New York Had Collected Nothing From 75 Nursing Homes That Missed Care-Spending Rules, and Pennsylvania Waived Penalties for 76, Federal Inspector General Finds

New York had not collected any money from 75 nursing homes that failed to meet its rules on how much revenue must go to resident care, and Pennsylvania waived penalties for 76 homes that fell short of its own standard, according to a report from the Office of Inspector General at the U.S. Department of Health and Human Services.

The audit, OAS-25-09-086, was issued Oct. 21 and posted Oct. 28. It examined the only four states that, as of January 2026, required nursing homes to spend a minimum share of their money on resident care: Massachusetts, New Jersey, New York and Pennsylvania. There is no federal minimum spending requirement.

Nursing Home Minimum Spending Rules in Four States

Each state wrote its own rule and calculated compliance differently, the report says. Massachusetts requires homes to spend at least 75% of total revenue on direct care. New Jersey requires at least 90% of Medicaid revenue to go to Medicaid patient care. New York requires 70% of revenue on direct resident care and 40% on resident-facing staffing, and caps excess revenue at 5% of expenses. Pennsylvania requires resident care and related costs to equal at least 70% of total costs.

According to state data cited in the report, 465 of 540 New York nursing homes, or 86.1%, met all three of the state's thresholds for 2023. The other 75 "were required to remit funds to the State," but "the State had not recouped any funds from nursing homes that did not meet the minimum spending thresholds as of June 2026," the report says, citing state officials.

In Pennsylvania, 435 of 511 homes met the 70% threshold. For the remaining 76, "the penalty was waived, and no penalties have been assessed as of October 2025," according to state officials quoted in the audit. Pennsylvania also used unaudited cost report data to decide compliance because audits would not be finished in time, the report says.

In Massachusetts, 74 of 328 homes, or 22.6%, fell below the 75% standard for state fiscal 2024 and "would have been subject to a downward adjustment" of Medicaid rates. The state audited about 10 homes that year. In New Jersey, 321 of 322 homes met the 90% threshold and one owed a rebate, but state officials said the reported data "has not been audited due to limited resources."

What Nursing Homes Told Investigators

Of 76 nursing homes interviewed, 42 reported problems complying. Thirteen cited staffing shortages that kept direct care spending down; one Massachusetts home said it competed with local hospitals for nurses. Nine New Jersey homes called the reporting a burden.

Six New York homes said they did not know exactly how the state calculated the percentages. One told investigators that nursing home associations and audit firms "have had to create their own models" of the state's math. Eleven Pennsylvania homes said counting the state's required bed tax as a cost lowered their spending percentages.

What Comes Next for CMS

Starting in 2028, federal rules will require states to report to the Centers for Medicare & Medicaid Services, by facility, the share of Medicaid payments spent on pay for direct care workers and support staff. CMS has said it may consider a federal minimum spending rule.

The inspector general recommended that CMS use the report's findings in carrying out the reporting rule and in any future rulemaking. CMS concurred, while noting that because state processes vary, "it may not be possible to align all details of the reporting process" with every state.

Sources: U.S. Department of Health and Human Services, Office of Inspector General, "Four States Implemented Different Nursing Home Minimum Spending Requirements Related to Resident Care, and Three of These States and Some Nursing Homes Experienced Challenges," OAS-25-09-086, October 2026 (PDF): https://oig.hhs.gov/documents/audit/11959/OAS-25-09-086.pdf ; report page: https://oig.hhs.gov/reports/all/2026/four-states-implemented-different-nursing-home-minimum-spending-requirements-related-to-resident-care-and-three-of-these-states-and-some-nursing-homes-experienced-challenges/ ; Cover photo: Erastus Corning Tower, Albany, N.Y., home of the New York State Department of Health (Albeit simple, CC BY 4.0, via Wikimedia Commons)