HHS Restructuring: Areas to Watch

Author: Kaitlyn DelBene, Wachler & Associates, PC

A press release from the U.S. Department of Health and Human Services on March 27, 2025, announced a self-described “dramatic restructuring” of the Department as part of the administration’s efforts at “workforce optimization.” Among other changes, the press release revealed a plan to slash the HHS workforce by 25 percent and announced oversight of certain HHS offices by a new Assistant Secretary for Enforcement. As these sweeping changes are implemented, providers should be aware of possible ramifications for their practices. The cuts to the HHS workforce have been challenged in a lawsuit by 21 states and the District of Columbia, though no injunction has yet been sought or ordered; in the meantime, the organizational restructuring—including the consolidation of 28 agencies into 15—is likely to be felt by Medicare providers interacting with HHS on policy, regulation, enrollment, and audit matters.

New Approach to Enforcement

HHS announced that it will create a new Assistant Secretary for Enforcement to oversee the Departmental Appeals Board (“DAB”), Office of Medicare Hearings and Appeals (“OMHA”), and Office for Civil Rights (“OCR”) in order to “combat waste, fraud, and abuse in federal health programs.” No further detail has yet been provided as to the Assistant Secretary role or whether the new oversight will lead to proposed changes to the appeal processes administered by OMHA and DAB. Providers should be aware that, in addition to the potential looming backlogs described below, shifting priorities may impact HHS’s approach to enforcement of overpayment determinations and/or provider enrollment actions. Close attention should be given to forthcoming press releases and updated guidance documents or regulatory proposals from these agencies.

Reduced Staffing and Return-to-Office May Cause New Appeal Backlogs

In addition to questions about HHS’s priorities and areas of focus going forward, as HHS carries out the planned transformation of its workforce and agencies, providers may expect to see a significant slowdown in the administrative appeals process for provider enrollment and audit matters.

For example, the Office of Medicare Hearings and Appeals (“OMHA”) employs administrative law judges to hear Medicare administrative appeals. In recent years, following lawsuits over OMHA’s inability to meet a regulatory requirement to decide cases within 90 days, OMHA implemented various initiatives to successfully reduce its considerable backlog of cases. With layoffs and voluntary departures of judges and staff, the backlogs are likely to return. OMHA currently maintains eleven field offices throughout the country, but it is unclear whether these will be retained with the planned reduction in the HHS workforce. Orders for OMHA staff to return to the office may also lead to administrative inefficiencies as staff address practical issues related to the transition out of remote work.

Given that Medicare is authorized to recoup alleged overpayments while an appeal to OMHA is pending, backlogs can have a significant impact on an audited provider’s Medicare revenue while awaiting a decision from the administrative law judge. Providers disputing an audit of claims made to Medicare are required to exhaust administrative remedies and must often weigh the estimated time to an administrative law judge decision when considering various recoupment and repayment options during the appeal process; a new backlog will affect these considerations.

Other Areas to Watch

In addition to the changes described above, the March 27 press release also announced consolidation efforts affecting many HHS agencies and offices. The new Administration for a Healthy America will combine five existing agencies with a stated goal to “break down artificial divisions between similar programs.” Providers may expect this consolidation to affect regulation of many services including treatment for substance use disorders and mental health conditions, care for HIV/AIDS, maternal health services, and occupational health initiatives. HHS also announced that its Administration for Strategic Preparedness and Response would be transferred to CDC. There will also be a consolidation of two research and policy agencies into a new Office of Strategy and a disbanding of the Administration for Community Living, which will be “integrated into other HHS agencies.”