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The United States Department of Health and Human Services (“HHS”) announced at the end of May that it is expanding its use of AI to analyze the audit reports of states and other recipients of federal healthcare funding. This expanded use of AI is meant to reduce the risk of fraud and decrease wasteful spending.
The initiative is called Audit Enforcement and Risk Oversight (“AERO”). According to HHS, AERO will use “next-generation AI analytical tools” to scan at least five years of audit history for recipients of federal healthcare funds across all 50 states.1 Gustav Chiarello, Assistant Secretary for Financial Resources who is leading the program, said that HHS will use ChatGPT and other AI resources to analyze the audit reports.2 He noted that AI will allow the government to dig into lengthy and exhaustive audit reports that would normally go unreviewed. HHS has also warned that states that fail to address deficiencies could face the potential loss of federal funding.
In conjunction with AERO, HHS sent letters to all 50 states notifying them of the initiative. The letters did not include a deadline for corrective action or indicate when HHS would start withholding funds. Additionally, it is unclear which tools HHS is using outside of ChatGPT to evaluate audit reports, and whether such tools are internally developed or developed by private entities. HHS has not released any official results from this initiative, but it has stated that early findings show a large number of audit deficiencies have gone unaddressed, and that hundreds of federal grantees have not submitted their required audits. This measure is part of a broad effort by HHS to combat healthcare fraud, including Medicaid funding deferrals to Minnesota and California, Medicare enrollment freezes, and a requirement that all 50 states audit Medicaid providers. Given HHS’s prioritization of healthcare fraud as a top policy priority, both private and public recipients of healthcare funding should continue to monitor enforcement efforts by HHS, so that they can stay in compliance and avoid the potential loss of federal healthcare funding that they rely on to deliver effective care to patients.
Footnotes
1. Press Release, U.S. Dep’t of Health & Human Servs., HHS Cracks Down on Years of Unchecked Audit Findings: New Initiative Holds States and Grantees Accountable for Persistent Audit Failures Across HHS-Funded Programs (May 21, 2026), https://www.hhs.gov/press-room/asfr-aero-audit-enforcement-risk-oversight-initiative.html.
2. Liz Essley Whyte, HHS Launches Crackdown Using AI to Detect Medicaid Fraud and Waste, Wall St. J., May 21, 2026, https://www.wsj.com/politics/policy/hhs-launches-crackdown-using-ai-to-detect-medicaid-fraud-and-waste-caf5ba18.
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