Home health agencies are at a pivotal moment. Proposed changes to Medicare and Medicaid reimbursement, particularly in the Home Health Prospective Payment System (HH PPS), are reshaping how agencies balance budgeting, staffing, and high-quality care delivery.
At PeopleWorX, we believe people first isn’t just a slogan, it’s a business strategy. In a reimbursement landscape that’s tightening year after year, how you manage HR, payroll, and compliance directly affects your ability to recruit and retain caregivers while staying financially viable.
Below, we break down the latest CMS trends, workforce challenges, and actionable steps your agency can take, including how the right HR/payroll tech and expertise can make the difference.
Understanding the Latest CMS Reimbursement Landscape
The Centers for Medicare & Medicaid Services (CMS) regularly updates the HH PPS payment rules. For Calendar Year (CY) 2025, CMS proposed a 4.067% reduction to home health payment rates, citing a requirement to better align expenditures with patient behavior under the Patient-Driven Groupings Model (PDGM).
These adjustments affect:
✔ Base payment rates
✔ Case-mix weights
✔ Outlier calculations
✔ Low Utilization Payment Adjustment (LUPA) thresholds
Understanding these is essential because lower reimbursement means tighter operating margins, which directly affects staffing budgets and compensation planning.
Workforce Pressures in Home Health
Home health agencies already contend with longstanding HR challenges:
High turnover, low wages, and tight labor supply make competitive recruitment difficult. Some key trends include:
- Agencies turning away patients due to staffing shortages
- Wage pressures as Medicaid rates lag inflation
- High early turnover (especially within the first year)
- A workforce heavily reliant on public benefits programs
These pressures are not abstract, they hit the bottom line, making workforce management a strategic priority.
Why Workforce Management, Not Just Billing, Matters
Reimbursement cuts increase pressure on operations. The difference between surviving and thriving isn’t only billing efficiency, it’s workforce resilience:
- Competitive pay and career pathway
- Workforce retention strategies (e.g., mentorship, flexible pay)
- Automated timekeeping aligned with payroll
- Accurate compliance reporting (PBJ, OASIS, audits)
When payroll and HR systems don’t talk to each other, your agency can fall behind in compliance and cost control. That’s where a single workforce management solution, backed by real support, transforms risk into growth.
Practical Steps for Home Health Agencies Today
Here’s what agency leaders can do now:
1. Re-Evaluate Your Compensation Strategy
Look at how reimbursement cuts affect wages and the total compensation package you offer caregivers. Competitive pay is critical, not just hourly rates, but incentive programs, flexible pay, and benefits that matter.
2. Improve HR Compliance from the Ground Up
Ensure your HR processes don’t just meet certifications, they protect you from wage and hour issues, classification mistakes, and costly penalties.
3. Expand Retention Programs That Work
Consider:
- On-demand pay
- Structured career ladders
- Mentorship and training boosts
These reduce churn, improve morale, and make your agency stickier for employees.
4. Integrate Payroll, Timekeeping, and Billing
Disconnected systems create compliance gaps and inefficiencies. A unified solution means:
- Faster payroll processing
- Better billing documentation
- PBJ readiness and audit trails
5. Stay Ahead of Reporting Changes
CMS requirements like Payroll-Based Journal (PBJ) data submissions and updated OASIS documentation standards require systems that can keep up. This isn’t optional, it’s a compliance mandate.
Don’t stop learning here!
Be part of our interactive sessions designed to help leaders build stronger teams.
Register for the next Peopleworx Webinar →Frequently Asked Questions
Q: What reimbursement changes are proposed for home health in 2025?
A: CMS proposed a 4.067% reduction in the home health payment rate for Calendar Year 2025, along with updates to case-mix, outlier payments, and utilization thresholds as part of the Home Health Prospective Payment System.
Q: How do cuts to Medicare reimbursement affect home health agencies?
A: Reductions tighten financial margins, making it harder to offer competitive wages and benefits. This impacts your ability to recruit and retain staff and may strain operations without proactive workforce and payroll strategies.
Q: What is PBJ reporting and why is it important?
A: Payroll-Based Journal (PBJ) reporting is a CMS requirement that tracks staffing data for compliance and quality reporting. Agencies must submit accurate payroll and timekeeping data, and misalignment can trigger compliance issues.
Q: How can improved payroll and HR systems help my home health business?
A: Integrated payroll + timekeeping + billing systems streamline compliance, reduce administrative burden, and protect against wage and hour risks, freeing you to focus on caregiving quality.
Q: What steps can home health agencies take right now?
A: Evaluate compensation strategies, invest in retention, improve HR compliance, unify systems, and stay abreast of reporting changes (e.g., PBJ and OASIS updates).
