The Service Line
Home-based care M&A volume just cratered, and dealmakers say the fraud crackdown is why. Home health, hospice, and personal care providers closed only 16 mergers and acquisitions in the second quarter of 2026, down 41 percent from 27 deals in the first quarter and down 45 percent from 29 deals in the second quarter of 2025, according to Mertz Taggart deal data reported by Home Care Magazine on July 24, 2026. “The fraud takedowns, the hospice 36-month rule, the new enrollment moratorium and enhanced oversight all make deals more complex to get across the line,” the advisory firm’s managing partner told the outlet. Two deals announced this quarter, including Deacon Associates’ agreement to buy 31 home health and hospice agencies from HCA Healthcare, have not yet closed, so the slowdown could deepen before it eases. Confidence: High. Source: Home-Based Care M&A Volume Drops in Q2 2026, Home Care Magazine.
Reimbursement
For the first time since CY2022, CMS did not propose a permanent PDGM behavioral-adjustment cut, but it wants a temporary 3 percent clawback instead. The Centers for Medicare and Medicaid Services (CMS) published its Calendar Year (CY) 2027 Home Health Prospective Payment System proposed rule (CMS-1844-P) in the Federal Register on July 6, 2026, proposing a net 2.4 percent aggregate payment increase, about $420 million, built from a 2.1 percent market basket update and a 0.3 percent fixed-dollar-loss outlier adjustment. Layered on top is a proposed temporary negative 3 percent adjustment to the CY2027 national standardized rate, meant to recoup an estimated $4.9 billion in cumulative overpayments CMS says occurred under the Patient-Driven Groupings Model (PDGM) between CY2020 and CY2025; CMS also proposes recalibrating PDGM case-mix weights and updating low-utilization payment adjustment (LUPA) thresholds, functional impairment levels, and comorbidity adjustment subgroups, though it has not published the resulting effect sizes. Comments are due August 31, 2026, and the National Alliance for Care at Home is already lobbying against the temporary cut. “The Alliance remains focused on working to stop unwarranted temporary adjustments that are based on a flawed methodology with underlying data integrity issues,” said Jennifer Sheets, the trade group’s chief executive officer. Confidence: High on the published figures, Medium on whether the temporary cut survives to the final rule. Sources: Calendar Year 2027 Home Health Prospective Payment System Rate Update, Federal Register, CMS Issues Far-Reaching Calendar Year 2027 Home Health Proposed Rule, Holland & Knight, The Alliance Responds to the CY 2027 Home Health Proposed Rule, National Alliance for Care at Home.
The same rule proposes program-integrity provisions that will outlast any single payment fight: retroactive provider revocation effective dates CMS estimates will save $82 million a year, a new geographic fraud-risk ground for denying or revoking enrollment in high-concentration provider areas, expanded “associational” denial grounds reaching owners and managing employees of previously revoked entities, and a shortened window, from 60 days down to 15, for submitting claims after a revocation. Confidence: High. Source: CMS Issues Far-Reaching Calendar Year 2027 Home Health Proposed Rule, Holland & Knight.
Enforcement
CMS just told the trade group it regulates that operators will get 60 days’ warning before Washington decides whether to extend the hospice and home health enrollment freeze past its November deadline. Jeneen Iwugo, CMS’s acting director of the Center for Program Integrity, told a July 13, 2026 panel at the National Alliance for Care at Home’s Finance and Technology Summit, “if we decide to extend it, we will provide 60 days notice,” addressing the six-month nationwide moratorium on new hospice and home health agency enrollments that CMS imposed effective May 13, 2026, published in the Federal Register May 15, and scheduled to expire November 13, 2026. The moratorium, part of Vice President JD Vance’s Anti-Fraud Task Force, arrived alongside payment suspensions on 773 hospices and 23 home health agencies in Los Angeles County, California alone, worth roughly $70 million, with suspension letters citing live-discharge rates as high as the mid-50s to 64 percent against a national FY2025 average of about 19.1 percent. Both the American Hospital Association and the National Alliance for Care at Home have separately urged CMS toward a “targeted, data-driven approach” instead of a blanket freeze, warning that rural markets already struggling to place discharged patients could be hit hardest. Confidence: High on the moratorium mechanics and dates, Medium on whether it extends past November. Sources: CMS Announces Aggressive Nationwide Crackdown on Fraud with Six-Month Hospice and Home Health Agency Enrollment Moratoria, CMS, CMS to Give 60 Days Notice if It Opts to Extend Six-Month Moratorium, McKnight’s Home Care, Hospice Crackdown: JD Vance Task Force Halts $1.4 Billion in Suspected Medicare Fraud, Newsweek, CMS Announces 6-Month Enrollment Moratorium on Home Health and Hospice Providers, American Hospital Association.
