A Health and Human Services (HHS) Office of Inspector General (OIG) report released on August 4, Analysis of Selected Nursing Facilities’ Use of Medicaid Reimbursement for Direct Care Compensation, examines Medicaid cost reporting and payroll-based journal data of 26 skilled nursing facilities (SNFs) in both 2018 and in 2021 to assess the percent of money received through Medicaid reimbursement that is spent on direct care compensation.

OIG found that of the 26 nursing homes, 17 (5 government-owned, 9 nonprofit, and 3 for-profit) increased the percentage of Medicaid funds spent on direct care compensation between 2018 and 2021. Of these 17 nursing homes, OIG also found that 12 had decreases in nursing hours per resident day (HPRD) between 2018 and 2021. Upon interview, most nursing homes reported increased labor costs including contract staff as a factor contributing to the increases in use of Medicaid reimbursement for direct care compensation.

Workforce shortages, including challenges to COVID-19, contributed to decreases in HPRD. This report from OIG comes at a time when there is much buzz about the use of Medicaid funds for direct care compensation across aging services providers. Nursing homes will begin reporting on the amount of Medicaid payments spent on direct care compensation by 2028 based on requirements finalized in 2024.