‘Considerably’ More Complicated: Nursing Homes Reeling From Estimated $1B in Owed Incentive Payments Face Federal, State Policy Shifts

Nursing homes in Ohio are navigating uncertainty from two directions: the ongoing saga of overdue quality incentive payments (QIPs) and longer-term reimbursement changes included in state legislation.

These issues come at a time when providers are caring for residents with higher acuity and complex needs, while also working to invest in quality care and workforce stability, Scott Wiley, CEO of the Ohio Health Care Association (OHCA), told Skilled Nursing News. And, a complicated situation may become even more so with expected shortfalls from the One Big Beautiful Bill Act (OBBBA), state associations said.

The Ohio Supreme Court ruled in favor of nursing home groups OHCA and LeadingAge Ohio last September to pay the correct QIPs to operators owed as part of the nationally-recognized incentive program, which at the time was estimated to be about $1 billion. Payments were supposed to be adjusted based on patient complexity, but when reimbursement came, acuity wasn’t accounted for.

As of March, the state Department of Medicaid (ODM) hasn’t completed the recalculation required by the Ohio Supreme Court, Wiley said, meaning the exact amount owed is still unknown. The association is ready to work with the state as soon as the amount is calculated in order to oversee a “thoughtful, orderly and collaborative implementation process,” added Wiley.

The agency hasn’t announced any timeline either, he said. The association has consistently requested updates, but with no luck.

Ohio’s situation appears to be unique, LeadingAge Ohio President and CEO Susan Wallace said. To the association’s knowledge, no other state is dealing with overdue QIPs and changing reimbursement policy at the same time.

“It’s worth noting that this has not happened in Ohio before either,” said Wallace. “This was the first time LeadingAge Ohio has decided to take legal action against Medicaid in our history, and we did it only after exhausting all other options — including many conversations and appeals to both the Department and General Assembly.”

The waiting game

The state may be waiting on the Ohio General Assembly to make a decision on where the owed funds should come from, Wallace said.

“It is not surprising that the Governor wants to consult with the General Assembly, which holds the power of the purse,” added Wallace. “The General Assembly will most likely have a preference on how this is paid for—whether it’s from Ohio’s rainy day fund, or from another source.”

One positive to think about, she said, is that tax revenue exceeds budget estimates.

“What we do know is that the amount will be significant,” Wiley told Skilled Nursing News. “The Court determined that ODM miscalculated quality incentive rates and underpaid providers across three consecutive rate years—the July 1, 2023, rate year, the July 1, 2024, rate year, and the current July 1, 2025, rate year.”

Still, the association’s approach is one of collaboration, WIley said. Open dialogue is key between ODM, the General Assembly and nursing home stakeholders.

“Ohio can both resolve the immediate obligations and set the state on a strong, predictable course for the future,” Wiley said. “Our goal is to support solutions that reinforce quality, sustain progress and give providers the stability they need to serve residents well.”

These underpayments come on the heels of extraordinary clinical, workforce and financial pressures tied to the pandemic, he said, bleeding into the complex recovery that followed.

New legislation sets SNFs further back

Meanwhile, legislation passed in November, HB 184, will guide the agency’s future annual quality incentive calculations beginning in July of this year. The legislation changes the contested language that led to the court decision in the first place – the new language would favor the agency’s interpretation, Wallace said.

The statutory change replaces the term “rate” with “cost per case mix unit,” according to LeadingAge Ohio.

“On that legislation’s effective date, March 20, the accumulation of owed payments will stop,” Wallace said. “[The legislation and owed funds] are two parts of one large, complicated issue to be addressed. Last year’s budget was focused on controlling spending in the Medicaid program, so we are not surprised that the legislature chose to stop accumulation of underpayments.”

Currently, the federal government reimburses 64.6% of every Medicaid dollar spent in Ohio.

Without QIP payments funded at the level prescribed in the 2022-23 budget, state nursing homes are losing $60 per day on average for every individual on the Medicaid program going forward, Wallace noted.

Thinking back to the 2022-23 budget, the state legislature was trying to restore providers to the level of losses they were experiencing pre-pandemic, she said. This goal was streamlined across care settings, including assisted living, home care and other health care services.

“That is how poor our funding levels are,” Wallace added. “With the reversal contained in HB 184, we’re now starting next year’s budget process farther behind.”

More complications around the corner

Wallace expects the situation in Ohio to get “considerably” more complicated, with the state slated to lose billions per year because of financing changes contained in OBBBA. All Medicaid providers are profoundly concerned with what next year’s budget may entail, she said.

Wiley agreed that even more reductions are expected under the federal OBBBA, which is all the more reason to resolve current uncertainties promptly and with clear communication. The state is in a strong position right now, with Medicaid for 2024 and 2025 yielding “significant surpluses,” and a rainy day fund exceeding $3.8 billion, Wiley noted.

“Establishing certainty around today’s obligations will help Ohio plan effectively for the future,” said Wiley. “Together, these factors create a constructive environment for collaboration on both the immediate and long-term financial framework for long-term care.”

More generally, each state designs and administers its Medicaid reimbursement system differently, but prolonged uncertainty creates unnecessary challenges for providers.

“Ohio has an opportunity to demonstrate how a state and its provider community can work through a complex issue collaboratively, transparently, and with residents at the center,” said Wiley. “We are committed to being full and constructive partners in that effort.”