How to Prepare Your Adult Day Center for a Medicaid Audit

How to Prepare Your Adult Day Center for a Medicaid Audit

If you run an adult day center that bills Medicaid, a Medicaid audit is not a question of if but when. Knowing how to prepare your adult day center for a Medicaid audit can be the difference between a short list of fixes and a demand to pay money back. This guide explains what auditors have actually found at adult day centers, which records prove the care you deliver, and a simple 30-day plan to get ready.

Educational information, not legal advice. Rules vary by state; confirm current requirements with your state licensing agency and state Medicaid agency.

Why adult day centers are getting a closer look

Federal auditors and prosecutors have paid close attention to adult day services. The HHS Office of Inspector General (OIG) audited adult day facilities in three states and found problems at nearly every one:

The findings were rarely exotic. They included water damage, exposed wiring, unlocked chemicals and expired fire extinguishers, along with incomplete policies, training gaps, missing staff health screenings and missing emergency contacts.

Fraud cases have raised the stakes. In 2026 the U.S. Department of Justice announced several adult day prosecutions, including a Brooklyn adult day owner sentenced to 76 months for leading a roughly $68 million Medicaid fraud and kickback scheme. Minnesota ordered a third-party audit of high-risk Medicaid services that includes adult day services and put a two-year moratorium on new adult day licenses starting February 1, 2026.

Most centers are honest. But under the federal False Claims Act, liability can come from "reckless disregard" as well as intentional fraud, so sloppy records can create real exposure.

What a Medicaid auditor will ask for

Auditors follow the paper trail from each claim back to the care. For a billed day, expect them to ask for:

  • The daily sign-in and sign-out record showing the participant attended, with times
  • The enrollment assessment and a current, signed person-centered plan of care
  • Notes showing the services in the plan were actually delivered that day
  • The authorization or prior approval covering that date and number of units
  • Staffing records showing qualified staff were on duty, with background and exclusion checks on file
  • Transportation logs, if you billed transportation

The biggest red flags

  • Billing for days or hours a participant was not there
  • Billing more participants than your licensed capacity
  • Offering cash, gifts or free services to recruit participants (OIG treats anything above $15 per item or $75 a year as more than nominal)
  • Services billed that are not in the plan of care
  • Staff or owners who appear on the OIG exclusion list

A 30-day Medicaid audit readiness plan

Week 1: Reconcile attendance to claims

Pull last month's claims and compare every billed day to your sign-in records. Note any mismatch, find the cause and fix it. If you find money you should not have received, federal law generally requires you to report and return it within 60 days of identifying it, so talk to an attorney about next steps.

Week 2: Check people and paperwork

Screen every owner, employee and contractor against the OIG exclusion list and your state's Medicaid exclusion list, and plan to repeat it monthly. Confirm personnel files have current licenses, training and health screenings.

Week 3: Walk your building like an inspector

Use a checklist to look for the same hazards OIG found: leaks, wiring, unlocked chemicals, fire extinguisher dates, posted emergency plans and current emergency contacts for every participant.

Week 4: Put a simple compliance program in place

OIG's General Compliance Program Guidance describes seven elements of an effective program, and it allows small organizations to scale them, including naming a compliance contact instead of hiring a full-time officer. Write down who that person is, adopt basic policies, train staff and schedule monthly self-audits.

Get organized with our Adult Day Compliance Toolkit

Our Adult Day Compliance & Inspection Readiness Toolkit walks you through all of this for any state, with a step-by-step attendance-to-billing reconciliation, a 143-item mock inspection tool, 28 ready-to-adapt policies, 22 forms and logs, and a worksheet to record your own state's rules. It was written by a Healthcare Compliance Officer and Healthcare Facility Owner who has run an adult day center. Running more than one type of care business? See the full compliance toolkit collection.

Opening a new center instead? Grab our free "Before You Sign a Lease" checklist from the sign-up box on our site.

FAQ

How often are adult day centers audited?

It depends on your state, your Medicaid program and your managed care plans. Licensing inspections, Medicaid program audits, managed care audits and fraud investigations are separate processes, so prepare as if a review could come at any time.

What should I do if I find a billing mistake?

Stop the error, document what happened and figure out the amount. Federal law generally requires reporting and returning an identified Medicare or Medicaid overpayment within 60 days, with a pause allowed for a timely, good-faith investigation. Talk to a health care attorney before you send a refund or self-disclosure.

Do I need a compliance officer?

OIG's guidance says small entities may designate a compliance contact rather than a full-time compliance officer, but the owner remains ultimately responsible for the program.

This article is educational information, not legal advice. Confirm current requirements with your state agencies and a qualified attorney.

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