Utah could be on the hook for hundreds of millions of dollars in federal paybacks tied to a rural hospital’s use of Medicaid funds. That’s despite years of warnings and a 2017 state audit that flagged the risk.
The issue centers on the state’s Medicaid Upper Payment Limit program, a federal matching initiative designed to help government-owned hospitals serve low-income patients and keep struggling facilities afloat. But in Utah, the program has quietly swelled into a $700 million pipeline that has disproportionately benefited a single rural hospital.
Much of that money has flowed through Beaver Valley Hospital, a city-owned facility in rural southern Utah that quietly took ownership of 44 nursing homes across the state starting in 2014. What began as a small-town 25-bed hospital evolved into a sprawling network, and one that former employees say prioritized revenue over patient care.
“I think they all did the bare minimum to do their little job, without trying to connect the dots or put things together,” said Susan Richards, whose husband passed away after staying in a BVH-owned facility in 2023.
In 2020, the Utah Investigative Journalism Project uncovered deep flaws in the state’s UPL program, including widespread sanitation problems and chronic understaffing at many BVH-linked nursing homes. Despite receiving millions in federal funding, inspections revealed fatal medical errors, poor hygiene and high-needs patients being admitted to facilities unprepared to care for them.
Hospital administrators have long said their goal was to keep these nursing homes from closing and to stabilize BVH’s finances, which were suffering due to low Medicaid reimbursement rates and declining admissions. But even as the network expanded, so did concerns about how the money was being used.
Beaver Valley officials acknowledged in a 2020 interview that they keep a “confidential” amount of the UPL money. A portion, they said, goes to administrative costs. However, critics, including those behind the 2017 state audit, say the hospital exploited a Medicaid loophole and kept half the funds, diverting dollars intended for vulnerable nursing home residents to cover other expenses. Still, even state auditors couldn’t find where all the money was going.
“Financial summaries we reviewed for BVH nursing facilities showed what UPL revenue they received, but we could not determine specifically how the funds were spent,” the audit said.
After multiple public records requests, no clear financial accounting has been released showing exactly how the hospital uses its large share of Medicaid Upper Payment Limit funds. But during a June 2021 Beaver City Council meeting, officials confirmed that some of the money was part of a $30 million hospital remodel.
“The UPL Program is helping fund this remodel,” the minutes state.
The project was undertaken to increase privacy in the emergency and radiology departments, build Beaver County’s first dialysis unit, expand space for specialty clinics, relocate MRI services inside the hospital, upgrade aging HVAC and medical gas systems and construct a rooftop helipad.
Daniel L. Hatcher, a law professor at the University of Baltimore School of Law who has studied Medicaid diversion practices nationwide, said the way some hospitals leverage UPL programs has strayed far from their original intent.
“Medicaid is supposed to be about providing Medicaid services. It's not supposed to be general funding for counties and hospitals and states,” Hatcher said.
The situation with BVH mirrors broader national concerns about Medicaid financing practices. A recent report by the conservative Paragon Health Institute, titled “Addressing Medicaid Money Laundering,” highlights how certain state strategies, such as imposing taxes on health care providers to draw down extra federal matching funds, can divert resources away from patient care. These practices, while legal, have been criticized for lacking transparency and accountability.
This issue has caught the attention of federal lawmakers because of the huge amount of money involved – an estimated $600 billion over a decade – in what GOP lawmakers have started deriding as “scams” or “gimmicks,” according to The New York Times. The House Energy and Commerce Committee is currently exploring ways to achieve significant budget savings, with Medicaid reforms being a focal point. Proposals include reducing or ending the federal match rate for these so-called provider taxes, which could lead to substantial cuts in funding for states.
Cash flows while conditions remain poor
Beaver Valley Hospital first entered the UPL program in 2014 and began acquiring nursing home licenses across the state. Over the next five years, the small hospital serving the 7,233 residents of the surrounding county quietly expanded its reach to 44 long-term care facilities, stretching from Logan to St. George, making it the dominant player in Utah’s UPL program.
