For healthcare professionals, navigating regulatory changes is about positioning your organization for long-term success. Recent shifts in funding programs and regulations impact everything from financial planning to compliance readiness. This guide explores key insights from recent payment reform developments to help your organization adapt and stay ahead of regulatory changes.
State Directed Payments & Revenue Recognition
State directed payments (SDPs) represent a significant funding source for the industry. CMS estimates cited near $145 billion for 2026. These funds are financially material, and revenue recognition is highly state fact-specific. The core accounting framework under FASB’s Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, remains unchanged. However, how and when revenue is recognized varies widely based on state rules and program structures.
There is no one-size-fits-all answer for revenue recognition. Healthcare organizations should consider taking the following steps to help maintain compliance and accuracy:
- Document the rationale: Formally document all considerations and assumptions used to formulate your revenue recognition conclusion.
- Align with auditors early: Have early discussions, particularly when facing differences between CMS approval dates and provider year-ends.
- Evaluate CMS approval status: Determine whether pending CMS approval is substantive versus administrative in nature.
- Separate payment components: Challenge revenue recognition for baseline payments separately from quality components, giving consideration to underlying payment metrics and potential variable consideration constraints on recognition, i.e., a lack of transparency into underlying participating provider pool quality data.
Preparing for Rural Health Transformation Program Grant Compliance
The Rural Health Transformation Program (RHTP) introduces $50 billion in federal funding over five years. This model behaves more like federal grant funding than traditional reimbursement. Consequently, it introduces grant-level compliance obligations and a need for internal controls that providers may not be aware of. To successfully handle RHTP funds, healthcare leaders should build robust compliance frameworks. Here are a few key preparation steps to consider:
- Determine funding status: Clarify whether your organization is a subrecipient or a contractor and if your organization will receive funds through advance payments or cost reimbursement.
- Create a compliance matrix: Create a road map that includes requirements, report due dates, and allowable cost limitations.
- Prepare for audits: Be ready for Uniform Guidance Single Audit testing if your organization is a nonprofit subrecipient expending over $1 million. Also, for-profits should be prepared for similar compliance and audit requirements depending on the amount received.
- Upgrade financial tracking: Set up unique general ledger expense accounts and cost centers to monitor budget-to-actual spending accurately.
Adapting to Shifting Reimbursement Rules
Reimbursement rules continue to change across the healthcare sector. This uncertainty requires continual updates to estimates, disclosures, and assumptions. Recent examples include the withdrawal and likely return of the 340B Rebate Model Pilot Program, alongside the expansion of Medicaid Disproportionate Share Hospital (DSH) uncompensated care definitions under the Consolidated Appropriations Act, 2026 (CAA). Consider prioritizing the following risk management strategies:
- Update estimation methodologies: Continually reassess how you calculate estimates as rules evolve.
- Enhance financial disclosures: Maintain robust financial statement disclosures regarding the amount of program revenue recognized and any underlying uncertainties.
- Monitor provider taxes: Keep a close watch on ongoing scrutiny and tightening of provider taxes used to fund SDPs.
How Forvis Mazars Can Help
Our Healthcare team at Forvis Mazars is ready to help you prepare for what’s next. We provide assurance services, strategic tax planning, and tailored consulting to help you comply with regulatory changes, enhance care, and drive innovation, all with a focus on measurable results. If you have any questions or need assistance, reach out to a professional at Forvis Mazars.
Watch our archived webinar on demand, “Payment Reforms: Accounting, Compliance, & Reimbursement,” for more information on these topics.