Key Ruling Impacts Quality Incentive Payments

On September 2, 2025, the Ohio Supreme Court unanimously ruled that the Ohio Department of Medicaid (ODM) must recalculate how it funds nursing homes through quality incentive payments. The Court found that ODM’s interpretation of the law “dramatically shortchanged” facilities, resulting in underfunding that ran contrary to state statute.

The case, State ex rel. LeadingAge Ohio v. Ohio Department of Medicaid, Slip Opinion No. 2025-Ohio-3066, was brought by LeadingAge Ohio, the Ohio Health Care Association, and the Academy of Senior Health Sciences. These associations argued that ODM failed to follow the updated statutory funding formula outlined in Ohio’s 2024–2025 state budget.

What Changed in the Law?

The Ohio General Assembly amended Ohio Revised Code 5165.26 in the 2024–2025 biennial budget to increase the pool of funds dedicated to nursing home quality incentive payments (QI pool). The law required that the contribution to the QI pool be based on 60% of the change in the “rate for direct care costs” resulting from rebasing.

However, ODM used a different calculation method—substituting “cost per case mix unit” (the “price”) instead of the “rate for direct care costs.” This resulted in a substantially lower allocation of funds for nursing home operators.

The Court agreed with the associations, ruling that ODM misapplied the statute and ordering the agency to recalculate past and future payments using the correct formula.

Why This Matters to Nursing Homes

Ohio has about 926 Medicaid-certified nursing homes serving 66,000 residents, with Medicaid covering roughly 65% of those costs (AVC News, Sept. 3, 2025). Quality incentive payments are a critical source of funding, rewarding facilities for delivering higher levels of care.

By requiring ODM to adhere to the plain language of the statute, the Court’s decision ensures that more accurate—and likely higher—funding will reach providers, directly impacting operational budgets and care delivery.

Looking Ahead

While the most recent funding cycle ended in June, the Court emphasized that the statutory formula remains in place and will continue to govern reimbursement calculations moving forward. This means nursing homes can expect changes in how Medicaid incentive dollars are distributed in the coming years.

Further guidance on how ODM will implement the recalculation is expected, and industry associations will likely continue to monitor compliance closely.

How Meaden & Moore Can Help

Understanding regulatory changes is critical for long-term care operators and health care providers. At Meaden & Moore, our Health Care and Long Term Care Services team works with organizations to assess financial impact, model reimbursement changes, and develop strategies that protect margins while maintaining quality of care.

Contact us today to discuss how this ruling may affect your organization and how we can help you navigate reimbursement changes with confidence.