On-Demand Webinar: “Washington Updates: FY2026 — First Day, Fresh Questions”

What changed for healthcare on October 1, 2025—the first day of FY2026?

October 1 opened with a federal government shutdown, immediate operational impacts at HHS/CMS (including furloughs), and the expiration of several temporary policies that had been extended only through the prior continuing resolution. The webinar detailed practical effects on Medicare claims timing, telehealth coverage, Hospital at Home, and the outlook for Medicaid DSH funding and sequestration.

How long will Medicare claims be held during the shutdown?

CMS indicated it would hold claims for 10 business days; payments are expected on day 14, with the payment level contingent on when/if Congress resolves the shutdown. Submitting now risks denials you’ll need to reopen/appeal later.

What’s the status of Medicaid DSH cuts right now?

Under OBBBA (the “One Big Beautiful Bill Act”), $32B in Medicaid DSH reductions over four years are on the books. During the shutdown, whether states issue DSH payments this quarter hinges on state decisions and available funds; historically, payments were restored retroactively once a shutdown ended.

Did Hospital at Home change?

Yes. CMS instructed hospitals with Medicare-approved Hospital at Home waivers that inpatients at home must be discharged or returned to the hospital as of Oct 1. There’s no historical precedent from 2018 for this program, so providers should act conservatively.

What just changed for Medicare telehealth as of Oct 1, 2025?

• Medical telehealth is now limited to beneficiaries physically present at an eligible facility in a rural area (no routine home-based medical telehealth).
• Temporary authority for PT/OT/SLP billing telehealth expired.
• RHCs/FQHCs may still bill G2025, but only when the patient is physically at a facility in a rural area at the time of service.
• Tele-behavioral health to the home remains covered permanently, but for new tele-behavioral patients, a face-to-face visit within six months is required (with some timing nuances for RHCs/FQHCs).

If we keep providing home-based medical telehealth, what are our options?

1. Issue an ABN and bill the patient (but you forfeit the right to bill Medicare later and must refund if Congress retroactively restores coverage).
2. Submit now and expect denial, then reopen/appeal later.
3. Hold the claim and submit later if Congress makes relief retroactive.

Are audio-only services still allowed?

Only for tele-behavioral health when the patient is at home and the practitioner could support audio/video but the patient chooses audio-only. There is no audio-only path for medical telehealth to the home now that coverage reverted.

What’s the near-term outlook on ending the shutdown and sequestration?

Senate action requires 60 votes. Policy bargaining points include enhanced ACA premium tax credits and reversing certain Medicaid provisions. Absent Congressional action, Medicare sequestration could rise to 4% at the start of 2026 (from 2%). Timing hinges on end-of-session maneuvers.

What is the Rural Health Transformation Program (RHTP) and how much money is at stake?

RHTP is a $50B CMS program (FY2026–FY2030), distributing funds to states (not directly to providers) to support transformative rural health initiatives. Funds are split into $25B baseline and $25B workload-based tranches.

How are states scored—and what drives the workload funding?

• Rural facility & population (objective data; ~50% of score).
• State policy factors (e.g., licensure compacts, scope of practice, SNAP nutrition rules, Medicaid telehealth/RPM; ~15%).
• Initiative-based factors (quality and rigor of the state’s proposed initiatives; ~35%).

Scores are reassessed annually (except the fixed rural facility/population score set in Q4 2025).

What’s the timeline and what should states assume in their budgets?

• Applications are open through November 5, 2025.
• CMS instructed states to assume $200M/year for five years in planning, subject to adjustment based on scoring.
• At least 90% of funds must be used each period; 10% maximum may be used for administration.
• Funds must be spent by Oct 31 of the following fiscal year.

What kinds of initiatives does CMS want to fund?

Ten lanes, including population health/clinical infrastructure, health & lifestyle prevention, rural provider partnerships (right-sizing, REH conversion, centralized back office), EMS & transport/treat-in-place, workforce stabilization, Medicaid APMs (more risk), dual-eligible integration (PACE/D-SNP), remote care services adoption, data infrastructure (EHR/AI/decision support), and consumer tech. Each initiative must include at least four quantifiable metrics, concrete workplans, and a sustainability path.

Are there spending restrictions providers and states should know?

• No new construction (alterations only if tightly linked to an initiative).
• EMR replacement is capped at 5%.
• Administrative spend capped at 10%.
• No funding clinician wages where non-compete agreements are imposed.
• CMS will monitor and can claw back funds for non-compliance.

Can a state get credit for future policy changes?

Partially. States may earn partial credit by committing to adopt specific policies (e.g., licensure compacts, nutrition CME) by set deadlines, but CMS can recoup funds if the state fails to deliver on those commitments by 2027/2028 (depending on the factor).

Why is Congress scrutinizing large nonprofit health systems?

Recent hearings—aimed at transparency and detailed reporting—focused on large nonprofits (not rural/community hospitals). Expect pushes for expanded community benefit reporting and attention on “administratively rural” classifications that unlock rural-only advantages for urban hospitals.

What’s happening with rural reclassification?

Rural reclassification among PPS hospitals jumped from 3 (2017) to ~425, representing ~one-third of community hospital beds. Policymakers are examining how wage index, 340B eligibility thresholds, and GME interact with these designations.

What is the proposed $100,000 H-1B fee and why does it matter to providers?

A new fee on each H-1B petition has been floated; given that ~25% of U.S. physicians are internationally trained—and rural dependence is even higher—the fee could worsen staffing shortages. States may need to budget RHTP workforce funds to offset these costs and encouraged targeted Congressional outreach.

What’s the latest on pharmaceutical tariffs and most-favored-nation (MFN) pricing?

Key moving parts discussed: an EU deal capping tariffs on name-brand drugs at 15% (generics excluded), a July 30 White House letter pressing MFN pricing for federal programs, a Sept 25 statement about 100% tariffs on companies without U.S. “buildings,” and a subsequent Pfizer announcement agreeing to MFN for Medicaid in exchange for tariff relief—alongside the launch of Trump RX gov (a DTC discount portal) slated for 2026.

What immediate action items should providers and states consider?

• Decide your telehealth posture (ABN & patient billing vs. hold claims vs. submit/appeal).
• Track Medicare claim holds/denials and be ready for reprocessing if Congress acts retroactively.
• Monitor Medicaid DSH disbursement decisions at the state level this quarter.
• For states: finalize RHTP applications by Nov 5; bake in metrics, sustainability, and budget to cover H-1B fees within workforce strategies.
• Watch for the OPPS final rule (normally late Oct/early Nov) and sequestration updates. PYA will present a webinar on the OPPS on November 12. Registration details will be released soon.