OIG Audit Highlights Challenges With Nursing Home Minimum Spending Requirements

The Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued a report on October 21, 2026 detailing results of an audit that explored implementation and challenges in four states that have enacted nursing home minimum spending requirements. The audit explored requirements implemented in MA, NY, NJ, and PA, and while each set of requirements was slightly different, all required that a certain percentage of revenue be spent on costs related to resident care, with NY implementing an additional requirement that capped excess revenue relative to total expenses.

The audit examined the experiences of both the state and providers within those states related to these requirements, identifying challenges to implementation for each. OIG found that data collection was a challenge to implementation in three of four states. Nursing homes in all four states reported difficulty meeting requirements, either through issues with data submission or issues with meeting spending requirement thresholds. Despite these issues, more than 75% of nursing homes in all four states met requirements, with 99% of nursing homes meeting requirements in New Jersey. All four states included financial penalties for noncompliance. Penalties included repayment of funds and reductions in Medicaid reimbursement rates.

Results of this audit could have implications for future policy making. Recall that the Centers for Medicare and Medicaid Services (CMS) finalized a Medicaid payment transparency reporting requirement in the 2024 minimum staffing standards rule that will require states to report the percentage of Medicaid payments spent on direct care compensation beginning in 2028. CMS has additionally applied spending requirements to certain home and community based services, requiring 80% of Medicaid funds to be spent on direct care compensation. A group of Senate Finance Committee Democrats, led by Ranking Member Ron Wyden (D-OR) released a Request for Information in October 2026 that, in part, explores the topic of minimum spending requirements in various forms. The OIG recommended that CMS utilize the information from this audit to inform how these or future policies are implemented.