Every spring, CMS releases the proposed payment rule for the upcoming hospice fiscal year. For most hospice administrators, it triggers the same set of questions: How does the rate change? What does this mean for our budget? Where do we have room to cut without hurting care?
CMS released the FY2027 hospice proposed rule in April 2026.
This year is no different. The FY2027 proposed rule carries implications for how hospices structure their costs - and DME is one of the few line items administrators can actually control.
Here's what to know.
CMS uses the hospice proposed rule to set routine home care rates, continuous home care rates, and the aggregate cap for the upcoming fiscal year. The rule also updates the hospice wage index, which adjusts payments based on local labor market costs.
Rate updates under the proposed rule are typically modest - often in the 2-3% range. For FY2027, CMS has proposed a payment update in the typical low single-digit range, continuing the trend of modest increases. But modest changes to reimbursement have outsized effects on margins for hospices already operating in a tight cost environment. A 2% payment increase that comes with a 4% increase in operating costs is a net loss.
The practical impact is that hospice finance teams need to evaluate their cost structure each spring - not just their revenue side.
DME is one of the largest controllable costs in hospice care. Unlike nursing labor, which is largely fixed to your census and acuity mix, DME spend has more variability - and more opportunity.
Most hospice DME budgets fall into three categories:
The first two show up on your DME invoice. The third one doesn't - it shows up as nursing time diverted from patient care. All three are affected by how your DME is structured.
When reimbursement tightens, hospices that have not benchmarked their DME spend are flying blind. They know the per diem rate on their contract but don't know how that compares to what they should be paying based on their census, market, and utilization.
A per diem rate that looked competitive two years ago may not be competitive today. DME management has evolved, vendor networks have expanded, and formulary structures have gotten more sophisticated. Hospices that haven't reviewed their DME contract in 18 months or more may be leaving meaningful savings on the table.
The proposed rule is a good reason to do that review now, before the final rule sets the FY2027 rates in stone.
How Hospice DME Per Diem Rates Get Calculated
The FY2027 proposed rule continues CMS's expansion of the HOPE (Hospice Outcomes and Patient Evaluation) quality reporting framework. HOPE collects structured data on patient assessments, symptom management, and care quality across the hospice stay.
DME delivery and equipment adequacy are directly connected to the symptom management outcomes HOPE measures. A patient whose hospital bed is delayed, whose oxygen equipment isn't functioning correctly, or whose pain management is compromised by missing equipment is a patient whose clinical outcomes will reflect that gap.
This is the piece most hospice administrators don't connect explicitly: DME process quality is not just an operational issue. It is a quality reporting issue. As HOPE reporting matures and may become more closely tied to payment and public reporting, the operational gap between well-managed and poorly-managed DME will start to show up in your quality data.
Payment pressure tends to increase survey risk. When hospices cut costs in ways that affect care quality, surveyors find it. CMS surveyors and accreditation bodies have expanded their focus on equipment adequacy, response times for equipment needs, and documentation of DME delivery and pickup.
Hospices that are managing DME through informal processes - phone calls, email chains, staff memory - are more exposed here. When a surveyor asks, "What is your process for ensuring DME is delivered within your required timeframe?" the answer needs to come from a system, not a person trying to remember.
The good news is that DME is one of the few cost areas hospice administrators can actually move. The opportunity tends to sit in three places:
Formulary alignment - most hospice formularies include items that add cost without adding clinical value for their specific patient population. A formulary review against your actual utilization often reveals items that can be removed without affecting care quality.
Vendor competition - hospices locked into a single vendor have no pricing pressure to apply. Hospices that work through a vendor-flexible model benefit from vendors competing for their business, which naturally holds rates down.
Administrative overhead - the staff time your team spends on DME coordination is a real cost that doesn't appear on any DME invoice. Reducing that time frees up nursing hours for patient care.
You don't need to wait for the final rule to act. The proposed rule gives you the directional signal you need to start the conversation now.
If that number is higher than you expect, the time to address it is now - before the final rule locks in your FY2027 operating environment.
Qualis works with hospice teams to run exactly this analysis. If you want to know where your DME spend stands and what's driving it, the conversation starts here.