Analysis: Updates to Chapters 5 and 7 of State Operations Manual
As previously reported, the Centers for Medicare and Medicaid Services (CMS) released updates to the State Operations Manual at the end of January. These updates, made to Chapter 5 Complaint Procedures and Chapter 7 Survey and Enforcement Process for Skilled Nursing Facilities and Nursing Facilities, do not include any new policies but rather reflect existing policies that previously were not included in the State Operations Manual. LeadingAge provides an overview of some key updates here based on questions or concerns frequently identified by our members.
Department of Labor Proposes New Worker Classification Rule
On February 27, the Department of Labor (DOL) published a proposed rule that would revise how employers determine whether a worker is an employee or an independent contractor under the Fair Labor Standards Act (FLSA) and certain related federal laws. The proposal would rescind the agency’s 2024 final rule and replace it with a framework similar to the standard adopted in 2021 during the first Trump administration.
Under the proposed rule, the test for determining worker classification would place greater emphasis on two core factors: the nature and degree of control exercised over the work, and the worker’s opportunity for profit or loss based on initiative or investment. If both core factors point to the same classification, that outcome is likely to prevail. Additional considerations—the level of skill required, the permanence of the working relationship, and whether the work is part of an integrated unit of production—may still be considered but would carry less weight than the core factors.
The proposal is a shift away from the 2024 rule’s “totality of the circumstances” approach, which treated a non-exhaustive list of factors equally in determining worker classification. The agency believes the new rule will offer greater flexibility and clearer guidance for organizations that use independent contractors, while potentially reducing misclassification risk and related litigation.
The proposed rule is subject to a 60‑day public comment period, with comments due by April 28. If this rule has implications for you and you would like to discuss further or weigh in on the issue, please reach out to Amanda Mead.
Vice President Vance and Administrator Oz Hold Health Care Fraud Press Conference and Announce New Medicaid and Medicare Policies and RFI
On February 25, Vice President JD Vance and Administrator Mehmet Oz announced new steps to crack down on fraud in the Medicare and Medicaid programs. In the State of the Union on February 24, President Trump announced that VP Vance would be in charge of the Administration’s “war on fraud” and that role was referenced in today’s press conference. LeadingAge recently engaged with the Administrator on fraud in hospice and home health and has been tracking the statements, actions, and potential actions across our continuum of care, including in the Medicaid program.
In terms of policies, VP Vance and Administrator Oz announced the following:
- The Administration is officially withholding federal dollars from Minnesota’s Medicaid program. Administrator Oz detailed that CMS had reviewed Minnesota’s Medicaid spending from the fourth quarter of 2025 and is withholding $259.5 million in federal matching funds for services already rendered and reimbursed by the state. Minnesota has 60 days to respond to CMS’s request for a corrective action plan or risk further deferral of additional federal Medicaid dollars. In its press release on the announcement, CMS notes that personal care services and HCBS services are program integrity hot spots. When asked by a reporter about the legal authority for withholding the federal Medicaid dollars, VP Vance said “We’re the ones who spend this money. Congress appropriates it. We’re the ones who actually make sure this goes to the people it ought to go to. And inherent in that is making sure that it only goes to the people that Congress says that it should go to. We shouldn’t be sending money to fraudsters.” Administrator Oz also indicated in his remarks that other states will be the subject of similar actions. Medicaid is an appropriated entitlement. This means that while the spending is mandatory (aka not dictated by the annual appropriations budget that governs discretionary spending) but the money for the federal share of the Medicaid match is appropriated by Congress. LeadingAge anticipates, as with other instances around impoundment and withholding of federal funds that have occurred recently, that this action will likely be challenged in court though no legal action has yet been announced.
- Nationwide moratorium on Medicare enrollment of durable medical equipment (DME) providers: Administrator Oz also announced a 6-month, nationwide moratorium on Medicare enrollment of new durable medical equipment (DME) providers citing fraud especially in South Florida. He noted the need for a nationwide moratorium to stop the bad actors from simply moving to another location. This temporary moratorium will allow for CMS to explore additional actions to further mitigate fraud — Administrator Oz mentioned an initiative underway with the Treasury Department, specifically the Internal Revenue Service (IRS) but did not elaborate. LeadingAge will analyze further the announcement around the moratorium so that we understand the rationale and impacts should this action be taken on any other Medicare providers.
- Request for Information to Comprehensive Regulations to Uncover Suspicious Healthcare (CRUSH): A request for information (RFI) was also announced and published in the Federal Register. It has a 30-day comment period. LeadingAge will be responding to the RFI and will be engaging closely with state partners and members over the course of the next month as we develop our response.
