Senate bill would require Texas nursing homes to spend 80% of Medicaid payments on direct resident care; advocates and operators disagree on effects

Senate Bill 457 would require nursing facilities that receive Medicaid payments to dedicate at least 80% of specified Medicaid funds to direct resident care and to disclose any affiliated entities with a 5% or greater ownership stake. The Health and Human Services Committee laid the bill pending for later public testimony.

Supporters said the measure would increase transparency and steer taxpayer dollars toward bedside care. “When families place a loved one in a nursing home, they do so with the expectation of safety, dignity, and quality of care,” Andrea Earl of AARP Texas told the committee. She noted more than half of Texas nursing homes were rated one or two stars by CMS and asked, “where is the money going?”

Patty Duque, the state long‑term care ombudsman, described resident accounts of missed showers, soiled briefs, missed skin assessments and staff burnout and urged the committee to retain owner‑disclosure and spending accountability provisions. “Knowing who owns a facility allows you to escalate a concern to the right person and get attention to a problem before it grows more serious,” Duque said. She argued related‑party transactions can obscure profits by shifting funds out of the facility to related businesses.

Provider witnesses and a certified public accountant who works with nursing homes warned the committee that the bill’s ratio could misapply to accounting categories that do not align with the state rate‑setting methodology. John Unruh, a CPA representing many facilities, told the panel that rate components and the revenue allocations “don't match up” and that measuring a facility against the proposed ratio could compare “apples to oranges,” potentially producing recoupments that some facilities could not absorb.

Gavin Gadbury of the Texas Health Care Association said federal rules adopted last year expand ownership‑disclosure requirements at the federal level and questioned duplicative rules. Providers also said many necessary facility costs — maintenance, utilities, insurance, administrator wages and capital upkeep — are not captured if the measure focuses narrowly on a single spending category. Eddie Pradis, representing independent nursing home operators, suggested folding multiple spending mandates into a single, administrable requirement so facilities can comply without duplicative penalties.

Victoria Grady, director of provider finance at HHSC, told the committee that Medicaid cost reports record actual facility costs and that HHSC’s provider finance and audit teams can and do examine related‑party arrangements and disallow costs that exceed fair market. She said the department would implement the legislature’s will and noted administrative flexibility would be important because costs vary by region and facility size.

The committee gathered extensive invited and public testimony and postponed formal action to a later date to permit additional public comment and technical work between stakeholders and HHSC.