OIG Digs into Indiana Supplemental Medicaid Payments

An audit by the Dept. of Health and Human Services (HHS) Office of Inspector General (OIG) said portions of Medicaid supplemental payments intended for nursing homes in Indiana went instead to the county hospitals, or non-state government-owned (NSGO) entities, which own most of the facilities.

According to Indiana’s state and federal Medicaid rules, nursing homes owned or leased by local government entities like the county hospital can receive 36 percent in additional reimbursement per resident per day than privately owned nursing homes.

OIG in the audit (November 2026 - A-05-24-00017) said because of the unique state rules, Indiana reported the most nursing facility supplemental payments in the nation ($1.02 billion of the $2.36 billion in total payments) during the year of the audit, federal fiscal year (FFY) 2022.

Medicaid supplemental payments are Medicaid payments to providers that are separate from, and in addition to, the payments for services rendered to people enrolled in Medicaid.

NSGOs Recover Funds

What OIG found is “although Indiana distributed $1.02 billion in supplemental payments, nearly half ($479.8 million) was recovered by NSGO entities rather than benefiting nursing home residents.”

Of this amount, NSGO entities recovered $274.6 million that they had originally paid as the state’s share of supplemental payments.

“Most notably, they recovered $205.2 million that was not used to increase Medicaid reimbursement for participating nursing facilities as intended. In addition, Indiana claimed $12.2 million in federal payments that did not comply with federal and state requirements,” the OIG report said.

To remedy the issues, OIG recommended that the state “explore ways to increase the portion of Medicaid supplemental payments that participating nursing facilities retain and refund the $12.2 million in excess supplemental payments to the federal government. . . Indiana did not indicate concurrence or nonconcurrence with our recommendations but stated that it will take our first recommendation into consideration and detailed steps it has taken and plans to take in response to our other recommendations.”

More Detail

The above is a highlights version of the OIG report. Some more details are below, directly quoting the audit unless otherwise mentioned:

-          We selected Indiana for this audit because it accounted for the largest share of these [Medicaid supplemental] payments. We conducted this audit because of the magnitude of these payments, combined with concerns raised by Congress and investigative reporting about transparency and whether funds benefited nursing facility residents as intended.

-          What Are NSGO Entities? During our audit period, Indiana NSGO entities consisted of 20 county hospitals, 1 county nursing facility, 1 county, 1 municipal corporation. These NSGO entities owned 498 nursing facilities.

-          For our audit period, the state agency distributed all $1.02 billion of the nursing facility supplemental payments to NSGO entities. Of this amount, nursing facilities spent $519.1 million on capital and operating expenses. However, the NSGO entities recovered the remaining $479.8 million to recover $274.6 million in IGT [intergovernmental transfer] payments they made to cover the state’s share of the supplemental payments and used the remaining $205.2 million for other purposes.

-          Although nothing prohibited Indiana from allowing the NSGO entities to recover the $205.2 million in nursing facility supplemental payments, these funds were not used as increased Medicaid reimbursement for participating nursing facilities as described in the Indiana State Plan. Opportunities exist for the state agency to explore ways to increase Medicaid reimbursement to participating nursing facilities in accordance with the Indiana State Plan’s intent for the supplemental payments. If allowed to retain more of the supplemental payments, nursing facilities may be able to provide higher quality care and achieve better health outcomes for Medicaid enrollees residing in nursing facilities.

Read the entire OIG report at Nursing Facilities Retained Only About Half of the $1.02 Billion Indiana Reported as Nursing Facility Supplemental Payments in Federal Fiscal Year 2022 | Office of Inspector General | Government Oversight | U.S. Department of Health and Human Services.

Comments or questions? Contact Patrick Connole at pconnole@parkplacelive.com.