New Act Expands Hospital Reimbursement for Nursing School Costs, Mandates 6-Year Refund for Past Payments

The newly introduced Rebuild America’s Health Care Schools Act of 2025 is taking aim at a persistent headache for hospitals: getting paid back for the cost of training the next generation of nurses and allied health professionals. This section of the bill essentially changes the rulebook for Medicare reimbursement, making it much easier for hospitals to count the real, complex costs of running these essential education programs.

The New Math for Medical Education

Starting immediately, the bill tells the Secretary of Health and Human Services they must allow hospitals to count a much wider variety of direct and indirect expenses when calculating their “reasonable costs” for Medicare reimbursement. Think of it this way: hospitals often partner with educational institutions—maybe they contract out faculty, or share administrative services like payroll, or even operate the program through a related corporate entity. Before this bill, Medicare often balked at paying for these costs if they weren't directly incurred by the hospital itself, leading to disputes and reduced funding.

The new rules explicitly allow hospitals to include costs passed along by a “related entity” (defined clearly as organizations with common ownership, control, or shared boards). They can also count the expense of hiring faculty through contracts with outside educational institutions, meaning a hospital running a nursing program can now reliably get paid back for the full cost of that specialized teaching staff. For hospitals, this is a huge win for financial stability, incentivizing them to keep those training pipelines open for nurses, physical therapists, and other allied health workers.

The Six-Year Lookback: A Financial Lifeline

Here’s the part that gives hospitals an immediate financial boost: the bill mandates that the government cannot try to claw back (recoup) or reduce Medicare Part A payments for education costs that would now be allowed under these new rules. Even bigger, if the government did reduce or recoup payments from a hospital over the last six years for costs that are now deemed allowable, the hospital must be refunded that money.

Imagine a hospital that was penalized five years ago for paying a shared payroll service run by their affiliated university. Under this new law, they get that money back. This retroactive protection and refund mandate provides a significant, immediate cash injection for hospitals that have been running compliant, accredited programs but were stuck fighting over technical accounting definitions. This helps stabilize the financial foundation of these crucial training programs, which is good news for anyone worried about the ongoing shortage of healthcare workers.

Who Pays for the Upgrade?

The primary beneficiaries are clearly hospitals and the educational entities they partner with, who gain financial certainty and stability for their training programs. The downside, however, falls on the Medicare Trust Fund. Expanding what costs are allowable, plus the requirement to refund six years of past payments, means Medicare will be paying out significantly more money. While this investment is aimed at securing the future healthcare workforce, it does increase the financial burden on the federal government and the Medicare system overall. This is the trade-off: increased stability for healthcare education in exchange for higher Medicare expenditures.