$76M Medicaid Clawback Looms as Federal Scrutiny on Nursing Home Payment Boosts Continues

Millions in payments made to a chain of nursing homes in the state of Georgia could be clawed back by the federal government, after an attempt to make use of a program to bolster Medicaid rates came under intense scrutiny.

The investigation by Georgia Health News and ProPublica examined how the use of the upper payment limit (UPL) program in the state of Georgia led to a dispute between the federal government and the state’s Medicaid agency, one where Georgia is facing a possible clawback of $76 million by the Centers for Medicare & Medicaid Services (CMS).

Ronnie Rollins, the owner of a chain of nursing homes that is now part of a non-profit network called Community Health Services of Georgia, made use of the program, which allows for Medicaid rates to be raised to the level of Medicare rates.

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In Georgia, it would have played out in this way, GHN and ProPublica reported: A nursing home owned by a government agency would send funds to the state’s Medicaid agency. That money would be sent to CMS, and the payment would be returned by the agency, along with a bonus amount, to the state. Georgia would take a portion of the bonus funds, while the rest of the funds would return to the local agency’s nursing home.

At the time Rollins began to look into the UPL program, 2001, the state stood to receive more than $80 million each year, which would let the Medicaid agency reinvest in health care reforms being promoted by the state’s governor at the time, Roy Barnes.

According to GHN and ProPublica, “[s]tate officials dangled the opportunity before providers, explaining that reimbursement rates could increase anywhere from 6% to 180%.”

Rollins worked with development authorities, which are designed to draw new jobs and businesses to counties, having them apply for the bonuses from Medicaid as the owners of the nursing homes his chain held. His facilities ended up drawing down about $300 million in bonus payments, according to GHN/ProPublica.

CMS ruled in 2014 that part of those bonus payments that went to Rollins’s nursing homes were “inappropriate,” calling on the Department of Community Health (DCH) to “immediately cease and desist” the use of development authorities to secure bonus payments in December of that year. The payments under the program stopped, and the agency is seeking $76 million in repayment from Georgia for those reimbursements.

*Rollins’s nursing home network used the bonuses to make additions to nursing homes rather than taking out commercial loans. Rollins also used the funds to start pharmacy, medical transportation, and health care supply companies that provided services to his nursing homes.

The development authorities, meanwhile, generally got less than 1% of the funds that moved through the agencies’ accounts, GHN/ProPublica reported.

Georgia’s Medicaid agency has appealed the decision. The DCH, which approved Rollins’ plan to use the UPL program after some debate, called CMS’s findings “factually and legally incorrect” in 2015. CMS denied the state’s appeal in 2018, but that was also appealed; a final decision is yet to come from a Department of Health and Human Services (HHS) appeals board.

Other nursing home operators in Georgia, such as the nursing home chain PruittHealth, decided not to pursue the bonus payment strategy, deeming it too risky, Neil Pruitt Jr., current chairman and CEO of PruittHealth, told GHN/ProPublica.

The application of the CMS program as Rollins used it was legal and approved, Rollins told GHN/ProPublica, and the loss of the bonus payments prevented Ethica, the entity that owns his nursing homes, from completing an overhaul that would have improved care. According to Rollins, the newer and remodeled facilities, renovated with the help of the bonus payments, have excelled compared with the older homes that lag in patient outcomes.

The use of different “loopholes,” as GHN/ProPublica termed them, to try to supplement Medicaid payments came after cuts to the program in the Reagan administration, according to the article.

Several states have tried to make use of these mechanisms to bolster payments to skilled nursing facilities, with varying degrees of success.

CMS last year issued the controversial Medicaid Fiscal Accountability Regulation (MFAR) designed to try to crack down on some of these programs, which would send billions in supplemental payments for nursing facilities to different states each year.

Nursing home providers argued that the rule would result in closures and damaging changes to provider taxes that support reimbursements. MFAR was formally withdrawn by CMS in September.

“We’ve listened closely to concerns that have been raised by our state and provider partners about potential unintended consequences of the proposed rule, which require further study,” CMS administrator Seema Verma wrote on Twitter last month. “Therefore, CMS is withdrawing the rule from the regulatory agenda.”

*A previous version of this article said that the program in Georgia was deemed legal by the Medicaid and CHIP Payment and Access Commission (MACPAC). MACPAC clarified that its comments were on the “legality of supplemental payments” and that it does not weigh in on the legality of payment arrangements at the state level.