Mom denied Medicaid due to not meeting “requirement to be in an institution.” Is this legal?

My mom has no money except SS. She was in a county subsidized adult group home. She began to decline and was hospitalized twice recently. Both times a doctor at the hospital asked if I had considered hospice for her. They believed she was not going get better and would continue to need hospitalizations for recurring UTI’s, dehydration, etc. The home said they would not take her back unless I paid for 8 hours of additional care per day—not possible. So the hospital found nursing homes. I approved of one and she was sent there—Medicaid pending. I just got a letter of denial. The caseworker hasn’t called back yet. Is this a common thing? Would they kick a 90year old with dementia who can’t get out of bed on her own out of the nursing home?? I can’t imagine it would be good for her to return to a group home. She has improved since leaving there, so she was not getting the best care. Should I bow out and let the nursing home battle with Medicaid? I am not her guardian and will not take any legal or financial responsibility. I am so done with all of this. I was never even close to my mom, but have taken responsibility for her care for the last seven years.