Today a new audit was released from the Office of the Utah State Auditor (the Office) which highlights significant issues with the state’s Skilled Nursing Facility Upper Payment Limit (SNF UPL) Medicaid program, revealing that only 49% of the nearly $1 billion intended for patient care was used at the nursing facilities from 2016 to 2024. The remaining 51% was retained by the Non-State Government Entities (NSGEs) as administrative fees.
The audit was initiated after the Auditor received a legislative request to investigate alleged misuse of Medicaid funds in Utah. Auditors from the Office interviewed DHHS and local government employees, reviewed state and federal Medicaid guidance, and traced the flow of funds from the program’s required “seed money” provided by NSGEs to the final payments made to nursing facilities.
“It is deeply concerning that over half of the funds intended to support medicaid patients in skilled nursing facilities didn’t reach the intended recipients,” said State Auditor Tina M. Cannon. “These are not just numbers on a spreadsheet, this is about ensuring that this type of Medicaid funding is used for its intended purpose – to provide direct care and improve the quality of life for patients in nursing facilities. We urge the Department of Health and Human Services to implement our recommendations to ensure these funds are accounted for appropriately and transparently and are used as intended: for the benefit of nursing facility residents.”
The investigation found that from 2016 through 2024, the three largest NSGEs, managed the distribution of $922,346,112 in gross SNF UPL payments. However, only $450,551,307 of that amount—just 49%—was used at the skilled nursing facilities for patient care. The remaining $471,794,805 was retained by the NSGE hospital groups, rather than at the nursing facilities, as the funds were designated.
The audit identified three key findings:
- Lack of DHHS Oversight: The DHHS failed to ensure that the supplemental Medicaid payments were being used at the nursing facility level as required. Contracts stipulated that 100% of the funds should be accessible to the nursing facilities, but in practice, the municipal hospital-affiliated NSGEs controlled the funds and used the majority of the funding for their own benefit.
- Excessive Overhead and Administrative Fees: The audit found that the administrative fees collected by DHHS far exceeded the actual cost of administering the program. In fiscal year 2025, DHHS collected over $1.8 million in fees above its estimated costs.
- Improper Use of “Seed Money”: The report noted that 100% of the initial funds provided by the NSGEs to draw down federal matching funds were eventually reimbursed to the NSGEs, which may violate the federal requirement for NSGEs to share in the cost of the program.
The Auditor’s Office has issued several recommendations to the Department of Health and Human Services, the state’s administering entity, including correcting discrepancies in public data, enhanced auditing and monitoring to ensure funds are spent at the nursing facility level, and working with state and federal agencies to clarify rules around appropriate levels of administrative fees or owner compensation to NSGEs.
The Office of the Utah State Auditor has provided these findings and recommendations to the Department of Health and Human Services. The full report is on the Auditor’s official website
