This diversion of funds has allegedly led to critically low staffing levels and subpar patient care in nursing homes, according to financial data obtained by Newsweek.
Indiana's nursing homes are among the most poorly staffed in the country, despite receiving billions in additional Medicaid payments intended to enhance conditions for elderly and disabled residents. As reported by Newsweek, almost half of the $5.6 billion generated by nursing homes over the past 15 years was retained by county hospitals for unrelated expenses, such as new hospital buildings and equipment.
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Indiana's Medicaid reimbursement system permits nursing homes owned by county hospitals to receive significantly higher payments than private facilities. County-owned homes qualify for an additional $108.30 per patient per day on top of the standard Medicaid rate of $297.42. However, a substantial portion of this money never reaches the nursing homes. In some instances, hospitals have utilized these diverted funds to finance major infrastructure projects.
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In Indianapolis, the Health & Hospital Corp. of Marion County used funds from over 70 nursing homes to aid in the construction of the $754 million Sidney & Lois Eskenazi Hospital. This information came to light following a public records lawsuit filed by IndyStar in 2022, which compelled eight county hospitals to disclose financial records previously withheld for various reasons.
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The hospitals initially refused to share the requested information, citing reasons such as the records constituting "protected trade secrets," and the request seeking "proprietary" and "competitive" information. The eight hospitals forced to disclose the information were Hancock General Hospitals, Hendricks Regional Health, Henry Community Health, Johnson Memorial Health, Major Health Partners, Rush Memorial Hospital, Witham Health Services, and Riverview Health.
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Scott B. Tittle, president of the Indiana Hospital Association, defended the practice, stating, "A significant majority of the funds from the program go to nursing facilities not only to direct care services, but also to expanding home health services and other sophisticated quality improvement initiatives that reduce the need for rehabilitative nursing home stays." Critics, however, argue that this practice enriches hospitals while leaving nursing home residents in understaffed facilities, with some suffering from severe neglect.
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A study conducted by the University of Iowa, analyzing Indiana's nursing home financing system, found that even when nursing homes received supplemental Medicaid funds, most of the money was spent on administrative costs, buildings, and equipment rather than direct patient care. Indiana's nursing homes currently rank 50th in the nation for total nursing staff hours per resident, a decline from 2020. This lack of staffing has been associated with preventable injuries and deaths, including severe falls, untreated infections, and violent incidents among residents.
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Hospital executives have defended the practice, arguing that without their participation, these supplemental Medicaid funds would not be available to Indiana at all. They insist the program is a "win-win" that has helped struggling public hospitals stay afloat while also benefiting nursing homes.
Scott B. Tittle further explained, "Indiana's Upper Payment Limit program was developed over two decades ago by Indiana policymakers to allow our state's county and municipal hospitals to collaborate with nursing homes to secure the resources needed to preserve high-quality care for Hoosiers. Without these partnerships, nursing homes and our public hospitals would have been deprived of essential federal funding that has undoubtedly protected local access to care at no cost to the state."
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However, health policy expert Hari Sharma, who led the university study, argued, "I'm not saying county hospitals shouldn't get any share for participating in this process, but I think the nursing homes should get more, and there should be some connection to quality of care."
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IndyStar reporter Tony Cook commented on the issue, stating, "This story wasn't easy to report. The program is cloaked in secrecy. Neither the federal government nor state officials track how the money is used. The public hospitals claim spending info is a 'trade secret.'"
Daniel Hatcher, a law professor at the University of Baltimore, said, "This is a state that desperately needs Medicaid funds to go directly to care for individuals, and the state needs to stop the diversionary tactics."
Despite the ongoing diversion of funds, neither state nor federal Medicaid officials have taken action against the practice. Some experts have called for Indiana lawmakers to pass reforms that would link supplemental Medicaid payments directly to staffing improvements and patient care.
