OMB federal grant rule delayed as Congress passes continuing resolution

The continuing resolution (CR) passed by both houses of Congress ensures the federal government will remain fully operational into December, and it also freezes implementation of a noteworthy change to grant-approval processes.

Until the CR’s Dec. 11 expiration date, the Office of Management and Budget (OMB) is blocked from finalizing a previously proposed rule regarding oversight of federal grants.

OMB’s rule would alter the awarding and administration of grants across the government, requiring agencies to adopt modified criteria. OMB initially said the rule would be finalized in time to take effect Oct. 1, but the CR provision has stymied those plans.

In issuing the pause, Congress gave itself more time to consider the implications of a far-reaching regulatory change. Within HHS, for example, grants made through agencies such as the CDC, the National Institutes of Health and the Health Resources and Services Administration would be affected by the rule.

“Research universities, academic medical centers, scientific associations and public-health organizations may experience the most immediate effects [from the rule],” according to an analysis by the law firm of Spencer Fane.

The new criteria for grant awards and administration under the proposed rule would be intended, in part, to ensure that activities funded through grants are consistent with federal law and policy, such as Trump administration policies scaling back diversity, equity and inclusion initiatives.

“Discretionary awards must, where applicable, demonstrably advance the President’s policy priorities,” the proposed rule states.

What the OMB grant rule could mean for healthcare organizations

Federal agencies would have greater authority to suspend work funded through a grant or to terminate an award under OMB’s proposed rule.

Pass-through entities, some of which are hospitals, would face new mandates with respect to subawards that are distributed to other entities. That funding would need to be reported to SAM.gov.

The proposed rule further states that pass-through entities “must ensure that subrecipients do not take actions that could significantly damage the reputation of the pass-through entity, awarding federal agency or the federal government. Where such actions occur, the pass-through entity must consult with the federal agency to determine whether termination of the award is warranted.”

Despite statements in the proposed rule that one goal is to reduce administrative burden, provisions shifting grants away from fixed-amount awards and subawards and toward cost reimbursement “may require more detailed documentation for labor, materials, indirect costs, overhead, contractor costs and reimbursement requests,” states an analysis by the consulting firm Aldrich.

Funding to support costs such as publication fees and conference travel would be restricted unless specifically stipulated in an award’s terms and conditions.

Congress leaves the WISeR Model in place

A provision that was left out of the CR after being approved earlier this year by a key House committee would have blocked continuing implementation of the Wasteful and Inappropriate Service Reduction (WISeR) Model. WISeR is a Center for Medicare & Medicaid Innovation (CMMI) initiative that utilizes AI-based prior authorization for a select list of services in traditional Medicare.

Launched at the start of 2026, WISeR applies in six states: Arizona, New Jersey, Ohio, Oklahoma, Texas and Washington. In May, the Government Accountability Office (GAO) concluded that WISeR is subject to congressional review because it imposes new requirements on providers.

Following the GAO report, a Senate resolution to block the model was introduced in July but rejected by a 50-46 party-line vote. The Senate then passed the CR on Aug. 8 by a vote of 90-6, leaving out any reference to WISeR.

Before that, the House Appropriations Committee had unanimously voted in June to include FY27 appropriations language blocking funding for the model. A bipartisan amendment from the committee stated that WISeR “may create burdens and delays for patients and providers.”

In addition, “Any proposal to impose prior authorization requirements in traditional Medicare should be subject to robust congressional oversight and transparent evaluation of impacts on beneficiary access to care, provider burden and program costs,” according to the committee’s amendment.

Nonetheless, the House did not seek to add the provision when it voted, 370-48, on Sept. 1 to pass the Senate’s version of the CR.

The amendment remains in the House’s FY27 draft appropriations bill for Labor, Health and Human Services, and Education and could receive consideration in a final appropriations bill or an omnibus spending package after the midterm elections.

Continuing resolution extends healthcare funding

The CR ensures there will not be a government shutdown before the midterms, maintaining funding for federal agencies and programs through Dec. 11. Without the CR, discretionary federal funding would expire Sept. 30.

In healthcare, the CR boosts funding for the Indian Health Service by $75.8 million and for Indian health facilities by $8.3 million. Those allocations specifically apply to the staffing and operation of facilities that were opened, expanded or renovated in FY22 or FY26, or that will be in FY27.

The CR also includes healthcare extenders for the Department of Veterans Affairs, such as authorization to collect copayments for VA hospital and nursing-home care, grants for rural healthcare access and for suicide prevention, and reimbursement for ambulance costs for rural-based veterans.