Federal healthcare enforcement is shifting from recovering improper payments after they occur to preventing questionable providers from receiving Medicare and Medicaid funds in the first place.
On July 21, 2026, the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) announced the deferral of more than $1 billion in federal Medicaid payments to California and Minnesota while the states provide additional documentation supporting certain high-risk claims.
The announcement also reinforced HHS’s intent to use exclusion authority more aggressively to remove individuals and entities considered “bad actors” from Medicare, Medicaid, and other federal healthcare programs.
Although the immediate Medicaid payment reviews are not directed specifically at skilled nursing facilities, the broader enforcement strategy has significant implications for SNF providers.
What Was Announced?
CMS is deferring approximately $867.5 million in federal Medicaid payments to California and $199 million to Minnesota.
In California, the review involves claims associated with certain in-home care programs where spending growth significantly exceeded national trends or additional documentation was needed. In Minnesota, CMS is reviewing claims across 14 high-risk service areas, including expenditures connected to providers identified through program-integrity reviews.
These are currently payment deferrals—not permanent funding reductions. Both states will have an opportunity to submit documentation demonstrating that the expenditures comply with federal Medicaid requirements.
However, the announcement extends beyond these two states. HHS also indicated that exclusion authority will be used as a central enforcement tool to remove individuals and entities from federal healthcare programs and, in some cases, prevent them from returning.
Why Exclusion Is Different From a Claim Denial
For SNFs, exclusion is significantly more serious than a routine claim denial, medical review, or repayment request.
When an individual or entity is excluded, federal healthcare programs generally cannot pay for items or services furnished, ordered, prescribed, or directed by that individual or entity. The prohibition can apply even when the excluded person’s work is not separately billed.
For example, a SNF may be at risk if an excluded individual participates in:
- Direct resident care
- Therapy, pharmacy, or medical services
- Ordering or prescribing services
- MDS and reimbursement functions
- Billing, accounting, or claims preparation
- Administrative or management activities
- Staffing-agency or contracted services
An excluded person does not necessarily need to submit a claim personally for the facility to be exposed. If the person contributes to a service included in a Medicare or Medicaid payment, the associated payment may be considered improper.
According to the HHS Office of Inspector General, the payment prohibition extends to administrative and management services necessary to provide federally reimbursed care. This can include leadership, billing, accounting, health information management, staff training, and strategic or operational support.
Related CMS Proposals Could Further Increase SNF Risk
The exclusion announcement should also be considered alongside CMS’s proposed changes to Medicare provider enrollment and revocation authority.
Although these provisions were included in the Calendar Year 2027 Home Health Prospective Payment System proposed rule, many of the enrollment provisions would apply to all Medicare providers and suppliers, including SNFs.
If finalized, the proposed changes would allow CMS to:
- Make all Medicare enrollment revocations retroactive to the date the noncompliance began.
- Broaden the circumstances considered a pattern or practice of improper billing.
- Expand revocation authority involving false or misleading enrollment-related information.
- Consider adverse actions involving owners, managing employees, managing organizations, officers, and directors.
- Expand the definition of managing employees to include additional clinical and departmental leaders.
- Extend an adverse enrollment decision across a provider’s other Medicare enrollments.
- Reduce the post-revocation claim-submission period from 60 days to 15 days.
- Impose reapplication bars of up to 10 years for enrollment denials.
- Require broader disclosure of affiliations and business relationships that may present a program-integrity risk.
These provisions remain proposed and are not all currently in effect. Nevertheless, they demonstrate the direction CMS is taking: increased scrutiny of enrollment information, ownership, management relationships, billing conduct, and affiliations across organizations.
The Revenue Cycle Implications for SNFs
SNF revenue-cycle compliance is often focused primarily on claim accuracy. Facilities monitor whether the correct payer, diagnosis, HIPPS code, covered days, revenue codes, and supporting documentation are included on the claim.
Those controls remain essential, but they are no longer sufficient on their own.
A technically accurate claim can still create repayment risk when an excluded employee or contractor participated in the service. Likewise, a facility may have accurate clinical documentation but still face enrollment consequences if its CMS records do not accurately reflect its ownership, management, location, or organizational relationships.
The potential financial consequences may include:
- Recoupment of Medicare or Medicaid payments
- Civil monetary penalties
- Payment suspension
- Medicare enrollment revocation
- Medicaid program termination
- Extended re-enrollment restrictions
- Increased audit and medical-review activity
- Disruption of cash flow while eligibility or enrollment issues are resolved
This makes exclusion screening and enrollment maintenance part of revenue-cycle protection, not simply a human resources or compliance function.
What SNFs Should Review Now
SNFs do not need to wait for additional enforcement action before evaluating their current safeguards.
1. Exclusion screening
Facilities should screen applicable employees, contractors, agency personnel, medical directors, therapists, vendors, owners, and managing personnel against the HHS-OIG List of Excluded Individuals and Entities and applicable state Medicaid exclusion lists. Screening should occur before hire or contracting and routinely thereafter. Facilities should also retain documentation showing when each search was completed and the results.
2. Contracted and agency personnel
SNFs should not assume that staffing agencies and vendors have completed appropriate screening. Contracts should clearly identify each party’s screening responsibilities and require timely notification of exclusions, licensing actions, or other program-integrity concerns. The facility should also have a process for verifying compliance rather than relying solely on contractual language.
3. Medicare and Medicaid enrollment information
CMS-855, PECOS, NPI, state Medicaid, ownership, managing employee, and practice-location information should be reviewed for accuracy. Facilities undergoing a change in ownership, management arrangement, leadership transition, address change, or restructuring should confirm that all required enrollment updates were submitted within the applicable reporting period.
4. Ownership and management affiliations
Facilities should understand the regulatory history of individuals and organizations involved in ownership or management. Previous Medicare revocations, Medicaid terminations, payment suspensions, licensing actions, outstanding federal debt, or relationships with excluded entities may affect current or future enrollment decisions.
5. Billing and documentation controls
Facilities should continue strengthening audits for unsupported or medically unnecessary services; MDS and claim inconsistencies; duplicate billing; incorrect payer sequencing; billing after discharge; inaccurate covered or noncovered days; services ordered by an excluded practitioner; claims involving uncredentialed or ineligible personnel; and overpayments that have not been investigated and returned timely. A repeated pattern of billing errors can create a different level of risk than an isolated, promptly corrected mistake.
A Broader View of Revenue Cycle Compliance
The recent announcement does not create an immediate nationwide change to SNF billing requirements, nor does it establish that SNF Medicaid payments in California or Minnesota are currently being withheld.
It does, however, send a clear message about the federal government’s enforcement priorities.
CMS and HHS are emphasizing proactive identification of high-risk claims, closer scrutiny of provider relationships, and earlier intervention before questionable payments are released. At the same time, proposed enrollment changes could give CMS broader authority to take action when it identifies billing, disclosure, or compliance concerns.
For SNFs, the takeaway is straightforward: protecting reimbursement begins before the claim is submitted.
Accurate enrollment records, documented exclusion screening, responsible vendor oversight, complete clinical support, and timely investigation of billing concerns must function together. Facilities that treat these responsibilities as separate compliance exercises may overlook the financial connection between them. As federal enforcement becomes more proactive, exclusion and enrollment compliance should be incorporated into the facility’s overall revenue-cycle quality assurance process.
