Low Medicaid rates slowing patient transfers to nursing homes

Modern Healthcare – Monday, January 12, 2026
By Diane Eastabrook

Hospitals are having trouble discharging patients to nursing homes as those operators receive skimpier reimbursements from state Medicaid programs.

Some companies are taking fewer Medicaid patients and more patients covered by higher-paying, fee-for-service Medicare or by private insurance. Others are considering adding special clinical services that provide higher reimbursements for more medically complex patients.

Nursing homes becoming more selective is adding to the challenges faced by hospitals trying to quickly move patients to post-acute care and avoid readmissions. The scenario already is playing out in states such as New York, New Hampshire and Idaho, where providers say Medicaid reimbursements fall short of covering the cost of care.

“The only way to survive is to get more fee-for-service Medicare [patients] into the building,” said Scott LaRue, president and CEO of ArchCare, a nonprofit operating seven skilled nursing facilities in New York.

Skilled nursing facilities began filling beds with fewer Medicaid patients in favor of those covered by Medicare and private insurance a few years ago, according to a recent study by accounting firm Plante Moran.

In 2024, 55% of nursing home patients were covered by Medicaid, compared with 57% in 2023, Plante Moran found in an analysis of Centers for Medicare and Medicaid Services’ nursing home cost reports.

The trend is likely to accelerate as federal Medicaid funding to states declines under the tax law passed last year, said Denise Leonard, a Plante Moran partner and one of the study’s authors.

Idaho cut Medicaid rates to nursing homes 4% last year due to a budget shortfall, and operators of facilities there are weighing options as they face the prospect of additional rate cuts.

Cascadia Healthcare operates nearly 50 nursing homes across five western states with more than half of them in Idaho.

The company is committed to serving Medicaid patients, Chief Financial Officer Steve Laforte said. At the same time, Cascadia must also accept more patients who bring in better revenue, he said.

“We are looking into taking in more specialized care or creating specialized care units. We have about four out of the five ventilator units in Idaho. They pay at a higher rate and we know how to run the units well,” Laforte said.

Pacs Group also is looking for ways to adapt to Medicaid cuts, Clark Nelson, senior vice president, western operations, said in an email. However, he offered no specifics on what the company is considering. Pacs Group operates nearly 290 nursing homes across 17 states, including three facilities in Idaho.

Targeting patients who require specialized care and provide higher reimbursements is a smart strategy for nursing homes, Leonard said. It also can benefit hospitals that need to free up beds for sicker patients, she said.

“Understanding what the hospital will need and understanding your clinical capabilities should be a win-win situation for all providers,” Leonard said.

The strategy could backfire on hospitals if they can’t discharge lower-paying Medicaid patients to post-acute care.

That is a growing concern for St. Luke’s Medical Center in Boise, Idaho. The hospital is having difficulty finding nursing homes that will accept some Medicaid patients who remain unnecessarily hospitalized for several days waiting for post-acute care, a spokesperson said in an email. The problem is especially acute in rural communities where up to three-quarters of residents are on Medicaid, the spokesperson said.

Favoring higher-paying patients over lower-paying ones also creates a dilemma for nonprofit nursing home operators with a mission to serve the poor.

ArchCare is among them.

Last year, ArchCare, a unit of the Catholic Archdiocese of New York, began focusing more on providing short-term rehabilitation services to patients covered by Medicare and private insurance, LaRue said. He said the nonprofit also took some beds for long-term care patients out of circulation because Medicaid doesn’t cover long-term care costs.

LaRue said ArchCare had to make difficult decisions to stay in business.

“It is our mission to serve the frail and the vulnerable. But if you aren’t here you, can’t have a mission,” LaRue said.

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