As organizations finalize their 2025 year-end financial statements, New York State long-term care (LTC) providers face a challenging financial landscape shaped by regulatory changes, delayed reconciliations, and ongoing audits. Third-party liabilities and receivables can significantly impact your year-end financial statements and overlooking them could lead to material misstatements or compliance risks. While there are many moving parts, six areas stand out as the most critical for this year’s audits.
1. Cash Receipts Assessment (CRA)
The Cash Receipts Assessment remains one of the most significant items for year-end. Nursing homes pay a monthly assessment on cash operating receipts at a rate of 6.8%, but only 6% is reimbursable. While the Department of Health (DOH) completed the 2023 reconciliation in late summer 2025, the 2024 and 2025 reconciliations are still pending.
Homes should reserve for these unreconciled years based on fee-for-service Medicaid days. If required payments weren’t made, penalties and interest must also be accrued. This is a recurring item that is a result of DOH’s lag in reconciling the assessments.
2. Nursing Home Quality Pool (NHQP) & 2% Penalty
The NHQP, an annual budget neutral $50 million pool designed to incentivize quality care, continues to be a major factor. The DOH issued quintile rankings for 2024 in December but financial impacts have not yet been released. Homes in the lower quintiles should anticipate liabilities, while those in the top three may expect receivables.
Adding to the complexity is the 2% penalty tied to poor performance over the last two years. If a facility was in the bottom quintiles for both 2023 and 2024 (was in 4th quintile and dropped to 5th quintile or was in 5th quintile year over year), a penalty reserve for 2025 rates may be necessary, unless the facility meets the definition of financially distressed and then the penalty is waived.
These quality-based adjustments can swing results significantly, so proactive analysis is key.
3. Medicaid Rate Updates: Frozen Case Mix & NYS Enacted Budget Increases
Medicaid operating rates case mix remains frozen as the state transitions to the Patient Driven Payment Model (PDPM), reducing volatility in rate changes. However, retroactive adjustment lump sum payments related to State enacted budget increases such as the federal share of the SFY 2024–2025 paid in December, and the state and federal share still owed to the industry for SFY 2025-2026, have created timing challenges.
We recommend confirming all adjustments have been properly recorded and that any deferred revenue from prior periods is recognized appropriately.
4. OMIG Audits: Property, Claims, Minimum Data Set (MDS) & Dropped Services
Audit activity from the Office of the Medicaid Inspector General (OMIG) is strong this year. Property audits, claims, MDS, payment integrity audits, and dropped services are all in play. Dropped services, in particular, can create liabilities if reimbursement continues for services no longer provided.
If your facility has received audit notices, draft audit, or final audit reports, those should be factored into year-end reserves, as applicable. Review OMIG’s published audit reports for any final determinations that could impact your financials.
Fact: In 2025 alone, our Healthcare Consulting team assisted clients with OMIG Dropped Services audits and successfully overturned $1.3 million in disallowances across the first 28% of final audit reports issued to date. We expect this amount to grow as OMIG continues to review provider’s responses to draft audit reports and issues additional final determinations.
5. Public Health Law Compliance
Two New York State public health laws continue to be closely monitored due to their operational and financial implications:
- Minimum Direct Resident Care Spending (70/40/5 Rule) – While the statutory requirements are effective, the timing and substance of compliance notices and related enforcement remain uncertain. At this time, facilities should continue to monitor compliance and consider appropriate contingency disclosures or record a liability where non‑compliance and related penalties are both known and estimable.
- Minimum Staffing Requirements – Compliance determinations and the first wave of penalties have been issued covering periods from the second quarter of 2022 through the fourth quarter of 2023. Although statutory penalties may apply for periods of non‑compliance, final outcomes may vary based on facility‑specific circumstances and the Department’s consideration of mitigating factors. For a deeper dive see our Minimum Staffing Penalty article here.
Collectively, these laws represent an evolving compliance risk that may affect financial statement disclosures, reserve considerations, and future regulatory audits.
6. Residual Equity Reimbursement Litigation
The ongoing litigation over residual equity reimbursement adds another layer of complexity. A federal preliminary injunction currently prevents the state from recouping payments dating back to April 2020, but if the case is lost, the financial impact could be substantial.
Facilities in the suit that benefited from these reimbursements should maintain liabilities until the matter is resolved. This is not the time to assume the risk has disappeared.
The Bottom Line
Year-end 2025 is all about balancing uncertainty with preparedness. Cash Receipts Assessment reconciliations, quality pool adjustments, State budget increases, OMIG audits, Public Health Laws and pending litigation are the big-ticket items that could materially affect your financials. Work closely with your audit and consulting teams to ensure reserves are accurate and contingencies properly disclosed. Staying proactive now will help avoid surprises later.
Our team of Healthcare Consultants have the expertise and knowledge to assist you in preparation and review of your third-party liabilities. If you have any questions or are interested in learning more, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
