Understanding the Downstream Effects of the AHRQ Grant Cancellations

In this edition of AcademyHealth’s Situation Report, we continue to highlight the downstream impacts of the grant terminations issued by AHRQ last week—including what they mean for the research enterprise, the future of health services research, and patient safety—and provide updates on our efforts to brief Congress on these impacts. The developments at AHRQ are part of a broader pattern of actions that threaten scientific independence and the stability of the federal research enterprise. We also spotlight news related to Medicaid funding, billing codes, prior authorization, and physician payment that could influence the future of health care delivery and access.

In today’s issue:

• Judge Rules Against Use of Obscure Clause to Cancel Grants to States

• AcademyHealth Continues to Raise the Alarm on AHRQ Grant Cancellation

• AHRQ Watch: AcademyHealth in the News

• CMS Questions the Future of CPT Coding and Physician Payment

• States Begin Adjusting to Medicaid Funding Reductions
  

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Judge Rules Against Use of Obscure Clause to Cancel Grants to States

On July 17, U.S. District Judge Indira Talwani in Boston ruled that the Trump administration could not use a provision in federal grant regulations to justify the funding cuts at issue in the case. The provision, part of the federal government’s Uniform Guidance for federal grants, allows an agency to terminate a grant if the award “no longer effectuates the program goals or agency priorities.”

Judge Indira Talwani rejected the administration’s interpretation, finding that it was inconsistent with the regulatory framework governing federal grants and the constitutional requirements governing federal spending. The decision has implications far beyond a single grant as recent grant terminations have affected scientific research, education, crime prevention, environmental programs, and food security.

The ruling came after 23 states sued the Trump administration over its decision to cut $11 billion in federal funding for medical research and public health programs. The decision also comes amid the recent AHRQ grant cancellations, in which awards were terminated to “better prioritize agency resources” and align with AHRQ’s current priorities.

For the research community, this ruling marks a significant victory because it protects the integrity and transparency of the federal grantmaking process. However, the broader debate over agency authority to terminate grants and political influence in federal funding decisions will likely continue in the coming months. With nearly 500,000 comments submitted in response to the Office of Management and Budget’s proposed grantmaking rule, additional legal challenges may be forthcoming to safeguard the independence and stability of federal research funding.

AcademyHealth Continues to Raise the Alarm on AHRQ Grant Cancellation

On July 15, AHRQ began issuing grant termination notices to researchers across the country, ending support for training programs and ongoing studies focused on cancer care, hospital-acquired infections, vaccination, telehealth, and other efforts to improve health care quality and patient safety. AcademyHealth has been at the forefront of tracking these cancellations, briefing congressional offices on their potential impact, and supporting affected researchers as they navigate this disruption. Our Situation Report provides timely updates on the scope of the cancellations, outlines actions the health services research community can take in response, and highlights the potential implications for the nation’s research infrastructure. Read the full report here.

The recent AHRQ grant cancellations are part of a broader pattern of fund impoundment that began on April 5, 2025. In yesterday’s Situation Report, we reflect on a series of unprecedented actions over last year, including the continued impoundment of AHRQ funds, the collapse of the agency’s grantmaking infrastructure, the pending GAO investigation, the firing of USPSTF’s leadership, and the response from AcademyHealth and the broader health services research community to protect AHRQ’s grantmaking capacity and scientific independence.

AHRQ Watch: AcademyHealth in the News

As AcademyHealth continues documenting the impact of AHRQ grant cancellations, our analysis and advocacy have been featured in national media outlets covering the growing disruption to the nation’s health services research enterprise. AcademyHealth President and CEO Aaron Carroll emphasized that these decisions affect not only researchers, but also patients, health systems, and the evidence needed to improve care.

Recent coverage includes:

• HHS research agency ends funding for dozens of health studies (CQ Roll Call)
  Features AcademyHealth’s estimate that at least 67 AHRQ grants have been canceled and Aaron Carroll’s warning that years of investment, staffing, and patient recruitment are being lost.

• Trump Administration Cuts Off Health Care Research Grants Without Warning (NOTUS)
  Highlights AcademyHealth’s concern that vastly different research projects received nearly identical explanations for cancellation, raising questions about how decisions were made.

