Nursing homes owned by eight county-owned hospitals in Indiana generated roughly $2 billion in supplemental Medicaid payments between 2018 and 2023, but only two-thirds of that amount actually went to the nursing homes.

The other third, about $649 million, was made available to the hospitals instead, according to an investigative report published on Tuesday in the Indianapolis Star. Overall, county-owned hospitals in Indiana diverted away more than $2.6 billion in Medicaid money intended to provide care to nursing homes over the course of five years, the report found.

IndyStar characterized the diversion of funds as a “secretive financing scheme,” which the hospital systems rely on to prop up public hospitals. County hospitals had acquired nearly all of Indiana’s county-owned nursing homes to access enhanced Medicaid payments that are supposed to be for nursing homes owned by local government entities.

Nursing homes owned by local governmental entities can claim a higher reimbursement rate than privately-owned facilities based on state and federal Medicaid rules, IndyStar reported. County-owned nursing homes qualify for 36% more in reimbursement, or another $108.30 on top of the average base rate of $297.42 per resident per day.

These eight hospitals control about half of the state’s nursing homes, the report found: Hancock Regional Hospital, Hendricks Regional Health, Henry Community Health, Johnson Memorial Health, Major Health Partners, Rush Memorial Hospital, Witham Health Services, and Riverview Health.

Twenty-one public hospitals in the state kept about 46% of $5.6 billion in supplemental Medicaid payments generated by 500 nursing homes they acquired over the past 15 years, but the state’s nursing homes rank near the bottom of the nation for staffing, IndyStar reported.