Can a nursing home discriminate because of payer source?

Yes, a nursing home can decide to only accept private-pay clients. It can also decide to dedicate only a certain number of rooms to Medicaid clients. (Medicaid pays less than the NH full charge.) This does seem a bit discriminatory to me, too, but it is the way it is.

Does the nursing home have a written polilcy re admission of family members of staff? That could be the reason, whether permissible under the law or not.
Re medicaid discrimination. I found this article after doing a search for
discrimination in nursing home admissions medicaid

But the advice in the article is to contact your state ombudsman or medicaid agency or attorney general fraud divsion if you suspect improper medicaid issues
Bottom line is I think nursing homes get away with this all the time. They selectively pick those going from the hospital to their rehab to make sure if for some reason the rehab results in permanent nursing home placement that you are the "right" admission. They even dump patients into the hospital for sometimes not hospitalization required reasons and then say there is no room when the patient is ready for discharge from hospital if they don't want to take on a medicaid patient. Here's the entire article:


Discrimination Against Medicaid Recipients

Discrimination in nursing homes has economic roots. Many nursing homes may prefer to take private paying patients because the private rate is higher than the medical assistance (Medicaid) rate. Medicaid discrimination occurs most frequently upon admission, or upon a need to convert from private payment to Medicaid status. This article includes detailed regulatory language that describes the prohibitions concerning Medicaid discrimination, as well as information for families of Medicaid recipients that will help them spot fraud and abuse.
One sign of potential discrimination is the response given to a prospective resident receiving Medicaid or friend of the prospective resident who contacts a nursing home to see if a bed is available and is told that the nursing home has a "quota" on "Medicaid beds," or only agrees to accept the resident if he/she agrees to pay privately for a certain time period prior to applying for or receiving Medicaid.

Another sign of discrimination occurs when a private pay resident indicates to the nursing home an intention or desire to apply for Medicaid (when the facility participates in the Medicaid program) and the nursing home informs the resident that such application will result in his/her transfer to another nursing home.

Federal law requires that no provider shall solicit, charge, receive or accept any money, gift or other consideration from a recipient, or from any other person, for any item of medical service for which payment is available under the Medicaid program, in addition to, in lieu of, or an advance or deposit against the amounts paid or payable by the Department of Health and Human Services for such item, except to the extent that the regulations specifically require or permit contribution or supplementation by the recipient or by health insurers.

Federal law makes it a felony for a provider to "knowingly and willfully" (1) charge, for any service provided to a patient under the state Medicaid plan – money or other consideration at a rate in excess of the rates established by the state, or (2) solicit, accept or receive (except for approved charges under a state plan), any gift, money, donation or other consideration (other than a charitable, religious or philanthropic contribution from an organization or from a person unrelated to a patient (a) as a precondition of admitting a patient. . .to a skilled nursing home or intermediate care facility, or (b) as a requirement for the patient’s confined stay in such a facility. . . where the cost of services to the patient is paid in part or in full under the state plan.

Therefore, it is a discriminatory practice to move or transfer a nursing home resident from one setting to another (i.e., from a private or semi-private room to a ward) solely because that person’s source of payment has changed to Medicaid from private pay. It is also a discriminatory practice for a nursing home to solicit or accept money to make up the difference between the private pay rate and the Medicaid rate.

Some conditions which might indicate Medicaid discrimination are:

Nursing home refuses to accept an admission application from a Medicaid recipient or family member, or refuses to place the applicants name on a waiting list;
Nursing home informs the applicant that it is not presently accepting any more Medicaid patients, or that its Medicaid quota has been met, or all of its Medicaid beds are full;
Nursing home suggests that admission may be expected or facilitated if the patient could be a private pay patient for a period of time;
Nursing home suggests that the Medicaid recipient must sell his/her home and use the proceeds for nursing home care before getting Medicaid benefits;
Nursing home informs the private paying family that when private pay funds are exhausted, the resident will be transferred to a different room; or
Nursing home says that it has no beds only after finding out that the patient is a Medicaid recipient.
Identifying and Preventing Medicaid Fraud and Schemes

Billing for Services Not Rendered: A provider bills for services not rendered, x-rays not taken; a nursing home continues to bill for services for a patient who has died or been transferred;
Double-Billing: A provider bills both the Medicaid program and a private insurance company (or recipient) for treatment; or two providers request payment on the same recipient for the same procedure on the same date;
Substitution of Generic Drugs: A pharmacy bills Medicaid for a brand name prescription but supplies a low-cost generic drug to the recipient;
Unnecessary Services: A doctor performs numerous tests which are medically unnecessary; equipment or medical supplies are provided and billed for that are not medically necessary;
Upcoding: Medicaid is billed for more expensive procedures than those that are performed; individual therapy codes are billed for group therapy sessions;
Kickbacks: A provider (e.g., nursing home owner) requires another provider (e.g., lab, ambulance company, pharmacy) to pay a portion of the money the second provider receives for rendering services to the first provider’s Medicaid patients;
False Cost Reports: A nursing home owner includes inappropriate expense for Medicaid reimbursement.
What to do if you suspect Medicaid discrimination or fraud:

Contact your local Long Term Care Ombudsman
Contact your local Medicaid agency
Contact your state Attorney General’s Medicaid Fraud Control Unit