Nursing homes fabricate schizophrenia diagnoses to hide antipsychotic drug use from CMS star ratings

A March 2026 HHS Office of Inspector General report found that nursing homes are systematically adding false schizophrenia diagnoses to residents' medical records to mask their use of antipsychotic drugs. CMS tracks antipsychotic use as a quality measure that affects a facility's star rating, but residents diagnosed with schizophrenia are excluded from that metric. So facilities game the system: staff receive electronic health record alerts flagging residents on antipsychotics who lack a schizophrenia diagnosis, and nurses are instructed to add one. At one facility, a nurse practitioner added schizophrenia diagnoses to dozens of residents' records in a single day. This matters because antipsychotic drugs carry an FDA black-box warning that they increase the risk of death in elderly patients with dementia. These drugs are being used as chemical restraints — staff admitted to inspectors that antipsychotics were administered to "lighten the workload by quieting patients." The OIG cited a Pennsylvania facility that gave a woman over 100 years old an antipsychotic because she enjoyed caring for dolls. Roughly 250,000 nursing home residents receive antipsychotics every week, and more than one in five residents (21.3%) are on these drugs. The false diagnoses prevent families, regulators, and prospective residents from seeing the true rate of chemical restraint at a facility. This problem persists because the incentive structure is backwards. CMS created the antipsychotic quality measure to discourage overuse, but instead created a loophole: exclude schizophrenia patients from the count. Facilities exploit this loophole because the penalty for a low star rating (fewer admissions, lower revenue) is immediate and financial, while the penalty for a fraudulent diagnosis is rare and delayed. State survey agencies lack the clinical expertise to audit psychiatric diagnoses, and the residents being drugged — elderly people with dementia — cannot advocate for themselves. The 2024 federal staffing rule that would have required 24/7 RN presence (which might have provided clinical pushback against inappropriate prescribing) was rescinded in December 2025.