The New Jersey Department of Health has used an expedited process to implement new financial transparency rules for nursing homes — notably, requiring that owner-certified financial disclosures be audited by a third party annually.
The DOH announced the rules March 18, along with plans to extend the rules for an additional half year ending in February 2026. The cost of the audits would be borne by providers — a provision that would cost the state’s nursing homes around $30 million each year, according to an estimate from the Health Care Association of New Jersey.
Providers are skeptical of and frustrated with the new requirements, which are similar to but distinct from a similar push for more provider-financed financial audits from state legislators. New Jersey’s renewed focus on financial transparency also runs parallel to federal regulators turning up scrutiny on issues such as private equity ownership disclosures.
The problem is not the request for more data, but the heavy cost imposed on providers, said Andrew Aronson, president and CEO of the Health Care Association of New Jersey.
“This is a mandate that has an extreme cost associated with it and no funding to back it,” he told McKnight’s Monday. “It’s just another unfunded mandate from the state.”
Lawmakers and consumer advocates have argued that independent audits are necessary to ensure nursing home finances are truly transparent, especially regarding related-party transactions, which some argue are a common method nursing homes use to hide profits.
New Jersey nursing homes, however, already provide financial data to state regulators in owner-certified reports, as required by processes set in state law. Without approving new cost-based reimbursements to cover the independent audits, those audits would be an expensive duplication of that same data and could drain resources that could be used for patient care, Aronson said.
“I think one of the questions the state has right now is whether the data being submitted is reliable. I think what they’re going to find with whatever process they implement is that the data is accurate and is reliable,” he explained. “It’s not going to be new data. It’s just going to be rehashing data they already have.”
Pushing for an alternative
In an April 4 comment to the state, HCANJ argued that the special adoption of the independent audit rules was outside of the bounds of what the regulatory body is allowed to require.
The comment — signed by Aronson — also notes that 60% of the nursing home sector in New Jersey is already struggling to break even financially and that unfunded regulations like this will only detract from patient care.
The comment called on DOH to rescind the expedited rule and withdraw its proposed extension, but also noted potential alternatives.
“For those who believe that audited financial statements are a way to ensure accuracy, there are clearly less costly, more targeted ways to accomplish that same goal,” Aronson’s submission argues. “Random or targeted audits of a percentage of nursing home cost reports would accomplish the same goal at a fraction of the cost.”
Another method could be requiring audits from a representative sample of facilities each year. Regardless, HCANJ called for state funding to accompany those audits.
“The best thing the state could do to support its long-term care providers would be to have a fair Medicaid rate setting methodology and to actually fund the Medicaid program so that it can pay providers… New Jersey does neither,” Aronson told Mcknight’s. “To try to make the issue about a lack of transparency to me is just a red herring.”
