Three of the largest provider associations in Ohio are suing the Ohio Department of Medicaid, alleging the department incorrectly calculated care quality incentives passed by the state Legislature — potentially costing providers hundreds of millions of dollars.

The Ohio Health Care Association, LeadingAge Ohio and the Academy of Senior Health Services are working together on the case, which requested last week that the Ohio Supreme Court issue a writ of mandamus compelling the state’s Medicaid program to correct the planned incentive payments. 

Ohio passed a large Medicaid increase in its budget for fiscal 2024-2025, investing between half and three-quarters of a billion dollars into both base Medicaid reimbursement rates and quality of care incentive payments for nursing homes.

But the legislation’s promised incentives are not being fully met by the Medicaid department, according to documents provided to McKnight’s Long-Term Care News by the Ohio Health Care Association.

“The Legislature intended that 40% [of funding] was to go to the base rate and 60% was to go to the quality incentive,” leaders of the three associations wrote in an initial complaint to ODM in August. “ODM attempted to determine each slice separately… with the result that the two slices do not add up to the whole pie.”

The associations do not dispute the base rate increase of around $415 million, but point out that the $169 million quality incentive increases calculated by ODM are only 29% of the increases, not 60%.

“The statutory language in the budget legislation is crystal clear,” Susan Wallave, CEO of LeadingAge Ohio, wrote in a prepared statement. “Unfortunately, the way ODM is implementing the budget does not align with the law as written, denying important resources for care to our most vulnerable citizens.”

Communication breakdown

For its part, ODM argued in an October letter responding to the associations’ complaints that a different interpretation of the budget is correct. 

“The plain language of the statute does not require the addition of 60% of the funding generated by re-basing to the quality pool of funds. Rather … the quality pool of funds includes 60% of the amount by which the nursing facility’s rate for direct care costs changed as a result of rebasing.”

The letter points out that the Legislative Budget Office expected Medicaid increases of between $620 million and $750 million over the next two fiscal years as a result of the legislation — a mark that the ODM’s calculation meets and the associations’ requested changes would far exceed. 

“Applying terms in the manner you have suggested would result in an expenditure of $285.6 million more per year than was authorized by the General Assembly,” the letter claimed. 

Despite the months-long back-and-forth between the associations and the ODM, the Ohio Supreme Court on Wednesday ordered the groups to pursue mediation before continuing legal action.

ODM’s deputy director of ratesetting, Joan Schlagheck, noted that even with its preferred calculation of care quality increases, state nursing homes will still be receiving one of the largest Medicaid funding increases passed by any state in the nation. 

The associations claim that they are pursuing legal action only as a “last resort,” and that ODM’s rates clearly violate the language and spirit of the Legislature’s passed budget, according to Pete Van Runkle, executive director of OHCA.

“We tried every avenue to convince the department that they are misinterpreting the clear language of the statute, to no avail,” he said in a statement provided to McKnight’s Thursday. “Our members read the budget bill and expected a much stronger commitment to quality-based funding. They are extremely disappointed that it did not materialize.”

Because the dispute has escalated to a legal matter, the associations have decided to not comment beyond such prepared statements, Van Runkle said.