Key Takeaways: CMS Releases CY 2025 Home Health Final Rule with Mixed Impact on Agencies
The Centers for Medicare & Medicaid Services (CMS) has released its highly anticipated Calendar Year (CY) 2025 Home Health Prospective Payment System Final Rule, bringing challenges and opportunities for home health agencies nationwide. While the rule promises an overall modest increase in Medicare payments of 0.5% ($85 million) compared to CY 2024, it further reinforces several significant changes for which agencies need to understand and prepare. Register now for our complimentary webinar on Thursday, November 7, at 12 p.m. EST, where SimiTree experts will break down the CY 2025 Final Rule’s key changes.
Perhaps most notably, the rule includes a permanent, prospective adjustment of -1.975% to the CY 2025 payment rate, continuing CMS’s phased approach to behavioral adjustments under the Patient-Driven Groupings Model (PDGM). This adjustment, while less severe than initially calculated, still represents a significant consideration for agencies’ financial planning. Our experts created this blog recap to guide you through the lengthy release.
Please do not hesitate to call us at 800-949-0388, email us with a question at contactus@simitreehc.com, or submit a form for a consultation. We are eager to help you through these changes.
Key Takeaways from the 2025 Home Health Final Rule
The CY 2025 Final Rule includes several significant changes in Medicare home health services. Agencies will see a modest 0.5% increase in Medicare payments, totaling $85 million in global spending compared to 2024.
CMS has finalized a -1.975% permanent behavioral adjustment while introducing new occupational therapy payment factors and updated wage index calculations.
Additionally, agencies must prepare for new Conditions of Participation requirements and enhanced social determinants of health data collection beginning in 2027.
Key Payment Updates
Updated Rate Changes
- CMS has approved a 2.7% home health payment update, resulting in a $460 million increase. This increase is partially offset by a -1.8% permanent behavior adjustment (—$305 million) and a -0.4% decrease from the updated fixed-dollar loss ratio (—$70 million). The final impact results in a 0.5% aggregate increase, providing agencies an additional $85 million in Medicare payments for 2025.
Behavioral Adjustments
- CMS has implemented a permanent adjustment of -1.975%, representing half of the proposed initially -3.95% adjustment. This continues the phased approach from previous years and addresses the difference between assumed and actual behavior changes under PDGM. While this is lower than the permanent rate adjustments from CY2023 and CY2024 (-3.925% and –2.890%, respectively), the behavioral adjustments continue to strain agencies’ financial performance. It must also be noted that a temporary adjustment of $971 million was calculated based on CY2023 data. CMS has chosen not to implement any temporary adjustments for 2025, bringing the total value of potential future temporary adjustments to $4,460,954,477.
Wage Index Updates
- The final rule adopts new OMB Core-Based Statistical Area delineations based on the 2020 Census data. These updates include new CBSAs and changes to urban/rural designations nationwide. CMS has implemented a 5% cap on one-year wage index decreases to protect agencies from significant payment reductions. These changes reflect current population shifts and labor market conditions more accurately. Agencies must evaluate these changes and incorporate them in their financial planning, as revisions could have as large of an impact (positive or negative) on reimbursement as the behavioral rate adjustments.
Quality Program Changes
Home Health (HH) Quality Reporting Program (QRP) Updates
- Beginning in CY 2027, agencies will be required to collect four new social determinants of health assessment items. These new elements will gather information about patients’ living situations, food security, and utility access. CMS has also modified the existing transportation assessment item to capture patient needs better. The timing of all-payer data collection has been adjusted to align with the start of care assessments.
Value-Based Purchasing Changes
- The 2025 final rule outlines potential future measure concepts for the expanded HHVBP Model. CMS is exploring new function measures that would complement existing DC Function measures and considering the addition of Medicare Spending per Beneficiary metrics. The agency has emphasized its commitment to advancing health equity initiatives within the program and continues to seek stakeholder input through technical expert panels.