• Health department abruptly cancels health research grants worth millions (Politico PRO)
  Reports on AcademyHealth’s estimate that more than $60 million in committed AHRQ funding has been canceled and the broad consequences for researchers, institutions, and patients.

CMS Questions the Future of CPT Coding and Physician Payment

The Centers for Medicare & Medicaid Services (CMS) is reconsidering the federal government’s longstanding reliance on the American Medical Association’s (AMA) Current Procedural Terminology (CPT) code set and the Relative Value Scale Update Committee (RUC) as part of the proposed 2027 Medicare Physician Fee Schedule. While CMS is not proposing immediate changes, the agency is seeking public comments on whether the current coding and valuation process supports patient-centered care, prevention, and evolving models of health care delivery. The request also asks whether alternative approaches outside of the AMA could improve transparency, reduce administrative complexity, and better align payment with federal health priorities.

For health services research, the discussion extends well beyond coding. Payment systems shape clinical practice, resource allocation, data collection, and the evidence available to evaluate health care delivery. Any changes to how services are defined or valued could affects research, quality measurement, reimbursement analyses, and comparisons across providers and health systems. Health services researchers are well positioned to evaluate how coding and payment policies influence care delivery, provider behavior, and patient outcomes, while generating evidence to inform future reforms based on what’s best for Americans interacting with the health care system rather than political oversight.

Senate Allows Medicare AI Prior Authorization Pilot to Continue

The Senate voted 46-50 to reject an effort to halt CMS’ Wasteful and Inappropriate Service Reduction (WISeR) Model, allowing the six‑year Medicare pilot to continue in Arizona, New Jersey, Ohio, Oklahoma, Texas, and Washington. The model applies prior authorization and prepayment review to a select group of services that CMS considers vulnerable to fraud, waste, abuse, or inappropriate use, including certain orthopedic procedures, implanted devices, and skin substitute treatments.

WISeR uses artificial intelligence and machine learning tools to assist with utilization review, while requiring a qualified clinician to review any proposed non‑approval. CMS argues the model will reduce unnecessary spending, improve program integrity, and speed decision-making. Critics, however, believe that AI supported prior authorization could create new barriers to care, reduce transparency, and potentially influence clinical decision making in ways that are difficult for patients and providers to understand or challenge.

Lawmakers from both parties have increasingly scrutinized the use of AI in prior authorization by Medicare Advantage and commercial insurers, citing concerns about inappropriate denials, transparency, and accountability. Yet the Senate voted largely along party lines to preserve a CMS initiative that applies AI-assisted review within traditional Medicare. The result underscores growing debate over whether AI supported utilization management should be judged differently when deployed by public programs versus private insurers.

The WISeR model creates an important opportunity to evaluate how AI-assisted prior authorization affects patient access, health outcomes, administrative burden, and health care spending. Researchers can help determine whether AI-supported review reduces inappropriate utilization without delaying medically necessary care, while also examining how oversight, transparency, and appeals processes function in practice.

Engage in conversations about the role of AI in health care at our Health Datapalooza conference this September. Learn more

States Begin Adjusting to Medicaid Funding Reductions

The proposed Medicaid funding reductions are beginning to reshape how states provide long-term services and supports, with several states moving to reduce payments for family caregivers as they prepare for lower federal Medicaid funding in 2027. In Maryland, officials have proposed significant wage cuts for family caregivers of people with disabilities, prompting advocates to warn that many families could face financial hardship or be forced to place loved ones in institutional care. Similar proposals in states including Idaho, Indiana, Missouri, and Colorado suggest these types of reductions may become more common as states adjust to lower federal Medicaid funding, particularly by scaling back home and community-based services, which are optional under Medicaid.

For health services researchers, these developments raise important questions about how Medicaid funding decisions affect access to care, health outcomes, and costs across the health system. As states make different policy choices, researchers will have opportunities to study how reductions in home and community-based services influence caregiver financial stability, workforce participation, institutionalization rates, emergency department use, hospitalizations, and Medicaid spending over time.

The changes also highlight the need for stronger evidence on the effectiveness and return on investment of self-directed care models, as well as the broader value of home and community-based services in helping people with disabilities remain safely in their homes. That evidence can help policymakers better understand the tradeoffs between short-term budget reductions and the potential long-term impacts on patients, caregivers, and the health care system.