CMS Proposes Sweeping New Enforcement Powers Against Noncompliant Medicare Providers

Key Takeaways

• CMS has proposed new grounds for revoking Medicare enrollment, including geographic fraud risk, certain misdemeanor convictions, and out-of-state license issues.
• Retroactive payment clawbacks would apply to all revocation grounds, increasing financial exposure for noncompliant providers.
• Noncompliance with the 36-month rule for home health, hospice, and DMEPOS ownership changes could now result in enrollment denial or revocation if the proposed rule becomes final.

On July 2, 2026, the Centers for Medicare and Medicaid Services (“CMS”) published a proposed rule (CMS-1844-P) that would significantly expand its authority to impose civil monetary penalties on noncompliant Medicare providers and suppliers and to more easily revoke their program enrollment. In its announcement, CMS stated that the proposed rule is part of its broader effort to “strengthen Medicare program integrity, combat fraud, and expand access to home health care.” Although embedded within the CY 2027 Home Health Prospective Payment System proposed rule, the enforcement provisions would apply to all Medicare provider and supplier types and carry an estimated $82 million in aggregate financial impact. Comments to the proposed rule are due August 31, 2026.

The key proposals in the rule include the following:

Expanded Grounds for Enrollment Revocation

The proposed rule would add several new bases for denying or revoking Medicare enrollment. Notably, CMS could revoke enrollment where a provider is located in a “limited geographic area” with too many providers presenting a high risk of fraud, waste, and abuse. Other new grounds include misdemeanor convictions related to sexual assault or financial misconduct within the past 10 years, license suspension or revocation in another state, and suspension or exclusion from Medicaid or another federal health care program. CMS also proposes to extend its authority to revoke a provider’s other Medicare enrollments when a separate application is denied, not just when an existing enrollment is revoked.

Retroactive Payment Clawbacks

Currently, CMS can recoup payments back to the date of noncompliance only for limited revocation grounds, and revocations generally take effect 30 days after CMS mails a notice. The proposed rule would make retroactive clawbacks available for all revocation grounds, significantly expanding the agency’s ability to recover payments from revoked providers.

Changes in Majority Ownership

The proposed rule also strengthens CMS’s enforcement of the “36-month rule” governing changes in majority ownership (“CIMOs”) for home health agencies, hospices, and DMEPOS suppliers. Under this rule, if one of these provider types undergoes a CIMO within 36 months of initial enrollment or its most recent CIMO, the provider’s enrollment terminates, and the new owner must re-enroll and obtain a new survey or accreditation. CMS has identified efforts to circumvent this rule — including failing to report ownership changes or using management agreements to disguise a sale until the 36-month window expires. To deter these practices, the proposed rule would authorize CMS to deny or revoke enrollment for noncompliance with the CIMO requirements, a new enforcement mechanism. Entities contemplating acquisitions or ownership restructurings of these provider types should be aware that noncompliance could now result in loss of Medicare enrollment.

What This Means for Providers and Suppliers

The proposed rule reflects a significant escalation in CMS’s enforcement posture. As CMS Administrator Mehmet Oz stated, “[t]hese proposals would give CMS stronger tools to protect Medicare beneficiaries and taxpayer dollars from fraud, waste, and abuse.” Providers and suppliers across all Medicare-enrolled categories should evaluate their compliance programs, enrollment data accuracy, and, where applicable, ownership structures in light of these proposals.

For more information, please contact AGG CHOW attorneys Hedy Rubinger or Maggie Callahan.

The Arnall Golden Gregory Change of Ownership (“CHOW”) team leads all regulatory aspects of healthcare transactions for investors, operators, managers, capital partners, and developers of every size in all 50 states. The team streamlines the regulatory process so that clients close their transactions on or ahead of schedule. Whether obtaining licensure and Medicare/Medicaid approvals, structuring transactions to expedite closings, anticipating issues to minimize cash flow disruption, negotiating regulatory terms in deal documents, creatively resolving diligence issues, or advising on CHOW guidelines and compliance, the team provides extensive experience and practical solutions. To date, the CHOW team has served as primary regulatory counsel in transactions valued at more than $35 billion.​​