The all-or-nothing nature of the Centers for Medicare and Medicaid Services (CMS) quality audits means nursing homes could face reductions in reimbursement – and, in the case of hybrid measures such as antipsychotic use, potential star rating downgrades – if they fail to comply with or fully respond to audit requests, experts say. This comes as CMS implements a new process to validate the accuracy of data used in nursing home quality and payment programs.

This data validation process tied to the Quality Reporting Program (QRP) for nursing homes began in early 2026, with facilities receiving selection notifications starting in mid-January 2026, according to Alicia Cantinieri, managing director of clinical reimbursement and regulatory compliance at Zimmet Healthcare Services Group. Facilities were initially notified of selection exclusively through the Internet Quality Improvement Evaluation System (iQIES), Cantinieri said.

Facilities may also receive a certified letter outlining the audit requirements for audits related to conditions like schizophrenia. The notice will include instructions, identify the residents selected and specify deadlines for response and documentation submission.

“CMS’ new data validation process looks at the accuracy of your quality measure data elements from the MDS that are used in the QRP program and value-based purchasing program to look at the quality of care, to measure improvement in that quality of care,” Cantinieri told Skilled Nursing News.

Roughly 1,500 facilities, or about 10% of the nearly 15,300 certified nursing homes nationwide who participate in federal reimbursement programs, were selected in early rounds of the audit process. Those selected for audit include facilities that submitted at least one minimum data set (MDS) record in the previous calendar year, Cantinieri said.

The nursing homes selected for the audit must respond within five business days and ensure all required documentation is submitted within 45 days to avoid a 2% reduction in payments, she said. Facilities must first check iQIES under the “My Reports” section within the MDS 3.0 Provider Review Records folder, Cantinieri noted. The initial notice was titled “Skilled Nursing Facility Data Validation Process – Initial Selection Notification.”

A follow-up notification has also been posted. However, the 45-day submission deadline begins on the date the initial notification was posted in iQIES, not the date the facility opened or downloaded the notice, she added. Moreover, the timing is based on calendar days rather than business days, making regular monitoring of iQIES essential, she said.

CMS will require data for calendar year 2025, from Oct. 1 through Sept. 30, 2025.

If selected, a facility may be required to submit up to 10 resident records. These records may include admission, discharge or other MDS assessment types, she said. The notification includes the resident sample, submission instructions and contact information for the CMS contractor, Healthcare Management Solutions, Cantinieri added.

CMS’ extensive and detailed instructions, often spanning several pages, specify exactly which documents must be submitted for each assessment type, how files must be named, how documents must be ordered and bookmarked, and how the submission should be formatted.

“For noncompliance, that is not responding to the validation audit record request within 45 days, SNFs will loose 2% off the annual payment update for the affected fiscal year,” Joel VanEaton, executive vice president of PAC regulatory affairs and education at Broad River Rehab, told SNN, explaining that while noncompliance will impact a facility’s FY 2027 APU, which is proposed to be 2.4%, currently there are no other penalties like downgrades to the Quality Measure (QM) ratings.

All-or-nothing

Compliance with the data validation process is all-or-nothing, Cantinieri said. If CMS requests 10 records and a facility submits fewer than the full number, the facility is considered noncompliant, she said, even if most of the documentation is provided. Also, failure to respond to the request or failure to submit all required records by the deadline constitutes noncompliance.

In order for providers to have a better grasp of the new QRP audit process, they would need to know how facilities are being chosen for audits, what documentation is being examined, and what’s the source of the compliance risks in this initial rounds of validation process, experts advised.

Chelsea Lowe, who unpacked the QRP audits process during a webinar sponsored by Simple last week, said reviewers will look at sampled MDS submissions, focusing heavily on functional status for Section GG, which measures a patient’s self-care and mobility at admission and discharge as well as skin assessments and wounds measures.

“So they will be asking you for either admission data or discharge data on your residence, there will be a sample size of 10. So five admissions, five discharges,” Lowe said. These should be identified in the letter posted on iQIES system. “Your letter will say you’ve been selected. You have a certain amount of days to submit your data.”

But even before an audit notice arrives, facilities should proactively be strengthening documentation and reporting workflows, Lowe added.

For admissions, auditors focus on the three- to seven-day window reflected in the MDS, she said. For discharges, they review the last seven days, including the final three days for functional status. Their primary focus is on functional scores from Section GG and skin integrity. They expect to see a skin assessment at admission, along with nursing notes from admission through eight days prior to discharge, as well as certified nursing assistant (CNA) documentation. (CNA) records, therapy documentation, treatment notes and MDS interview components, such as the pain interviews, are compared against what was coded on the MDS, Lowe noted.

Judging by the results of a survey conducted during the webinar led by Lowe, the new QRP audit process is opaque to many in the sector. About a fifth of the participants had received a request for a QRP audit, and among these, 38% said they passed the audit, while 15% said they failed. However, aAmost half noted not knowing how to tell their status.

Special case of the antipsychotic measure

Given that the antipsychotic quality measure is now categorized as a “hybrid measure,” there is a greater likelihood of facilities receiving requests for schizophrenia-related audits, Lowe said.

“We’ve recently seen a change in our antipsychotic quality measure. It went to what we call a hybrid measure, and so I do think that with this [change], we could see an influx of schizophrenia audits,” she said.

As a hybrid measure, CMS is not simply looking at what is coded on the MDS, but other sources as well. CMS is now including pharmacy dispensing records, physician encounter claims, hospice claims, and insurance enrollment data to determine inclusion or exclusion in the measure, Lowe said.

If a facility is selected for a schizophrenia audit, it will receive a formal certified letter outlining the audit process and specifying the documentation required. Failure to comply can result in a 2% reduction payment. And, if a facility fails a schizophrenia audit, additional penalties may include a downgrade of the long-stay quality measure rating to one star for six months and suppression of the long-stay antipsychotic quality measure for 12 months, she said.

Since data from IQIES and CASPER reports is typically not real-time, Lowe said that it was important for facilities to maintain internal tracking of residents on antipsychotics, those with supporting diagnoses, and those who may meet exclusion criteria. The most challenging factor to track is insurance enrollment status, which may not always be readily visible to clinical or billing teams, she said.