Home Health Braces For Potential $1 Billion Cut In Medicare Payments

Author: Vandana Singh | July 01, 2025 08:23am

The Centers for Medicare & Medicaid Services (CMS) released a proposed rule on Monday outlining changes to how Medicare pays home health agencies (HHAs) in calendar year (CY) 2026.

These updates are required by law and occur annually.

The rule includes a routine payment increase of 2.4%, which would add about $425 million in funding. However, three other proposed changes would reduce payments:

• A permanent behavior adjustment would cut payments by about 3.7% ($655 million),
• A temporary adjustment would reduce payments by 4.6% ($815 million),
• A change to the outlier payment formula (FDL ratio) would result in an additional 0.5% ($90 million) reduction.

Overall, CMS estimates that total Medicare payments to home health agencies in 2026 will decrease by 6.4%, or approximately $1.135 billion, compared to 2025.

Stock In Focus

Specific to its coverage, William Blair notes that home health accounts for roughly 5% of Addus HomeCare Corp (NASDAQ:ADUS) revenue and roughly 63% of Amedisys Inc‘s (NASDAQ:AMED) revenue (Amedisys is in the process of being acquired by UnitedHealth Inc‘s (NYSE: UNH) Optum.

Addus HomeCare

“In our view, Addus presents one of the few opportunities for public equity investors to gain exposure to the in-home care delivery theme, with a particular emphasis on nonmedical care,” William Balir wrote in an investor note on Monday.

Also Read: As US Faces Shortage Of Expensive Skilled Clinicians, Home-Based Health Service Provider Addus HomeCare Is Well-Positioned To Grow: Analyst

Analyst Matt Larew views the company's differentiated position in the marketplace as supporting strong growth characteristics, which are expected to be at the high end of management's typical 3% to 5% organic baseline target. William Blair maintains an Outperform rating.

Amedisys

“We believe that Amedisys is well-positioned to take advantage of strong secular tailwinds that should support total volume growth in the company's markets (home health, hospice, and personal care) at least in the mid single digits for the next decade-plus,” the analyst wrote.

Amedisys' focus on quality and its well-rounded approach to in-home care position it to benefit more than most from the market's growth. However, in the short term, its stock will likely be influenced by labor trends, hospice recovery, home health payments, and the growth of its Contessa unit.

Looking further ahead, Amedisys is on track to become a top player in aging-in-place care. Through its mix of clinical expertise, technology, and on-the-ground staff, it will help insurers reduce costs and improve patient outcomes.

Price Action: ADUS closed at $115.19 on Monday. AMED stock is down 0.2% at $98.11 during the premarket session at the last check on Tuesday.

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Posted In: ADUS AMED UNH