The Regulator

A federal court this week vacated the community integration provisions of HHS’s Section 504 disability regulations, erasing the rules that told every provider receiving federal funding how to keep disabled patients out of nursing homes and in their communities, in a consent decree that applies in all 50 states. A federal judge in the Northern District of Texas approved the consent decree September 24, 2026, settling Texas v. Kennedy, in a settlement proposed jointly by the Department of Justice, on behalf of the Department of Health and Human Services, and a coalition of plaintiff states including Texas, Florida, Alaska, Louisiana, and Montana. The vacated provisions included HHS’s definition of “most integrated setting” and the entire community integration section of HHS’s 2024 final rule updating Section 504 of the Rehabilitation Act of 1973, the statute that bars disability discrimination by entities receiving federal funding. Olmstead v. L.C., the 1999 Supreme Court decision establishing the right of disabled people to receive services in the most integrated setting appropriate to their needs, remains federal law, as does the Americans with Disabilities Act, but the regulatory provisions HHS used to enforce community integration requirements no longer stand as a basis for federal compliance action. Those provisions underpinned home and community-based services waiver programs that accounted for more than $145 billion in Medicaid spending in fiscal year 2024. Confidence: Medium-High. The court order was not directly retrieved this run; content confirmed through disability advocacy organization summaries of the filing. Sources: Final Ruling Issued in Texas v. Kennedy, American Council of the Blind, National Disability Organizations Condemn Federal Government’s Abandonment, National Health Law Program.

CMS announced Thursday that it is partnering with 37 states to shift how Medicaid quality is measured for the program’s 73 million enrollees, replacing process-compliance metrics with indicators of whether patients are actually getting healthier. CMS announced the “Investing in Health Outcomes” initiative September 25, 2026, committing to eliminate 450 individual reporting requirements spanning roughly 260 unique quality measures currently tracked in 42 states. CMS Administrator Dr. Mehmet Oz said the partnership would refocus the program on “whether patients are getting healthier” rather than on “whether boxes are checked.” The initiative is voluntary, and CMS plans to hold workshops for participating states later in 2026 to begin the transition. For health plans and providers whose value-based contracts tie payments to Medicaid quality benchmarks, the announcement signals that those underlying metrics will shift toward outcomes measures consistent with what CMS is developing under the initiative. Confidence: High. This run reviewed CMS’s own press release directly. Sources: CMS Refocuses Medicaid Quality on Health Outcomes, Launches Innovative Partnership With 37 States, Centers for Medicare and Medicaid Services.

The former chief operating officer of a New York-based COVID-19 testing company pleaded guilty this week to his role in a scheme that billed insurers for more than $500 million in tests that patients never took, submitting claims for services before test kits were ever mailed. The Department of Justice announced that Hasan “Lucas” Seyhun, 45, of Miami, Florida, who served as chief operating officer of Fast Lab Technologies LLC, pleaded guilty in the Eastern District of Michigan to one count of conspiracy to commit health care fraud; prosecutors say Fast Lab submitted insurance claims for COVID-19 tests before test kits were mailed to patients, or for tests patients never returned. Seyhun personally received approximately $35 million from the scheme and agreed to forfeit $4.3 million; co-defendants include the company’s chief executive officer and medical director, whose cases remain pending. Sentencing has not yet been scheduled. Confidence: High. The DOJ Eastern District of Michigan press release was confirmed as the primary source but could not be directly retrieved this run due to a technical access block; secondary reporting from American Bazaar Online and Townhall.com quoted the DOJ announcement directly. Sources: Chief Operating Officer Pleads Guilty for Role in $500M COVID-19 Test Billing Fraud, U.S. Department of Justice Eastern District of Michigan.

A federal watchdog found Tennessee’s Medicaid program claimed $59.3 million in federal reimbursement for targeted case management services that were not eligible under federal or state rules, and recommended the state return the money to CMS. The HHS Office of Inspector General issued report A-07-24-03259 September 23, 2026, covering a sample of targeted case management service groups billed under Tennessee’s Medicaid program for fiscal years 2021 through 2023; OIG found 43 of 150 sampled service groups unallowable, either because the enrolled individuals did not meet the state’s requirement of being at serious or imminent risk of entering state custody, or because providers billed early intervention case management services at the higher federal match rate assigned to targeted case management. Projecting that error rate across the full universe of claims, OIG estimated $59.3 million in federal overpayments. Tennessee’s Medicaid agency accepted all of OIG’s recommendations, including a process to identify and refund similar claims going forward. Confidence: High. This run reviewed the OIG report directly. Sources: Tennessee Claimed Federal Medicaid Reimbursement for Millions of Dollars in Targeted Case Management Services That Did Not Comply With Federal and State Requirements, HHS Office of Inspector General.

The FDA approved a new indication for Genentech’s Gazyva Thursday, adding a rare but difficult-to-treat pediatric kidney disease to the drug’s label and giving doctors a targeted option to prevent relapses in children as young as two. The FDA approved obinutuzumab, sold as Gazyva, September 25, 2026 for use in patients two years and older with frequently relapsing or steroid-dependent childhood-onset idiopathic nephrotic syndrome who are in complete remission; the approval is based on the INSHORE Phase 3 trial, in which 73 percent of Gazyva-treated patients maintained complete remission without relapse at week 52, compared with standard of care, across 85 enrolled patients. Gazyva is administered by intravenous infusion on days 1 and 15 of the first treatment cycle and again at weeks 24 through 26; the drug already carries labeled warnings for hepatitis B reactivation and progressive multifocal leukoencephalopathy from its existing oncology indications. Idiopathic nephrotic syndrome affects roughly 1 to 4 children per 100,000 annually; payers will face coverage questions under their medical benefit policies for a drug already available on cancer formularies. Confidence: High. This run reviewed the FDA’s own approval notice directly. Sources: FDA Approves Drug to Treat Idiopathic Nephrotic Syndrome in Patients 2 Years and Older, U.S. Food and Drug Administration.

The FDA elevated a thyroid medication recall to Class I this week, its highest-risk classification, meaning the agency believes the mislabeled tablets are likely to cause serious adverse health consequences, and the lot expires in four days. The FDA upgraded Vitruvias Therapeutics Inc.’s recall of Thyroid Tablets, USP 30 mg, lot number 504950, to Class I on September 24, 2026, after the company had first issued the recall in August; the issue is superpotency, meaning the tablets contain more active thyroid hormone than the label states, which can produce hyperthyroidism symptoms including rapid heart rate, chest pain, cardiac arrhythmias, and unexplained weight loss. Approximately 1,955 bottles were distributed nationwide; the lot expires September 30, 2026, leaving a four-day window for patients, pharmacies, and prescribers to identify and pull the recalled product. Elderly patients, pregnant patients, and infants face the greatest risk of serious harm. Patients taking this medication should not stop without first consulting a health care provider. Confidence: High. This run reviewed the FDA’s own recall notice directly. Sources: Vitruvias Therapeutics, Inc Issues Nationwide Recall of One Lot of Thyroid Tablets, USP 30 mg Due to Potential Super Potency, U.S. Food and Drug Administration.