- The more significant VBP updates were detailed in the 2024 final rule, including payment adjustments for performance year 2023, which will be implemented starting January 1, 2025, and changes to both OASIS-based and Claims-based measures. Discharge to Community is shifting from an OASIS-based measure to a Claims-based measure. In contrast, the TNC Mobility and TNC Self-Care measures are replaced by a Discharge Function Score calculated from the GG items at discharge. The Claims-based Acute Care Hospitalizations and ED Use without Hospitalization are being replaced by the aforementioned Discharge to Community and a new measure deemed Potentially Preventable Hospitalizations. Lastly, the baseline year for all measures will shift from 2022 to 2023 for performance year 2025.Home Health Conditions of Participation (CoPs) Updates
CMS is implementing new Home Health Agency Conditions of Participation (CoPs) focused on two main requirements:
Patient Acceptance Policy
- HHAs must develop and annually review a consistent acceptance-to-service policy
- Must evaluate patient needs, current caseload/mix, staffing levels, and staff competencies
- Existing policies can remain but must include these minimum criteria
Public Service Information
- HHAs must publicly share accurate information about their services
- Must disclose any limitations on specialty services, duration, or frequency
- Information must be reviewed annually or whenever services change
The goal is to reduce care delays by helping referral sources and patients make more informed decisions about HHA selection.
PDGM/LUPA Updates
- CMS has completed a comprehensive recalibration of PDGM case-mix weights using 2023 data.
- The final rule establishes a new occupational therapy LUPA add-on factor of 1.7238 and updates existing factors for skilled nursing (1.7200), physical therapy (1.6225), and speech-language pathology (1.6696). These adjustments aim to reflect current healthcare practices and costs more accurately.
Additional Policy Changes
Data Analysis Section
- The final rule’s impact analysis reveals a complex financial landscape for agencies. Medicare payments show a modest increase overall, with the 2.7% market basket update being partially offset by behavioral adjustments and other factors. The crosswalk implementation for mapping OASIS-E to OASIS-D responses will help maintain consistent data analysis for payment determinations. This systematic approach ensures accurate payment calculations while transitioning between assessment instruments.
Home Health Aide Section
- While the final rule doesn’t directly address home health aide utilization trends, the comprehensive payment updates and quality measures affect overall service delivery. The enhanced focus on social determinants of health and patient acceptance policies may influence how agencies deploy aide services. These changes align with CMS’s broader goals of improving patient care access and quality while maintaining program sustainability.
Industry Impact & Recommendations
- Prepare for the -1.975% permanent adjustment by optimizing operational efficiency, exploring technology enhancements, and assessing current cost structures
- Review and update patient acceptance policies to meet new CoP requirements
- Implement systems to collect new social determinants of health data
- Ensure clinical and quality teams are prepared for HHVBP measure changes going into effect for performance year 2025
- Evaluate wage index changes an updated CBSA delineations to understand true financial impact of final rule
- Enhance documentation practices to support accurate case-mix weights
Success in 2025 will require strategic planning around new CoP requirements, quality reporting changes, and payment adjustments. Agencies should focus on strengthening their documentation practices, updating operational policies, and preparing for enhanced data collection requirements to maintain compliance and optimize reimbursement under these new regulations.
Watch our HH Final Rule Webinar
SimiTree hosted a webinar on Thursday, November 7, at 12 p.m. EST, where they broke down the CY 2025 Final Rule’s key changes. Access the Recording & Handout:
Visit our webinar page and select ‘Consulting‘ from the dropdown menu.
You’ll find “Navigating the 2025 Home Health Final Rule: Strategic Insights for Agency Success” as the first option, including the webinar recording and handout. Feel free to share our webinar page with your team. Presented by:
- Brian Harris, Vice President of Financial Consulting
- John Rabbia PT, DPT, MS, MBA, COS-C, Director, Operations Consulting
Preparing Your Agency for Success in 2025
The final rule represents a balanced approach to payment updates while advancing quality initiatives. The 0.5% aggregate increase provides some financial relief, though agencies must carefully navigate the permanent behavioral adjustment and enhanced compliance requirements. As mentioned earlier, agencies should focus on strengthening their documentation practices, updating operational policies, and preparing for enhanced data collection requirements to maintain compliance and optimize reimbursement under these new regulations.
To succeed under these new regulations, SimiTree suggests a strong focus on:
- Streamlining operations to offset financial impacts
- Improving coding and documentation to support accurate case-mix weights
- Building stronger quality measures for value-based care
- Developing robust compliance programs to meet new CoP requirements
You don’t have to tackle these changes alone. SimiTree’s industry experts provide comprehensive support across all aspects of agency operations – from strategic planning and financial optimization to compliance and quality improvement.
Whether you need help with PDGM optimization, revenue cycle management, compliance programs, or operational efficiency, SimiTree has the expertise and tools to improve your agency’s performance. Let us help you turn these regulatory changes into opportunities for growth.
Ready to strengthen your agency’s position for 2025? Connect with SimiTree’s experts today to explore our consulting and outsourced services tailored to your specific needs.
Additional Resources
See the final rule fact sheet
Read the full rule