Can Medicare and Medicaid Stop Reimbursing Bad Nursing Homes?
Medicare Advocacy published an article asking that question. The well-known and long standing problem of national for-profit chains and individual nursing homes neglect vulnerable adults under their care; provide poor care, and yet year after year, they remain eligible to receive taxpayer funds via Medicare and Medicaid reimbursement.
As previously covered by the Center for Medicare Advocacy, the article describes the abysmal ratings of two Midwestern nursing home chains and explains how federal authorities could be used more effectively to deny and revoke certification for owners that provide poor care.
The Two Chains
The ratings for the two Midwestern chains reveal a shocking pattern of failures.
One of the chains has 15 nursing homes, 14 of which all have one star in staffing ratings. Eight had one star in health inspections, nine had abuse icons, and 14 had multiple federal civil money penalties (CMPs).
Many of the chain’s facilities had denials of payment for new admissions (DPNAs) imposed against them according to Care Compare, a Centers for Medicare & Medicaid Services website.
The second chain had 10 nursing homes with an average overall rating of 1 star; an average health inspection rating of 1.6 stars; an average staffing rating of 1 star; and an average quality measure rating of 2.8 stars. All of the ratings are either below average (2 stars) or much below average (1 star).
This chain has had 20 federal payment denials in the past three years, or 2 federal payment denials per facility.
In addition, the chain has had 46 federal fines in the past three years, an average of 4.6 federal fines per facility. The federal fines total $3,060,491 and average $306,049.10 per facility.
These penalties are inadequate, as the chains evidently view millions of dollars in federal CMPs and fines as the cost of doing business.
More aggressive action from the federal level is needed so these negligent corporations can stop raking in reimbursements.
Federal Laws with Potential for Greater Enforcement
42 C.F.R. §424.535 allows the federal government to revoke Medicare billing privileges of providers for specified reasons including:
- The CMS’s determination that the provider “has a pattern or practice of submitting claims that fail to meet Medicare requirements,” 42 C.F.R. §424.535(a)(8)(ii)(B)
- A civil judgment under the False Claims Act, §424.535(a)(15)
- Revocation of a provider under a different name or business identity, §424.535(a)(18)
Furthermore, the HHS Inspector General has authority to exclude providers, 42 C.F.R. §§1001.2001-2007.
Though exclusions are rare, they have been done before. One notable example is Bob G. Dean, Jr., a Louisiana nursing home operator of seven nursing homes who was excluded after seven residents died in a warehouse he owned to which he had evacuated more than 800 residents during Hurricane Ida in August 2021.
Denial of certification is another tool the federal government could use.
In a William & Mary Law Review article, law professor Nina Kohn explained how CMS has statutory authority under 42 U.S.C. §§1395i-3(d)(1)(A), 1396r(d)(1)(A), 1395i-3(f)(5), 1396r(f)(5) to steer funds away from poor quality nursing homes as well as to deny them certification.
Kohn writes, “Denying certification to facilities owned or operated by entities with a history of endangering residents is therefore consistent with the Secretary’s statutory mandate to refrain from certifying facilities that are not administered in a way that enables them to provide residents with high-quality care.”
The Center for Medicare Advocacy also argues that the CMS has the authority under the 1987 Nursing Home Reform Act to establish specific federal standards for federal certification of nursing homes.
The Act defines the Secretary’s “duty and responsibility . . . to assure that the requirements governing skilled nursing facilities . . . , and the enforcement of such requirements, are adequate to protect the health, safety, welfare, and rights of residents and to promote the effective and efficient use of public moneys.” 42 U.S.C. §§1395i-3(f)(1), 1396r(f)(1), Medicare and Medicaid, respectively.
Should CMS continue refuse to recognize the clear logic of establishing regulatory standards for certification, Congress should pass a law with these standards.
A Model of Effective Enforcement
Critics of nursing home reform may think that these proposals are unable to be put into action, but New Jersey is currently proving them wrong.
For years now, New Jersey’s OSC has taken multiple enforcement actions against owners and operators that provide the lowest quality of care, barring them from future Medicaid funding.
On February 10, 2025, OSC suspended the owners of four New Jersey nursing homes from Medicaid based on guilty pleas to “federal healthcare fraud and tax conspiracy charges in connection with an alleged scheme in which they diverted millions in Medicaid and Medicare funds away from Wisconsin facilities for personal purposes.”
On January 19, 2026, OSC announced its suspension of South Jersey Extended Care (SJEC) and its owners from the Medicaid program. An OSC report found that “SJEC’s owners and operators improperly funneled millions of Medicaid dollars into their own businesses and charities, leaving residents in a dismal, understaffed, and under-resourced facility.”
In short, New Jersey’s strong actions needed to be replicated at the federal level. Nursing home owners and operators that are unwilling or unable to provide high quality care to residents simply cannot be reimbursed by Medicare and Medicaid.
The CMS needs to utilize meaningful enforcement actions by permanently barring owners and operators from participating in Medicare or Medicaid programs for any nursing home.
(Note: A new Notice of Proposed Rulemaking for home health agencies includes substantial revisions to revocation rules that are applicable for all health care providers. 91 Federal Register 41216, 41283 (Jul. 6, 2026). Comments must be submitted by August 31, 2026.)