A $922M Medicaid fund for nursing homes. Half never reached them.
Summary
Utah's Skilled Nursing Facility Upper Payment Limit program funneled $922.3 million in federal Medicaid money to three hospital-owned entities from 2016 through 2024, intended to help pay for nursing home care. A state audit found only 49% -- $450.6 million -- was used at the nursing facilities themselves; the rest covered hospital administrative costs, operations, and owner compensation. Neither the hospitals, the state health department, nor the audit itself found any rule or contract violation -- the dispute is over whether Utah's own Medicaid plan should have allowed this in the first place.
How the program is supposed to work
Utah's Skilled Nursing Facility Upper Payment Limit (SNF UPL) program was created in 2013 to help close the gap between what Medicaid and Medicare pay for nursing care. Only nursing homes owned by a local government entity qualify⧉ -- a structure that has grown from 7 such owners and 48 facilities in 2018 to 10 owners and 75 facilities today. Three hospital-owned entities dominate the program: Beaver Valley Hospital, Gunnison Valley Hospital, and Kane County Hospital together hold licenses for 64 of the 75 participating nursing facilities.
View data as table
| Used at nursing facilities | 450,551,307 |
|---|---|
| Retained by hospitals (owner pay, admin, operations) | 471,794,805 |
Where the rest of the money went
A state audit released this month⧉ found the three largest participants received $922.3 million in program funds from 2016 through 2024 -- but only 49%, or $450.6 million, was actually used at the nursing facilities. The rest, $471.8 million, stayed with the hospitals for owner compensation, administrative costs, and hospital operations. Separately, the audit found the Utah Department of Health and Human Services (DHHS) collected $2.75 million in administrative fees from participants in fiscal year 2025 -- more than three times the $864,000 DHHS itself estimated the program costs to administer.
View data as table
| Fees collected by DHHS | 2,746,288 |
|---|---|
| DHHS's own estimated administrative cost | 863,981 |
Seed money that never touched a nursing home
The program also requires participants to put up their own 'seed money' before the state draws down a federal match, the way local governments typically do for programs like this. The audit found⧉ that in Utah's program, the seed money instead sits in a nursing-facility account only until the end of the fiscal year -- when the hospital withdraws it. Across the nine years reviewed, none of the three hospitals' seed money was ever actually used at the nursing facilities it was meant to fund.
No one alleges the hospitals broke the rules
The three hospitals disputed the audit sharply in a formal written response, calling one of its statements 'fundamentally wrong and libelous' and warning that acting on its recommendations would 'literally destroy an essential state program,' cost 'nearly $100,000,000 annually for healthcare,' and force 'dozens of nursing facilities' to close. They said the program funds nursing care 'at no cost to the State' and saves the legislature $80 million to $100 million a year -- and that no audit finding accused them of violating their contract with the state.
DHHS's own response⧉ agrees on that point: the department says it has been 'operating the UPL program reviewed in this audit under long-standing approval from ' and has 'no reason to believe it is not compliant' with the program's cost-sharing rules, even as it agreed to consult federal regulators and consider changes to the state's Medicaid plan by mid-2027. The State Auditor's office, in its final response, did not dispute that no rule was broken -- it reframed the issue instead: the retained funds, 51% of the total, 'are not included in the State Medicaid Plan and therefore not reviewed and approved by or other applicable federal agencies.'
The takeaway
- The money split roughly down the middle, tilted toward hospitals. $450.6 million reached nursing facilities; $471.8 million stayed with the hospitals that own them.
- None of nine years' seed money reached a nursing home. The funds meant to demonstrate local cost-sharing sat in an account and were withdrawn by the hospitals each year-end.
- Nobody says a rule was broken -- including the auditor. Both the hospitals and DHHS say the arrangement has long-standing approval, and the State Auditor's own summation doesn't dispute that; its complaint is that Utah's Medicaid plan never addressed this retention in the first place.
- The hospitals say the alternative is worse. They warn that tighter rules could cost $100 million a year in care funding and close facilities -- a real tradeoff the audit's recommendations don't resolve.
This piece relies on the audit's own stated aggregate figures; the report's per-facility and per-year appendix tables are embedded as images and were not machine-extractable, so this piece cannot break down the $922.3 million or $471.8 million figures by individual hospital. Both the hospitals' and DHHS's management responses are embedded as scanned images in the report rather than machine-readable text; this piece recovered and quotes them by rendering those pages and running . The most important framing point in this piece: neither the hospitals, DHHS, nor the audit itself alleges a violation of the existing contract, state Medicaid plan, or federal law. This is a dispute over whether current rules should have allowed hospitals to retain program funds in the first place, not an allegation that anyone broke them.
Sources(1) ▾
- Office of the Utah State Auditor, Medicaid Upper Payment Limit Supplement for Skilled Nursing Facilities, Audit Report No. 25-06 (July 1, 2016 through June 30, 2024) (2026-04-01) — The Utah State Auditor's own report, triggered by a legislative request to investigate alleged misuse of Medicaid funding for the Skilled Nursing Facility Upper Payment Limit program. Includes three findings, DHHS and hospital management responses, and the auditor's final summation. Fetched directly and converted with pdftotext -layout; the report's own appendix tables (facility/year breakdowns) and DHHS's own management response section (pp. 18-22) are embedded as scanned images -- the appendix tables were not recovered, but DHHS's response text was independently recovered and read via pdftoppm + tesseract at 300dpi for this piece. reporting.auditor.utah.gov · original document
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Utah built a $922 million Medicaid program to help nursing homes afford care. A state audit found that only 49% of the money actually reached them⧉ -- the rest stayed with the hospitals that own the qualifying nursing facilities.