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NJ will allow MCOs to exclude chronically low‑quality nursing homes; department lays out exclusion criteria and protections for residents
Summary
Starting July 1, 2025 the Department of Human Services will permit Medicaid MCOs to stop contracting prospectively with nursing facilities that repeatedly fail to meet CMS or state health standards; the department described specific exclusion criteria, safeguards for current residents and ties exclusions to a $50M quality‑incentive program and other rate investments.
The New Jersey Department of Human Services told the Assembly Budget and Appropriations Committee it will transition the Medicaid nursing‑home network policy to an “any willing qualified provider” model that allows managed care organizations to decline contracting with facilities that repeatedly fail to meet federal or state quality and safety benchmarks.
Effective date and scope: Department staff said the change takes effect July 1, 2025. Under the new approach, MCOs may choose not to contract prospectively with facilities that meet exclusion thresholds; the department emphasized MCOs cannot displace current residents by terminating payments if a contract ends — residents retain their choice to remain — and MCOs must increase care‑manager visits to monitor residents in such facilities.
Exclusion criteria: The department summarized objective triggers for exclusion: - Facilities placed on CMS’s Special Focus Facility list twice in the last three completed calendar years (candidate or special focus status based on serious survey deficiencies); - Facilities receiving two or more Level‑G (or higher) licensing violations by the state Department of Health — typically findings tied to resident harm; - Facilities with a persistent overall 1‑star CMS rating over a stated look‑back period.
Examples and rationale: Commissioner Sarah Edelman and deputy officials described the kinds of incidents that would trigger exclusion — failure to prevent or investigate abuse, failures to initiate CPR, repeated medication documentation lapses that may have caused harm, repeated falls with known fall risks, and similar serious deficiencies. The department framed the change as a tool to protect residents and prevent public funds from flowing to providers that do not use those dollars to improve care.
Quality program and support: The state funds a $50 million Quality Incentive Payment (QIP) program to reward high‑performing or improving facilities and said there are mission‑critical DOH teams and other improvement supports. Deputy officials also described a provider‑ready registry used in the DDD system to identify replacement providers when a facility closes or can no longer operate, and said the DDD transition experience informs readiness planning.
Industry concerns and oversight balance: Legislators pressed on whether small or resource‑constrained providers might be unfairly excluded and how quickly facilities can be re‑inspected after corrective actions. The department said the exclusion thresholds are tied to severe and repeated deficiencies, and it emphasized that facilities that demonstrate sustained improvement regain qualified status; the department offered to follow up on re‑inspection timelines, which are handled jointly with the Department of Health.
Why it matters: Medicaid is the primary payer in many nursing facilities. The change shifts some front‑line quality decisions from retrospective enforcement to prospective network choices by MCOs, while the department said it will continue to fund quality incentives and increased reimbursement where appropriate.
Speakers quoted: Deputy Commissioner Kaylee McGuire and Commissioner Sarah Edelman provided the policy overview and the exclusion criteria at the hearing.
