The Rebuild America’s Health Care Schools Act of 2025 instructs Medicare to treat a wider range of costs as ‘‘reasonable’’ when hospitals participate in state-licensed or nationally/regional-accredited nursing and allied health education programs. The bill adds a new subparagraph to section 1861(v)(1) of the Social Security Act that explicitly permits inclusion of both direct and indirect training-related costs incurred by hospitals or allocated from related entities, and it defines which affiliated organizations can contribute those costs.
The Act also requires the Department of Health and Human Services to issue implementing rules within 120 days and prohibits the agency from recouping Medicare payments for costs that would be allowable under the new rule; it directs refunds for any such recoupments during the prior six years. For compliance officers, hospital CFOs, and health system counsel, this changes what training costs can appear on Medicare cost reports and shifts both audit focus and potential fiscal exposure for Medicare.
At a Glance
What It Does
The bill amends Medicare statute so hospitals may report a broader set of direct and indirect costs tied to nursing and allied health education, including costs allocated from affiliated entities, and defines ‘‘related entity’’ for that purpose. It requires HHS rulemaking within 120 days and bars recoupment of Medicare payments for costs that would be allowable under the change, with refunds for certain prior recoupments over six years.
Who It Affects
Acute-care hospitals with hospital-based or system-affiliated nursing and allied health programs, health systems that operate or financially support training programs, Medicare administrative contractors and auditors, and state-licensed or nationally/regional-accredited educational programs that place trainees at hospitals. Medicare program managers and budget officials will also be directly affected by the change in allowable cost scope.
Why It Matters
This statutory expansion creates a new, explicitly covered pathway for hospitals to recover training-related expenses via Medicare cost reports, potentially increasing reimbursement for hospital-based education and altering audit and compliance workflows. It also raises fiscal and oversight questions: broader allowable costs can inflate Medicare outlays unless HHS establishes clear allocation and documentation rules.
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What This Bill Actually Does
The bill adds a new clause to the Medicare ‘‘reasonable cost’’ rules that tells the Secretary to count as allowable any direct or indirect costs a hospital incurs for nursing and allied health education — and to include costs that are allocated to the hospital from an affiliated organization. The covered training must be in a program that is either licensed under state law or accredited by a national or regional professional group; that condition links Medicare reimbursement to recognized programs rather than informal training arrangements.
A key feature is the statutory definition of ‘‘related entity,’’ which reaches common ownership or control relationships and lists specific organizational relationships (for example, entities where the hospital is the sole corporate member, entities that share a board, or entities that are part of the same legal structure). That definition is designed to make clear that costs transferred within a health system or vertically integrated education provider can be claimed on the hospital’s Medicare cost report.To operationalize the change, the bill forces HHS to promulgate implementing rules within 120 days.
Those rules will need to say how hospitals must document allocated costs, what allocation methods are acceptable, and how auditors should treat cross-entity transfers. Finally, the statute prohibits HHS from recouping Medicare payments for education-related costs that would be allowable under the new language, and it requires the agency to refund any such recoupments from the prior six years — a retroactive fiscal impact that pairs with the prospective change in what CMS will pay for training-related spending.
The Five Things You Need to Know
The statutory change applies to cost reporting periods beginning on or after the date of the Act’s enactment; hospitals should treat the change as prospective to those reporting periods.
The bill’s ‘‘related entity’’ definition explicitly covers entities where the hospital (or another related entity) is the sole corporate member, entities that are the hospital’s sole corporate member, entities that share a board, and entities that are part of the same legal entity.
HHS must issue implementing regulations within 120 days of enactment—an aggressive timeline that will force quick decisions on allocation methodologies and documentation requirements.
The Secretary is barred from recouping or reducing Medicare Part A payments for training costs that would be allowable after the amendment takes effect, and the Secretary must refund any such recoupments made by HHS during the prior six years.
Eligibility to claim these costs requires that the training program be state-licensed or accredited by a national or regional professional organization; informal preceptorships or unaccredited programs are not covered by the text.
Section-by-Section Breakdown
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Broadening what counts as reasonable costs for hospital-run training
This subsection directs the Secretary to include both direct and indirect costs tied to hospital participation in nursing and allied health education as ‘‘reasonable costs’’ for Medicare reimbursement. Practically, that allows hospitals to place on their Medicare cost reports items such as instructor salaries, supervision costs, clinical training overhead, and other indirect expenses tied to an approved program, subject to whatever documentation standards HHS later sets.