While Beaver Valley Hospital’s strategy has brought in hundreds of millions of federal dollars, the conditions inside many of its affiliated nursing homes tell a different story.
South Ogden Post Acute, one of their largest facilities, was placed on a federal watchlist for homes with persistent and serious care problems by the federal Centers for Medicare & Medicaid Services in March 2025. Between 2022 and 2024, it was fined $320,000 for violations, including infection control failures and safety lapses deemed “immediate jeopardy.” South Ogden Post Acute and Cascades Healthcare, which manages the facility, did not respond to a request for comment.
At Provo Rehabilitation and Nursing, federal regulators issued a $144,918 fine in January 2023 following citations for repeated neglect. And at Rocky Mountain Care–Hunter Hollow in West Valley City, inspectors documented such serious safety risks that, by the end of 2023, the facility had been fined a total of $51,000. Provo Rehabilitation and Nursing and the Ensign Group, which manages the facility, did not respond to requests for comment.
Despite the stream of violations, the money continues to flow. Government data shows that nurse turnover at South Ogden Post Acute reached 70% in 2023, among the highest in the state. Reviews from residents and families echo what inspection reports already show: missed medications, poor hygiene, pressure sores and long stretches without staff assistance.
Beaver Valley Hospital did not respond to multiple requests for comment. The Utah Department of Health and Human Services confirmed that while maintaining a quality improvement program for facilities participating in UPL, it does not oversee or track how hospitals spend those federal funds.
Susan Richards brought her husband to Holladay Healthcare in Utah for physical therapy and rehabilitation after a leg amputation. But she said his basic medical needs were ignored, and staff delayed urgent care even as he spiraled into septic shock, later dying at another hospital.
“I didn’t see any empathy. I didn’t see anybody trying to connect all the dots,” Richards said.
Despite voicing concerns about his brown urine, severe rectal pain and sudden confusion, Richards said her warnings were brushed aside for days.
The law firm Eisenberg, Lowrance, Lundell & Lofgren is currently litigating several cases involving facilities in Utah’s UPL program. The firm said that in 2023, UPL facilities had an average overall staffing rating of 2.73, significantly lower than the 4.05 average at non-program nursing homes. The government-calculated rating, scored on a 1-to-5 scale, reflects the number of nursing hours provided per resident each day, adjusted for patient needs.
“It’s no surprise UPL facilities are heavily represented in the caseload,” said Barry C. Toone, an attorney working with the firm. “Despite receiving hundreds of millions in supplemental Medicaid funds, Utah’s UPL facilities consistently underperform.”
Although poor care can result in fines, citations, and, in extreme cases, decertification, Hatcher, the Baltimore professor who’s looked extensively into these programs, said those enforcement actions are rare and slow compared to the rewards of UPL participation.
“The financial incentive remains strong, even when the care does not,” Hatcher added.
Reinvesting or redirecting?
Meanwhile, BVH has defended its use of Medicaid Upper Payment Limit funds for internal hospital projects. In public meetings and emails, officials argued that infrastructure upgrades ultimately strengthen health care delivery in Beaver. Hatcher has warned that programs like this can be manipulated to divert money away from patient care and into unrelated capital projects.
Beaver City officials did not respond to questions about the hospital’s use of UPL funds or the facility’s operations. Speaking broadly about how Medicaid supplemental payment programs can be misused nationwide, Hatcher said the practice amounts to a form of financial misconduct that harms vulnerable populations.
“It's money laundering, you know, when you look at it,” Hatcher said. “And it's definitely harming the elderly and disabled residents of nursing homes.”
But as the Beaver hospital’s financial footprint grew, so did efforts to legally distance it from the city that owns it, and from the financial risks that could follow.
In December 2017, Utah’s legislative auditor general sent a delegation to Indiana to study how that state structured its Medicaid supplemental payment program. What they found was troubling: public hospitals acquiring nursing homes to unlock extra federal dollars, then using the money on unrelated capital projects, all with minimal oversight.
“We didn’t really leave with notes of things we were going to implement,” Legislative Auditor General Kade Minchey later told reporters.
