also help reduce uncertainty during future buyer due diligence.

10/22/20267 min read

Flat vector illustration of home health care records and payment analysis.

MedPAC is examining whether Medicare’s skilled nursing facility and home health payment systems reflect differences in the cost of caring for different patients. This exploratory study has reached no conclusions, but its questions about coding and patient selection give home health owners a practical reason to review their documentation and operating data before results begin to arrive in fall 2027.

Quick-Scan Summary

Who this is for

Home health and hospice owners, especially operators in the $2 million to $10 million revenue range.
Home health leaders reviewing PDGM documentation, coding practices, or revenue cycle tools.
Owners weighing succession, a sale, or a strategic partnership and preparing for buyer due diligence.

Key takeaways

MedPAC is studying both skilled nursing facilities and home health agencies. It is testing payment accuracy, patient selection, and coding practices using 2021 through 2025 data.
Aggregate payments being high relative to aggregate costs is a different question from whether payments accurately reflect the costs of individual cases.
MedPAC has reached no conclusion. Staff plan to begin presenting results in fall 2027.
Owners can prepare by checking whether assessment information and coding are supported by clinical records, and whether admission and case patterns are clearly understood.
A strong documentation profile can help reduce buyer uncertainty. It does not guarantee a particular valuation or protect an agency from future policy changes.

What MedPAC is actually studying

In its October 9 workplan, MedPAC set out three questions about the skilled nursing facility and home health prospective payment systems. The home health analysis focuses on 30-day payment periods. The workplan describes an exploratory analysis using claims, patient assessments, cost reports, and beneficiary enrollment data from 2021 through 2025.

MedPAC expects to report results by case-mix group, provider group, and beneficiary characteristics. Its work also covers skilled nursing facilities, whose payment system differs from home health in important ways.

Flat vector illustration of payment accuracy, patient assessment, and provider distribution.

Why case-level accuracy is different from aggregate spending

MedPAC says aggregate payments to skilled nursing facilities and home health agencies are high relative to aggregate costs. That is a systemwide comparison of total payments with total costs. The new study asks a different question: within the payment system, do payments appropriately vary with the cost of different cases?

For example, if a patient’s clinical complexity and care needs increase, the system should reflect the added cost. If some case-mix groups are more profitable than others, that may create incentives to favor certain cases. MedPAC wants to examine whether those differences exist and how cases are distributed across providers. Its workplan notes that average payment-to-cost ratios are not expected to equal 1.0 given the high aggregate level of payments relative to costs.

Those distinctions matter. The study does not establish that a particular agency is coding improperly, that any case-mix group is overpaid, or that a payment cut is coming. It is an analysis of the system, not a finding about an individual provider.

The two live questions for home health owners

Coding intensity: does the record support the payment?

In home health, patient assessment information helps assign cases to PDGM case-mix groups and establish payment. MedPAC plans to examine whether changes in recorded assessment items correspond to changes in patient complexity and cost.

Its approach includes comparing coding patterns for assessment items used as payment adjusters with patterns for items that are not used as adjusters. Where a patient had a prior hospitalization, analysts also intend to compare the home health and skilled nursing facility coding patterns with how the same case was coded during the preceding hospital stay.

For an owner, the operational question is straightforward: if a diagnosis, functional score, or other assessment detail affects payment, can the agency point to clinical documentation supporting it? A clean, consistent record is more defensible than a result that depends on unexplained coding changes.

Patient selection: are case types distributed unevenly?

MedPAC will examine whether higher-profit and lower-profit case-mix groups are distributed unevenly among providers. The analysis is intended to explore whether providers can identify cases likely to be more or less profitable, and whether those cases are concentrated among particular providers or patient populations.

Some home health stakeholders believe the payment system favors patients admitted after a hospital stay over patients admitted from the community. That is a stakeholder belief, not a MedPAC finding. The Home Health Care News report describes this concern and MedPAC’s plan to explore the distribution of high-profit and low-profit case-mix groups.

Owners can start by examining community-admitted and post-hospital admissions by branch and clinician. The goal is to understand operational patterns, not to steer away from patients who need care.

The AI coding warning is a governance issue, not a finding

At the MedPAC meeting, Commissioner Kenny Kan raised a concern that some providers may use artificial intelligence to increase coding intensity or reported patient complexity in ways that are not supported by the patient’s condition. This was one commissioner’s stated concern. It is not a finding of the study, and MedPAC has not concluded that AI tools are causing improper coding.

For owners using AI in coding or revenue cycle processes, human review is prudent. Reviewers should be able to verify suggested codes and assessment details against the clinical record, document corrections, and explain how decisions were made. An AI tool can help organize information, but the clinical documentation needs to stand on its own.

Flat vector illustration of a human reviewer checking AI-assisted coding against clinical notes.

