This lawsuit challenges whether PBJ audit guidance is authorized under the Affordable Care Act and whether publishing five star rating changes without giving the recipient an opportunity to contest findings violates federal due process protections.
SNFs in states where Medicaid incentive payments are tied to federal star ratings face direct revenue consequences from PBJ audit downgrades. The case was brought by the same national healthcare law firm currently challenging CMS schizophrenia audit practices and may serve as a significant test of whether CMS can alter Five-Star ratings outside the established survey enforcement system and without provider appeal rights.
Our Lady’s Center for Rehabilitation and Healthcare, LLC v. OZ
Case Filed: Apr 21, 2026 | Judge: Karen M. Williams
COMPLAINT against MEHMET OZ with JURY DEMAND, filed by OUR LADY’S CENTER FOR REHABILITATION AND HEALTHCARE, LLC.
Our Lady’s Center for Rehabilitation and Healthcare, LLC v. OZ (1:26-cv-04200). United States District Court for the District of New Jersey, 21 April 2026. https://www.pacermonitor.com/public/case/64234268/
OUR_LADYS_CENTER_FOR_REHABILITATION_AND_HEALTHCARE%2C_LLC_v_OZ
‘Profoundly detrimental’ PBJ audits targeted in new provider lawsuit
A New Jersey nursing home that expects to lose $450,000 in annual Medicaid revenue over its staffing data is suing the Centers for Medicare & Medicaid Services to stop off-site audits from triggering quality rating changes. Our Lady’s Center for Rehabilitation & Healthcare in Pleasantville argues third-party audits of Payroll Based Journal reporting may be legal, but docking star ratings over missed or inaccurate reports exceeds CMS authority under federal law — especially given a lack of appeal rights.
Our Lady’s had hoped to appeal the audit results, but after one internal submission of additional information to audit firm Myers and Stauffer, facility leaders learned that CMS had no further procedures to contest findings.
“While the collection and submission of the [PBJ] data is presumably authorized under the Affordable Care Act, the guidance implementing the PBJ audit process is not articulated therein,” Our Lady’s attorneys argued. “Specifically, the publishing of the change in the facility’s five-star rating calculation before the facility has had a chance to appeal any decrease in its five-star rating is not ever mentioned, discussed or specifically allowed under the Affordable Care Act.”
Facilities that fail a PBJ audit are given the lowest possible turnover scores until the affected quarter falls out of calculations 1 ½ years later.
— McKnight’s Long-Term Care News, April 22, 2026
NJ Nursing Home Claims Medicaid Quality Score Cut Without Appeal
A New Jersey-based nursing home is alleging the Trump administration violated its due process rights by lowering its facility quality rating without allowing the company a hearing to appeal the decision. The lawsuit, filed Tuesday by Our Lady’s Center for Rehabilitation and Healthcare in the US District Court for the District of New Jersey, claims that the nursing home’s Five Star Quality Rating was docked by the Centers for Medicare & Medicaid Services after an audit allegedly found discrepancies in the company’s payroll data. Five Star Quality Ratings are used by prospective patients and their families to vet facilities.
— Bloomberg Law, April 21, 2026
