Montana nursing home operators are warning of financial strain after state health officials pulled back a Medicaid reimbursement rate increase that providers had been counting on to offset rising operating costs. The Department of Public Health and Human Services notified providers in late May that the previously approved 3% rate increase would not take effect, citing projected budget shortfalls.

A Rescinded Increase, a Growing Gap

The rate increase had been approved by Governor Greg Gianforte and the 2025 Legislature as part of the state’s health budget. But DPHHS reversed course after the legislature’s health budget committee opted to use a lower Medicaid caseload projection from the legislative fiscal division rather than the higher estimate offered by DPHHS itself. The decision to hold reimbursement rates flat is expected to save the department roughly $10 million.

Federal budget reconciliation legislation — the bill known as H.R. 1 — added further uncertainty by creating new rules that affected Montana’s budget picture, compounding the pressure on the department to find savings.

The rollback arrives as providers say the gap between what care actually costs and what Medicaid pays has been widening for years. A state rate study from 2023 found that Medicaid reimbursement rates were averaging nearly 22% below the standard across all provider types. For nursing facilities, that gap translates directly into operating deficits on Medicaid residents.

The Numbers on the Ground

The financial math is stark for individual facilities. At Immanuel Living, a faith-based organization operating a skilled nursing facility, daily care runs roughly $481 per patient. The state’s average Medicaid reimbursement to Immanuel Living amounts to $292 per patient per day — a gap of nearly $190 per resident, per day.

Jason Cronk, CEO of Immanuel Living, said the loss of the rate increase has real consequences for an organization where a large share of revenue comes from Medicaid. “This hits home when the reimbursement [increase] for a large part of their revenues is eliminated,” Cronk said.

Across Montana’s 61 certified nursing homes — most of them located in rural communities — Medicaid is the dominant payer. More than half of all nursing facility residents in the state, 56%, relied on Medicaid as their primary payer source last year. That concentration makes the reimbursement rate central to the financial viability of facilities in smaller communities where private-pay alternatives are limited.

Flathead Valley Providers Feel the Pressure

In Kalispell, BeeHive Homes operates three assisted living facilities serving up to 66 residents at a time. About one in five of those residents is covered by Medicaid. Rachel Hershberger, the facility’s assisted living administrator, said providers had been relying on the approved increase as costs continued to climb.

“It is disappointing because the costs to stay open have just been going up,” Hershberger said. “It makes it harder and harder to maintain being a provider for Medicaid services.”

Hershberger’s concern reflects a broader worry in the industry: that persistent reimbursement shortfalls, combined with workforce costs and inflation, will push some facilities to limit Medicaid admissions or exit the program entirely — reducing access for Montana’s most vulnerable elderly residents.

State’s Defense and Legislative Backdrop

DPHHS Director Charlie Brereton pointed to rate increases enacted during Governor Gianforte’s 2023 budget cycle as evidence that the administration has invested in provider rates. The department framed the current freeze as a necessary response to budget conditions rather than a policy reversal.

Representative Jane Gillette, who chaired the health budget committee during the 2025 session, acknowledged at a March 17 interim committee meeting that the legislature had chosen the lower caseload projection from the legislative fiscal division over the DPHHS estimate — a decision that now factors directly into the department’s budget constraints.

The 2027 Legislature will face pressure to address the reimbursement gap when it convenes, particularly if rural nursing home access continues to deteriorate. Interim committee work over the next year is likely to examine both Medicaid caseload projections and long-term care funding as lawmakers begin building the next budget.

For providers, the immediate concern is survival through the current budget cycle while serving a population that has few other options for care.