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It does sound like your father needs to be in a nursing home. How stressful for your mother! It is not at all unusual for middle class elderly people to not be able to afford the high costs of nursing homes. Help her apply for Medicaid. And disregard what you may have heard about Medicaid as it applies to a single person. When there is a spouse involved the rules are different, and they are set up to avoid impoverishing the "community" spouse.
Many nursing homes and other care facilities will accept someone "Medicaid pending." It sounds like it is time to begin that search.
Why has he been turned down for nursing home care.
What state are you in? In some states, Memory Care facilities accept dementia patients in all kinds of conditions, even incontinent and bedbound. Maybe, your dad has improved since you spoke with these facilities. However, with dementia, it's very difficult for them to manage in a regular assisted living once they have progressed. Memory Care Assisted Living offers much more hands on support and that's what I would explore. I know there is a cost, but, I would see if he qualifies. I know of people who have just tried and tried and finally got into a place. Have you actually gone through the process to see what is eligible for?
The other common need for memory care is for persons who are disturbing to other residents or who have difficult behaviors beyond what an NH staff can handle.
Just having dementia isn't sufficient to require memory care.
The facilities themselves can help you decide where your father will get the care he needs.