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DHS outlines nursing-home cost drivers and new MCO network rules to hold underperforming facilities to account
Summary
DHS told lawmakers it expects higher nursing-home enrollment and per-client costs in FY26 and described a July 1 policy shift allowing MCOs to de-network chronically underperforming nursing facilities under strict criteria while maintaining continuity of care for current residents.
Department of Human Services officials told the Senate Budget & Appropriations Committee on May 6 that FY26 projections show increased nursing-home enrollment and higher per-client costs and explained a forthcoming policy change affecting managed-care plan networks.
DHS cited an anticipated average monthly enrollment increase of about 1,605 nursing-home enrollees per month for FY26, a rise it attributed in part to effects from the Medicaid unwinding and higher acuity among residents. The department also cited an actuarial estimate that the average annual cost of long-term care per client will rise by about $4,402.67 in FY26.
To improve accountability, DHS said it will shift to an "any willing qualified provider" model beginning July 1, under which managed-care organizations may stop contracting with facilities that chronically fail to meet state and federal licensing standards. DHS listed specific trigger criteria: repeated inclusion on CMS's special focus facility list, multiple Level G-or-higher licensing violations, or sustained 1-star CMS ratings over many quarters. DHS emphasized that MCO authority would not allow abrupt resident displacement; plans must continue to authorize and pay for residents already in impacted facilities unless residents choose to move.
Lawmakers pressed DHS on potential short-term disruptions should an MCO decide to stop contracting with a facility and asked about intermediate remediation steps and supports. DHS said it expects the parameters to be applied sparingly and stressed opportunities for facilities to improve and return to contracts once standards are met.
Committee members also discussed FY26 nursing-home rate increases and prior federal staffing-rule activity; DHS said it remains committed to investments that support workforce recruitment and retention and reiterated that the FY26 budget continues the prior year's $67 million increase for nursing facilities.