The Office of Inspector General also quietly added a new hospice-adjacent target to its Work Plan this month: routine home care billed for patients who are actually residing in nursing homes. Compliance group CHAP flagged the new item in its July 17, 2026 bulletin. The addition signals auditors are widening the general-inpatient-upcoding enforcement pattern into level-of-care mismatches for nursing-home residents, a theory that has not previously carried its own named Work Plan item. Confidence: Medium, the item’s final scope is not yet published. Source: The Compliance Monitor (7/17/26), CHAP.
Who’s Buying
The quarter’s biggest deals show two different bets: consolidate Medicare-certified care against a wall of fraud enforcement, or buy non-medical personal care where none of that applies. General Atlantic completed a roughly $3 billion, about 10 times EBITDA, acquisition of Team Services Group from Alpine Investors, a non-medical personal-care and household-employment platform operating in all 50 states with about 100,000 caregivers, a business model largely outside Medicare’s hospice and home health enrollment rules. On the Medicare-certified side, private equity firm Kinderhook Industries closed its $1.1 billion take-private acquisition of Enhabit at $13.80 a share, a 25 percent premium, giving Kinderhook roughly 250 home health and 115 hospice locations across 34 states just as the moratorium and PDGM cuts squeeze that business model. Also this quarter: Deacon Associates agreed to acquire 31 home health and hospice agencies that HCA Healthcare picked up in its Brookdale Senior Living transaction, still pending close; PruittHealth acquired Georgia Home Health Services; Lucent Health Group acquired eight-location Chambers Home Health and Hospice; and Renovus Capital Partners-backed Superior Health Holdings added Chant Healthcare. Confidence: High on deal terms, Medium on how the moratorium changes underwriting for deals still pending close. Sources: General Atlantic Completes $3 Billion Acquisition of Team Services Holding, PYMNTS, Private Equity Firm Closes $1.1B Take-Private Deal of Home Health and Hospice Provider Enhabit, Healthcare Dive, Deacon Associates ‘Doubles Down’ on Hospice with HCA Healthcare Acquisition, Hospice News, Lucent Health Group Buys Chambers Home Health & Hospice, Home Health Care News, Home-Based Care M&A Volume Drops in Q2 2026, Home Care Magazine.
Clinical Policy
Hospices are getting FY2027 payment-penalty warning letters in their inboxes this month, tied to data most of them submitted more than a year ago. CMS began posting Hospice Annual Payment Update non-compliance notifications in providers’ iQIES “My Reports” folders during July 2026, based on Calendar Year 2025 submissions to the Hospice Outcomes and Patient Evaluation (HOPE) tool, the CMS assessment instrument that replaced the Hospice Item Set on October 1, 2025. Hospices that failed to submit and get accepted at least 90 percent of required HOPE assessments within 30 days of a patient’s admission, update visit, or discharge, or that lacked an approved vendor running 12-month Consumer Assessment of Healthcare Providers and Systems caregiver surveys, face a 4 percent cut to their FY2027 annual payment update; a reconsideration process is available for hospices that believe a notice is in error. Separately, CMS is finalizing new modifier and G-code guidance for telecommunications-based hospice face-to-face recertification encounters, effective January 1, 2027. Confidence: High. Source: The Compliance Monitor (7/17/26), CHAP.
The Operator Metric
19.1 percent. That is the national hospice live-discharge rate CMS is using as its baseline, while some suspended California hospices are getting letters over rates in the mid-50s to 64 percent. Every hospice, not just the ones already caught in the Los Angeles County suspensions, should be pulling its own live-discharge, meaning non-death discharge, rate this quarter. CMS’s anti-fraud task force is using that rate, alongside long length-of-stay patterns, as a primary automated screen for which hospices get a payment-suspension letter next, and a rate meaningfully above the high-teens national average is now a documented trigger for scrutiny even without a formal complaint. Operators in fraud-hotspot states, historically California, Nevada, Arizona, and Texas, plus Florida given Miami-Dade’s enforcement history, should treat this number as a standing board-level metric rather than a year-end compliance afterthought. Confidence: Medium, the specific letter-cited range is reported by trade and vendor sources tracking individual suspension notices rather than published in a CMS table. Sources: Hospice Crackdown: JD Vance Task Force Halts $1.4 Billion in Suspected Medicare Fraud, Newsweek, CMS Announces Aggressive Nationwide Crackdown on Fraud with Six-Month Hospice and Home Health Agency Enrollment Moratoria, CMS.