2027 Home Health Final Rule: What It Means for Agency Values and M&A

By Cory Mertz, M&AMI, Managing Partner, Mertz Taggart | November 6, 2026

The 2027 home health final rule is modestly positive for M&A involving established, compliant agencies. It gives buyers a clearer near-term reimbursement picture, but it does not automatically increase what your agency is worth. Stronger enrollment enforcement also makes ownership history and accurate filings more important to a transaction.

CMS issued the final rule on November 4, 2026. For an owner considering a sale, the practical questions are how it affects your earnings, whether your provider agreement can transfer under the contemplated structure, and what a buyer will need to verify.

What changed in Medicare home health payments for 2027?

CMS estimates that aggregate Medicare home health payments will increase 2.4%, or approximately $415 million, in 2027 compared with 2026. That includes a 2.1% payment update—a 3.1% market-basket increase less a 1.0-percentage-point productivity adjustment—and an estimated 0.3% increase from changes to high-cost outlier payments.

The 3% temporary adjustment applies to both 2026 and 2027 payments, so it is not an additional cut to the 2.4% increase.

CMS is not applying an additional permanent behavioral adjustment for 2027. However, it retains the ability to make further adjustments, and the temporary-recovery obligation remains. Owners and buyers should not assume that the temporary reduction will simply disappear after 2027.

The payment provisions take effect January 1, 2027. The national increase is not a forecast for your agency: geography, patient mix, low-utilization payment adjustments (LUPAs), and outlier utilization can produce a different result. It also does not automatically increase Medicare Advantage, Medicaid, or other payer rates.

Will the final rule increase home health agency values?

It may support value through improved earnings, but a higher reimbursement rate is not the same thing as a higher valuation multiple.

The distinction matters because enterprise value depends on both sustainable adjusted EBITDA and the multiple a buyer will pay for those earnings. A payment increase that reaches the bottom line can increase value even if the multiple stays the same. If higher labor and other expenses absorb that increase, the valuation benefit may be limited.

For illustration, assume your agency has $10 million in annual revenue, with 70% from traditional Medicare. If those Medicare payments increased 2.1% at unchanged volume and mix, revenue would rise by approximately $147,000 before expense changes. This is a simplified illustration, not a prediction of your agency’s reimbursement or EBITDA.

As we explain in how buyers evaluate home health agency value, the reliability and durability of earnings matter alongside their size. The useful next step is to model the final rates against your actual claims and then assess the cost of delivering that care.

What should an owner considering a sale know about enrollment?

The final rule strengthens enforcement of the existing 36-month majority-ownership requirements. It does not impose a new blanket restriction on selling a home health agency.

A nonexempt change in majority ownership within 36 months of initial enrollment or the most recent majority-ownership change requires new enrollment and a survey or accreditation; the existing provider agreement does not transfer. The final rule adds explicit authority to deny or revoke enrollment for noncompliance with those requirements.

CMS also identifies management agreements that effectively transfer control before a later purchase as potential circumvention. Management agreements are not prohibited generally, but their substance matters. You and your transaction counsel should resolve whether the contemplated structure complies before relying on an interim arrangement.

The separate nationwide enrollment moratorium announced in May 2026 was imposed for six months and may be extended. Transactions requiring initial enrollment can be affected. An existing provider agreement may make an acquisition more attractive than starting a new agency, but neither transferability nor a permanent scarcity premium should be assumed.

Historical enrollment accuracy matters as well. CMS expands retroactive revocation provisions and broadens the affiliations and managing personnel relevant to enrollment oversight. Not every administrative error triggers revocation, but a buyer has more reason to verify ownership filings, management disclosures, and known enrollment issues rather than rely solely on the agency’s current billing status.

Does palliative care create a new revenue stream?

Not under this rule. CMS clarifies that qualifying skilled palliative care can be furnished within the existing home health benefit. It does not create a separate benefit, payment add-on, or dedicated billing code, and existing home health eligibility requirements still apply.

That clarification may support how an agency serves seriously ill patients and works with referral partners. It is not, by itself, a basis for adding a new reimbursement stream to a sale forecast.

Should the final rule change your decision to sell?

Not on its own. Our assessment is that the rule provides useful near-term payment visibility while reinforcing the importance of a well-documented, transferable business. It does not establish that all home health agencies are worth more or that owners need to sell before another policy change.

If you are considering a sale, focus on what the rule changes in your agency’s sustainable earnings and transaction readiness. For broader transaction context, see our Q3 2026 Home-Based Care M&A Report.

If you would like to discuss how the rule affects your agency’s value or sale plans, contact Mertz Taggart for a confidential conversation. You do not need to be ready to sell to begin that discussion.

Frequently asked questions

Are Medicare home health payments increasing in 2027?

CMS estimates a 2.4% aggregate increase over 2026. Individual agency results will vary with geography, patient mix, and other payment factors. The increase does not automatically apply to other payer contracts.

Is the 3% temporary adjustment an additional cut to the 2.4% increase?

No. Both 2026 and 2027 payments include a 3% temporary adjustment. CMS’s estimated 2.4% year-over-year increase already accounts for the finalized policies.

Does the 2027 final rule change the home health 36-month rule?

It strengthens enforcement of the existing majority-ownership requirements through explicit denial and revocation grounds. Whether a sale requires new enrollment depends on the ownership history, transaction structure, and applicable exceptions.

Will the rule increase my home health agency’s valuation multiple?

Not automatically. A reimbursement increase may support sustainable earnings, but the rule alone does not establish a higher multiple. Agency-specific performance, risk, and buyer interest still need to be assessed.

Cory Mertz, M&AMI, is Managing Partner at Mertz Taggart, where he advises home health, home care, and hospice owners on selling their businesses.

This article reflects the final rule released November 4, 2026, and information available November 5, 2026. It provides general M&A commentary, not legal advice.