Back home, Utah was already heading in a similar direction. Internal emails show that by 2019, state and local officials were quietly working to legally separate Beaver Valley Hospital from Beaver City, the municipality that owns it, an effort that could shield the city from financial blowback if the UPL program ever unraveled.
In a July 23, 2019, email, BVH Chief Financial Officer Tyler Moss requested a meeting with the Utah state auditor’s office to discuss the “Component Unit relationship” between the hospital and the city. Records confirm the meeting happened a month later, in August, and centered on how to separate the hospital for legal and financial accountability.
In a Sept. 10, 2019, Beaver City Council meeting, BVH Director Scott Langford told council members that the Utah Attorney General’s Office had approved a resolution recognizing Beaver Valley Hospital as a legally distinct entity. He said the office would provide supporting case law from Nebraska and assured the council the resolution “will be a permanent document in the Attorney General’s Office.”
But when a public records request was filed in August 2024, any such resolution could not be located. In a formal letter, Assistant Attorney General Lonny J. Pehrson wrote that, after “a reasonable search,” no documentation of the separation could be found. In a follow-up email, officials reiterated that no resolution establishing legal independence had been located.
That appeared to confirm the conclusion of Seth Oveson, local government manager for the Utah auditor’s office, who stated in a Sept. 3, 2019, email that the attorney general had declined to make any definitive ruling in the matter. The question of whether BVH was legally independent, he wrote, had ultimately been left to local interpretation. The state auditor’s office declined to comment further.
A risk of clawback or penalty
If federal regulators determine that Utah’s program has violated Medicaid rules—whether through misuse of funds, poor oversight or failure to ensure quality care—the consequences could be staggeringly expensive to taxpayers. Under federal law, states must repay any Medicaid dollars deemed improperly claimed.
The warning signs aren’t new. A 2017 audit from Utah’s legislative auditor general pegged the potential liability at over $20 million just for BVH—a figure that has ballooned as the hospital’s UPL-related revenues have surpassed $700 million.
Other states have already faced blowback for similar models. Oklahoma’s program was rejected in 2019 after the federal government cited misuse concerns. And in Indiana, a 2025 investigation by the Indianapolis Star revealed that county hospitals diverted more than $2.6 billion in Medicaid funds intended for nursing homes to other projects like hospital construction and equipment.
Patient advocates are now urging federal officials to turn their focus to Utah. In July 2024, the Disability Law Center and the National Health Law Program submitted a formal petition to the U.S. Department of Health and Human Services Office of Inspector General calling for a federal audit. The center cited ongoing care violations, financial opacity and the use of Medicaid dollars for unrelated hospital projects.
“The Utah Legislature sought feedback from the National Conference of State Legislatures on UPL programs and was informed that UPL demonstration structures in other states like that found in Utah have been found to be illegal and required paybacks to CMS,” the petition said.
Hatcher, who has spent years analyzing revenue diversion strategies like Utah’s, said the legal risk is real and growing.
“This practice is really exposing themselves to significant liability,” he said. “Both in terms of the clawback of Medicaid funds, but also liability from the individuals and the nursing homes, you know, if they're getting poor care.”
Despite audits, citations and formal calls for investigation, Utah’s UPL model remains intact. BVH still operates the largest nursing home networks in the state and the federal dollars keep flowing. Efforts at reform have had little visible effect, according to experts.
“The flow and use of Upper Payment Limit funds remain opaque,” said Toone, the attorney involved in litigation. “But the federal quality data from 2017 to 2024 is unequivocal: UPL-participating facilities routinely lag behind their non-UPL counterparts.”
That leaves one fundamental question: Should a rural city-owned hospital meant to serve one small community be allowed to control dozens of nursing homes, retain a large portion of the federal money and spend it on capital upgrades hundreds of miles away from the nursing homes for which the funding was intended?
Hatcher doesn’t think so.
“The first solution, [in] anything like this, when there's harm happening through a harmful revenue scheme, is stop the harmful revenue scheme,” he said. “Stop taking resources from the elderly poor, right?”
