While the dust has now settled on the legislative text found in this summer’s One Big Beautiful Bill Act (OBBBA), health care providers are starting to see the real-world implications of this law. OBBBA implementation is occurring alongside a proliferation in powerful program integrity tools. Recent developments include a significant influx of federal funds in many states for health care providers that serve rural populations, a new Medicaid prepayment claims review program for certain “high-risk” services in Minnesota, and a new artificial intelligence (AI) driven initiative that is intended to proactively identify fraud and abuse based on machine learning (ML) applied to previously billed Medicare claims.
Medicaid Prepayment Claims Review Program
The OBBBA made several significant changes to the Medicaid program, a number of which will not come into effect for several years. For example, the Medicaid “work requirements,” obligations for state agencies to perform beneficiary renewals more frequently than they do currently, and reductions in the period of retroactive Medicaid coverage will not kick in until January 1, 2027. Expanded Medicaid cost-sharing for certain services will not begin until October 1, 2028.
Meanwhile certain state Medicaid agencies are taking separate steps to deploy enhanced program integrity tools. This month, for example, the Minnesota Department of Human Services (DHS) announced a new claims prepayment review process on October 29. For 14 specific services, which have been identified as “high risk,” a third-party contractor will review whether the services are necessary, appropriately documented and provided before DHS reimburses the billing provider. The trigger for claims review does not depend on the category of provider at issue, but rather on the services that are billed. Services identified as “high risk” include the following:
- Adult Companion Services
- Adult Day Treatment
- Adult Rehabilitative Mental Health Services
- Assertive Community Treatment
- Community First Services and Supports
- Early Intensive Developmental and Behavioral Intervention
- Housing Stabilization Services
- Individualized Home Supports
- Integrated Community Supports
- Intensive Residential Treatment Services
- Night Supervision Services
- Nonemergency Medical Transportation Services
- Recovery Peer Support
- Recuperative Care
DHS will have 30 days to pay or deny clean claims and 90 days to deny or pay “complex” claims. Claims considered “complex” include those that are billed with attachments, have information in the notes/comments field, constitute replacement claims, or reflect Medicare crossover or third-party liability claims.
This development follows aggressive efforts by state Medicaid agencies to more generally exercise their authority under the Affordable Care Act in order to suspend payments to providers where the agency has determined there is a credible allegation of fraud. DHS has indicated that it recognizes that payment delays can have an impact on providers, and noted that it is “committed to processing claims as quickly as possible within the mandated timelines.”
Rural Health Transformation Program
The OBBBA created the Rural Health Transformation (RHT) Program, which is trumpeted as an initiative to improve access to health care in rural communities. The RHT will allocate $50 billion to qualifying states over a five-year period, with funding to start flowing in 2026. Half of the funding will be split equally among the approved states, and the other half will be allocated based on factors like the size of the state’s rural population, the percentage of the state’s population that is located in qualifying rural areas, the proportion of rural health facilities in the state, the amount of uncompensated care in the state; and the percentage of hospitals that receive disproportionate share payments under the Medicaid program.
States are required to use RHT funds for three or more specifically approved uses. Activities like the following are examples of approved uses:
- Providing payments to health care providers for the provision of health care items or services. Provider payments cannot exceed 15% of the total funding awarded to the state.
- Supporting access to opioid use disorder treatment services, other substance use disorder treatment services, and mental health services.
- Developing projects that support innovative models of care which include value-based care arrangements and alternative payment models.
- Recruiting and retaining the health care clinical workforce in rural areas.
- Promoting consumer-facing, technology-driven solutions geared toward preventing and managing chronic diseases.
Most states – including California, Colorado, Illinois, Kansas, Massachusetts, Minnesota, Missouri and Texas – solicited input from health care providers and others in the community about their participation in the RHT Program.
States are permitted, but not required, to identify sub-awardees or contractors in their applications to participate in the RHT Program. If those parties are not identified, states are required to define and include the methodology, process and criteria for selecting the parties that will ultimately receive a share of this additional funding. Each state has discretion to determine whether and to whom to sub-award or contract funds (including the types of providers), and there are no limits on the types of entities that can receive funds. However, there are certain restrictions on how states can use the funds. For example, RHT funds cannot be used to modify or replace payment for services that are covered by Medicare or Medicaid.
The specific implications for health care providers will depend on what participating states are doing with the grant funds and how their plans are described to the Centers for Medicare and Medicaid Services (CMS). For example, providers that have had demonstrated success participating in accountable care organizations or other value-based programs, or that have done well implementing data-driven care models, may be attractive candidates for serving as a contractor under a state’s RHT Program. Similarly, providers that have thrived in delivering care via telehealth or other forms of remote technology may be well-positioned for a role in the RHT Program. Notably, there is no requirement that the providers themselves be located in rural areas.
States will undoubtedly take varying approaches and emphasize a mixture of initiatives within the parameters of what CMS will permit under the RHT Program. In Minnesota, for instance, the focus of the state’s plan appears to be on emergency services, primary care, care for people with complex and chronic conditions, mental and behavioral health care, and maternal health care. In Colorado, areas of focus appear to include prevention and chronic disease management; initiating, fostering and strengthening partnerships between rural health care providers and providers in other areas; and developing value-based care delivery models. The focus in Missouri does not appear to be publicly available in full, but some of the principles described as potentially being part of the Missouri plan include supporting rural facilities to restart or add service lines in the areas of maternity care, cardiology and chemotherapy; taking steps to reopen previously closed facilities to restore access to care; and adopting innovative transportation methods that bring patients to care and care to patients.
The deadline for states to apply for the RHT Program is November 5, 2025, and awards will be announced by December 31. RHT funds will start to flow to the states in January 2026.
Crushing Fraud Chili Cook-Off Competition
CMS recently announced a new initiative to target health care fraud and abuse. Similar to the WISeR Model [previously discussed here], the “Crushing Fraud Chili Cook-Off Competition” initiative focuses on leveraging ML within AI to detect anomalies in Medicare claims data. A key goal of this market-based research challenge is to identify indicators that can be used “proactively flag similar fraud schemes across Medicare claims data.” The idea is to harness the power of AI/ML to translate detected patterns into indicators of fraud, which would presumably lead to the deployment of tools that might be able to flag and corral suspicious claims before they are paid. This also would likely save time and money for enforcement agencies as they would have a better chance of catching potentially fraudulent claims early on, as opposed to paying those claims and having to track down and recover reimbursement from the perpetrators.
Finalists in the competition are currently in the process of applying their AI/ML tools to a data set made available by CMS. The test data consists of a random sample of Medicare fee-for-service hospice, Part B and durable medical equipment claims. Finalists can submit their analysis to CMS starting October 31, 2025, with the submission period running through December 1. CMS will announce the winner on December 15, 2025. CMS will also reveal the names of the other finalists at that time. Participants have been informed that they are welcome to “leverage [their] innovations for any future contract bids that CMS announces.” It seems reasonable to expect, therefore, that the technology which ultimately prevails in the Crushing Fraud Chili-Cook Off will find its way into Medicare program integrity initiatives at some point down the road.
If you have any questions about any OBBBA changes to the Medicaid program affecting health care providers, or health care fraud abuse enforcement more generally, please contact Jesse Berg or your regular Lathrop GPM attorney.