CMS Auditor Threatens Patient Access to SNF Rehab After Surgery, and CJR Returning

I am having a disagreement with the Centers for Medicare & Medicaid Services (CMS) that is worth discussing. As I have been teaching for the last 10 years, when CMS took total knee arthroplasty off the Inpatient-Only List, they stated that patients who require care in a skilled nursing facility (SNF) after discharge can be admitted as inpatients. They repeated this in 2018, when they took total hip arthroplasty off the List, and again last year, when they started eliminating the List.

But then a few weeks ago, I heard from a hospital that had experienced an audit by a CMS contractor that denied several inpatient claims for patients who had a rational, well-documented need for SNF care after a non-inpatient-only surgery. These patients were admitted as inpatients and stayed three days before being transferred to the SNF for Part A Medicare coverage of their rehabilitation.

I contacted CMS about this discrepancy, emphasizing that this auditor was ignoring CMS’s own position on this, as clearly stated in federal regulation. And the response I got was not what I expected.

The email, from the division of CMS that handles SNF payment issues, asserted that this auditor is correct, and that “if the patient was otherwise appropriate for outpatient surgery and the only reason for inpatient status was to access SNF coverage, the denial is likely supportable.”

If you know me, you know that I am not going to accept this response. Now, let me be clear: I am not doing this to get hospitals the Diagnosis-Related Group (DRG) payment, rather than the outpatient Ambulatory Payment Classification (APC) payment. In fact, for some hospitals, the cost of keeping the patient for those three days may even exceed the extra money they get from the DRG. This has everything to do with ensuring that patients who truly need rehabilitation in a safe environment after major surgery can get it.

Imagine telling a Medicare beneficiary who lives alone – in a condominium with a flight of stairs to enter their home, and then another flight of stairs to get to the bathroom and bedroom – that they are just either going to have to pay $2,000 a week to go to a SNF or figure out how to manage at home after their hip replacement. If they choose the latter option, they will get home care visits a few times a week, but only if they are able to get down the stairs to let the nurses and therapists inside. I certainly hope that is not what CMS envisions for Medicare beneficiaries as they remove surgeries from the Inpatient-Only List.

My unofficial advice? Keep admitting such patients as inpatients. Get them their SNF benefit. And if you get denied, first appeal it, then, if necessary, rebill the claim as a 121 Part B claim – so you get the Part B payment, meaning you also get to keep your medical education payment from CMS, and most importantly, the patient maintains their SNF coverage, since a 121 claim is an inpatient claim.

Now, one quick note about the 2027 Inpatient Prospective Payment System (IPPS) Proposed Rule. CMS is proposing to create a nationwide bundled payment program for total joint replacement starting in 2027, modeled after the Comprehensive Care for Joint Replacement (CJR) Model program.

Like CJR, it will look at 90 days of spending for all services and compare that to a target rate. I thought CMS had realized that 90 days makes no sense when they released the Transforming Episode Accountability Model (TEAM), which uses 30-day spending for much more complex surgeries like coronary bypass artery graft (CABG) and colon resection.

I would urge you all to submit comments and ask them not to use 90 days, as most controllable costs are incurred within the first month. (And don’t get me started on why 30 days and not 31 days, when more months have 31 days than 30.)

I certainly don’t want a CJR participant telling a patient to delay their appointments with their primary care doctor and specialists (and other necessary care) for three months after surgery in order to reduce their overall spending.

You can submit your comment at: https://www.regulations.gov/document/CMS-2026-1256-0002