SALT LAKE CITY (ABC4) — The Office of the Utah State Auditor released a new report, finding that less than half of Medicaid funds intended for patient care at nursing homes was actually used at those facilities, while nearly $500 million went to administrative fees.
This audit found issues with the state’s Skilled Nursing Facility Upper Payment Limit Medicaid program. Only 49% of the nearly $1 billion intended for patient care was used at the nursing facilities between 2016 and 2024, while the rest was retained by Non-State Government Entities (NSGEs) as administrative fees.
These NSGEs are municipal programs affiliated with hospitals, and they control the funds for this program. According to the auditor’s office, the NSGEs used the majority of the funds for their own benefit. This came from a lack of oversight from the Department of Health and Human Services (DHHS), who reportedly failed to ensure that 100% of the funds were actually going to the nursing facilities, which is required by the NSGEs contracts.
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The audit also found that the administrative fees being collected by DHHS were much higher than the actual cost of administering the program. Reportedly, in 2025, DHHS collected more than $1.8 million in fees above its estimated costs.
The NSGEs pledge “seed money” or initial funds to the state government while those NSGEs wait to receive federal funding, and then that money is passed along to the nursing facilities. However, the audit found that the seed money never actually went to the nursing facilities. There are federal requirements for NSGEs to share in the cost of the program, so this may be in violation of those requirements.
The audit was performed after the legislature requested an investigation into alleged misuse of Medicaid funds in Utah, and auditors interviewed DHHS and local government employees, reviewed state and federal Medicaid guidance, and traced the flow of the initial seed payments from the NSGEs to the final payments made to the nursing facilities.
Reportedly, the investigation found that the three largest NSGEs managed the distribution of more than $922 million in payments, but only $450 million was actually used for patient care.
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“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,” said State Auditor Tina M. Cannon. “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.”
The State Auditor’s office provided the findings of the audit to DHHS, and they also gave them recommendations to make sure that the funds are used as intended. “We urge the Department of Health and Human Services to implement our recommendations to ensure these funds are accounted for appropriately and transparently and are used as intended: for the benefit of nursing facility residents,” Cannon said.
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First, the auditor’s office recommended that DHHS monitor actual dollars spent at the facility level and compare that to the dollars given to the NSGE to make sure that the funds are being used appropriately. Additionally, the audit recommends that the state stop allowing funds to be used for administrative expenditures.
Second, the audit recommended that the state change the State Medicaid plan to stipulate an administrative rate that can be collected by DHHS. Finally, the audit recommended that the state require both seed money and federal funds drawn down to be used for the nursing facilities.
You can read the full report from the Office of the State Auditor here.
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