Costs incurred directly or allocated from affiliates, and costs associated with off-site training
The provision distinguishes three routes for a cost to be included: costs directly incurred by the hospital, costs allocated to the hospital by a related entity holding the license or accreditation, and costs connected to training that takes place either at the hospital or at a related entity. This structure anticipates common health-system arrangements where educational programs are legally housed in a separate corporate entity but operationally tied to hospital clinical sites.
Who counts as a related entity for cost allocations
The bill provides a non-exhaustive statutory definition of ‘‘related entity’’ that measures relationships by ownership and control and then lists four concrete relationship types (sole corporate member relationships, shared legal entity, and shared board situations). That list narrows disputes about whether a health system affiliate may allocate costs to a hospital, but it also creates a bright-line test auditors will apply when assessing whether an allocation is permissible.
120-day rulemaking obligation to implement the new cost rules
Congress requires HHS to issue any necessary rules within 120 days of enactment. The agency will need to specify allocation methods, acceptable supporting records, whether market or transfer pricing controls apply, and how Medicare Administrative Contractors should audit and resolve disputes. The short deadline will push HHS to prioritize clarity on documentation and prevent prolonged interpretation gaps.
Blocking retroactive clawbacks and refunding certain past recoupments
The bill bars HHS from recouping Medicare Part A payments related to education costs that would be allowable under the new rules and instructs the Secretary to refund any such recoupments made during the previous six years. That clause creates immediate fiscal exposure for CMS: refunds must be calculated, hospitals identified, and operational processes established to return funds where appropriate.
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Who Benefits
- Hospitals with existing nursing or allied health programs — They can include a broader set of training-related direct and indirect costs on Medicare cost reports, improving reported cost recovery and potentially increasing Medicare reimbursements.
- Health systems that operate separate education entities — Systems that currently house education programs in separate corporate entities can allocate program costs to hospitals and recover them through Medicare, reducing the disincentive to integrate education functions within system structures.
- Hospital-based nursing and allied health schools — Programs licensed by states or accredited nationally/regional gain clearer financial pathways to recover clinical training costs, potentially stabilizing program finances and supporting expansion of clinical placements.
Who Bears the Cost
- Medicare trust fund / CMS budget — Expanding allowable costs and refunding prior recoupments increases near-term and potentially recurrent Medicare outlays unless HHS limits the scope through regulation.
- Medicare auditors and contractors (MACs and OIG) — They must adapt audit protocols and potentially re-open closed audits to evaluate allocations, increasing administrative workload and audit complexity.
- Hospitals without accredited or licensed programs — Hospitals that do not host recognized training programs do not get the same recovery opportunity; further, taxpayers and providers could face indirect effects if Medicare rates or audit scrutiny shift to cover training costs for some hospitals.
Key Issues
The Core Tension
The central dilemma is balancing two legitimate goals: encouraging hospital-based training to shore up the health workforce versus guarding Medicare’s fiscal integrity and preventing cost-shifting. Granting hospitals broader reimbursement for education supports clinical capacity and workforce supply, but it also invites expanded Medicare costs and requires strong allocation, documentation, and audit rules to prevent inappropriate claims. There is no politically easy middle ground: loosen too much and Medicare payouts grow; regulate too tightly and hospitals lose the financial incentive to sustain or expand clinical education.
The bill solves a common practical problem—how to reflect health system training costs on hospital Medicare cost reports—by statute rather than by rule. That expedites cost recovery for hospitals but hands HHS a compressed timetable to write the detailed allocation and documentation rules that control abuse.
The practical risk is that, without rigorous allocation standards, hospitals and related entities could shift previously excluded overhead into Medicare-reimbursable categories. Determining acceptable allocation bases (direct tracing, step-down allocation, negotiated transfer prices) and the supporting records required will be decisive for whether this expands legitimate cost recovery or creates opportunities for inflated charges.
Another unresolved area is enforcement and audit practice. The statute bars recoupment for costs that ‘‘would be allowable’’ after the amendment, and requires refunds for recoupments over the previous six years; implementing that retroactivity will require CMS to identify affected hospitals and recalculate net payments, a process that raises practical challenges around reopened audits, statute of limitations questions, and potential disputes over allocation methodologies used historically.
Finally, the ‘‘related entity’’ definition narrows uncertainty but also risks covering a broad set of affiliates in integrated delivery systems; HHS will need to clarify whether common governance alone suffices to permit allocation or whether economic substance and operational control should matter more than formal corporate ties.
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