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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Adequacy of Medicaid Payments to Albany County Nursing Home," (A-02-02-01020)

June 17, 2004

Complete Text of Report is available in PDF format (517 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


The report points out that total Medicaid payments initially made to the nursing home were adequate to cover its operating costs. During the 3 years ended September 30, 2001, these payments totaled $132 million:  $41 million in Medicaid per diem payments and $91 million in enhanced payments available under the upper payment limits.  During the same period, the nursing home’s total operating costs were about $70 million.  However, because the State and county required the nursing home to return about 90 percent of its upper-payment-limit funding, the nursing home was allowed to retain only about $50 million--$20 million less than its total operating costs.  As designed, the State’s upper-payment-limit funding approach benefited the State and the county more than the nursing home.  The State received $20 million more than it expended for the nursing home’s Medicaid residents and the county was reimbursed 100 percent for its upper-payment-limit contribution.  In effect, the Federal Government provided almost all of the nursing home’s Medicaid funding, contrary to the principle that Medicaid is a shared responsibility of the Federal and State Governments.  Another result was that the nursing home ended up significantly understaffed, which may have affected the quality of care provided to its residents.  We recommended that the State (1) seek necessary authority to calculate the nursing home’s Medicaid per diem rate to more closely reflect operating costs, and (2) allow the nursing home to retain sufficient funding so that it can attract, hire, and retain sufficient nursing staff to provide and adequate level of care to its residents.