Salt Lake City, Utah — A state audit has found that more than half of nearly a billion dollars meant to improve care at Utah nursing homes never reached patients at all — and some of the hospitals controlling the money are now warning that fixing the problem could shut the program down entirely.
State Auditor Tina Cannon released the report this week after examining almost a decade of spending through Utah’s Skilled Nursing Facility Upper Payment Limit program, covering 2016 to 2024. The program was created to bridge the gap between what Medicaid pays for nursing care and the higher Medicare rate for the same services. But the audit found that of the $922 million administered during that period, only $450 million — about 49% — was actually spent on nursing facility care.
The rest went to a combination of owner compensation, administrative costs, and hospital operating expenses.
“It is deeply concerning that over half of the funds intended to support Medicaid patients in skilled nursing facilities didn’t reach the intended recipients,” Cannon said. “These are not just numbers on a spreadsheet. This is about ensuring that this type of Medicaid funding is used for its intended purpose — to provide direct care and improve the quality of life for patients in nursing facilities.”
A Concentrated Problem
The audit reveals that the program’s structure made the problem possible. Under Utah’s plan, only nonstate government entities — not state hospitals or private nursing facilities — can qualify for the subsidies. That’s left three rural county hospitals holding the vast majority of the 75 Upper Payment Limit licenses the state has issued: Beaver Valley Hospital holds 44, Gunnison Valley Hospital holds 15, and Kane County Hospital holds five.
The auditor found those entities kept control of the funds at the hospital level rather than passing them to nursing facility management, and then used a significant portion to improve hospital operations — not nursing home care. The report called this “contrary to the purpose of the funds.”
Hospitals Push Back Hard
The three hospitals didn’t respond through the usual agency channels. Instead, they sent a letter through legal counsel challenging the audit team’s grasp of the program’s details. They argued the funds were used in full compliance with their contracts, the State Medicaid Plan, and all applicable state and federal law — and that any surplus after nursing home costs were covered could lawfully be directed toward other healthcare purposes.
The stakes are enormous. The hospitals warned that implementing the auditor’s recommendations “will literally destroy an essential state program, cause the loss of nearly $100 million annually for health care, cause dozens of nursing facilities to close their doors and leave thousands of patients annually with no professional care options.”
It’s a familiar threat in long-term care policy debates — and one that complicates any push for reform. Industry reports indicate states across the country are grappling with similar Medicaid oversight gaps, as watchdogs scrutinize how public dollars flow from state programs to the facilities that are supposed to spend them on residents. Kentucky faced similar scrutiny earlier this year, when auditors found inspection backlogs and Medicaid payments tied to residents who had already died.
State Responds With Partial Agreement
The Utah Department of Health and Human Services concurred or partially concurred with each of Cannon’s recommendations, with Executive Director Tracy Gruber calling the audit an opportunity to “improve the transparency of our program management.” Gruber said the department is ready to implement improvements within the timelines the auditor identified.
The auditor recommended that the state require better oversight of how nursing care funds are spent, modify its Medicaid plan to cap administrative fees, and explicitly require that remaining funds be used “for their intended purpose.”
With Medicaid already under pressure from potential federal cuts, the Utah findings add another dimension to an already strained national picture. Whether the state acts on those recommendations — and how quickly — could determine whether hundreds of millions in future Medicaid dollars actually reach the nursing home residents they’re meant to serve.