Why this matters for 2027 and 2028

The study arrives alongside separate Medicare payment developments. In its CY 2027 proposed rule fact sheet, CMS proposed a 3.0% temporary adjustment to the home health base payment rate to continue recouping retrospective overpayments it attributes to CY 2020 through CY 2025. CMS also proposed no additional permanent adjustment to the CY 2027 30-day base rate.

CMS’s fact sheet lists these permanent adjustments

CMS estimates that its CY 2027 proposed policies would increase aggregate payments by 2.4%, or $420 million, compared with CY 2026. That estimate reflects the overall proposed payment package. It does not mean the proposed temporary adjustment has no effect on the base rate.

MedPAC’s case-level accuracy study is separate from CMS’s annual payment rule process. Each year, MedPAC reviews the adequacy of Medicare fee-for-service payments and makes update recommendations through its March report. The Commission’s 2026 to 2027 analytic agenda says it will continue studying payment accuracy for skilled nursing facilities and home health agencies. It also separately covers hospice use patterns and Medicare spending effects. Hospice payment adequacy is reviewed during MedPAC’s December and January meetings. The home health study does not establish hospice findings.

MedPAC plans to begin presenting study results in fall 2027. Owners should view the topic as a policy and underwriting uncertainty to monitor into 2028, not as evidence of a predetermined payment change.

What this means for valuation and exit timing

Buyers assess more than revenue and reported EBITDA. They also consider how durable the earnings appear, whether payment assumptions are documented, and how exposed the agency may be to policy and compliance risk. Unexplained coding shifts or gaps between assessment details and the clinical record can create diligence questions and reduce confidence in the earnings being valued.

Consider an illustrative example: an agency with $750,000 in normalized EBITDA valued at 5.0 times EBITDA would have an implied value of $3.75 million. At 4.5 times EBITDA, the implied value would be $3.375 million, a difference of $375,000. These multiples are illustrative only, not a market quote or prediction of what an agency will sell for. They show why buyer confidence in earnings quality can matter.

A clear documentation profile is a defensible position whether an owner plans to sell soon or is still building toward a transition. Waiting for MedPAC’s results is not a substitute for addressing known recordkeeping or reporting gaps today.

Flat vector illustration of an agency owner and acquisition partner reviewing organized records.

What owners can do now

Test whether OASIS responses and assessment items used in payment are supported by the clinical record.
Review coding changes over time. Ask whether shifts are matched by a documented change in acuity or patient needs.
Compare community-admitted and post-hospital admissions by clinician and branch. Understand differences without discouraging appropriate admissions.
Require human review of AI-supported coding or revenue cycle outputs, with a documented process for checking and correcting them.
Make sure functional scores and other important assessment details have a clear clinical rationale.
Prepare to explain case mix, documentation controls, and payment trends during buyer due diligence.

For hospice owners, the MedPAC home health payment accuracy study is not a hospice payment study. Still, hospice operators can apply the same disciplined approach to documentation, coding oversight, and explaining financial performance. Monitor MedPAC’s separate hospice work on utilization, spending effects, and payment adequacy rather than assuming the home health analysis applies to hospice.

Plain-Language Glossary

PDGM: The Patient-Driven Groupings Model, Medicare’s system for determining home health payment based on patient and care characteristics.
Case-mix group: A category used to group cases with similar characteristics for payment purposes.
Case-mix weight: A value used to adjust payment for the relative characteristics of a case.
Payment-to-cost ratio: Payment divided by the cost of care. It helps compare financial results across case types.
OASIS: The standardized assessment information collected for many Medicare home health patients.
Coding intensity: The degree to which diagnoses or assessment details are recorded in a way that can affect payment.
Patient selection: Choosing, intentionally or otherwise, which types of patients an agency admits or serves.
Aggregate versus case-level: Aggregate compares totals across a system; case-level examines payment and costs for individual types of cases.
EBITDA: Earnings before interest, taxes, depreciation, and amortization.
Normalized EBITDA: EBITDA adjusted to better reflect ongoing business performance by accounting for items that are unusual or not expected to continue.
Multiple: A valuation measure that expresses business value as a factor of EBITDA or another financial measure.

So what should you do now?

Review assessment and coding support before a buyer or auditor asks for it.
Check whether changes in case mix align with documented changes in patient needs.
Add human oversight and a written review trail for AI-enabled tools.
Track policy developments, but do not treat an exploratory study as a forecast.

Explore a sale or partnership

Senate Healthcare LLC is the buyer and strategic partner pursuing home health or hospice agency acquisitions. We are not a broker or advisor. Your agency does not need to be perfectly positioned today to have a confidential conversation with us about reducing transition risk, improving readiness, and exploring a sale or partnership.

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