PROJECT SUMMARY/ABSTRACT Objective: SNFs depend on high-margin Medicare payments to subsidize payments from lower margin payers, like Medicaid. Because all Medicare patients are transferred from hospitals, new Medicare alternative payment models (APMs) that encourage hospitals to control quality and cost across the continuum may change the SNF market. Existing research shows that hospitals in APMs reduce SNF use and form preferred partnerships with SNFs, providing support and potentially preferential referrals to partnered facilities. As a result, these partnered facilities may receive more of the market’s Medicare patients (improved payer mix) and have subsequently improved clinical quality at the expense of other facilities in the market; SNFs might diverge. The objectives of this study are to examine whether APMs targeted at hospitals are associated with divergence in SNF market-level payer mix and clinical quality and how SNFs respond to maintain positive business and quality outcomes. Methods: This study includes three aims in a convergent mixed-methods analysis. Aim 1 is a trend analysis using publicly available SNF-level secondary data (2009-2016) to conduct a SNF-market level trend analysis assessing divergence in payer mix (1a) and subsequent divergence in clinical quality (1b). Aim 1a is a random intercept model; the outcome is divergence in payer mix as measured by the dissimilarity index, which is most often used in racial disparity literature. The independent variable of interest is time in years; a linear spline with a knot in 2012 will evaluate differences in divergence before and after the acceleration of APM implementation. Aim 1b is a fixed intercept model where the outcome of interest is market-level divergence in clinical quality measured as the standard deviation of star values; the independent variable is lagged payer mix divergence. Aim 2 evaluates changes in absolute quality after the implementation of a specific APM – Bundled Payments for Care Improvement. Aim 2a includes a multi-level model that evaluates the impact of market-level BPCI implementation on SNF star ratings. Aim 2b is a difference-in-differences model. The outcome is the quality divergence metric from Aim 1b and the independent variable of interest is market-level BPCI implementation. Finally, Aim 3 is a qualitative study using semi-structured interviews with SNF administrators to identify SNF responses in changes to hospital relationships and how these changes influence SNF payer mix and clinical quality. Contribution and Significance: While skilled nursing facilities (SNFs) play a large role in caring for patients both after a hospitalization and long-term, little is known about how recent health reforms might impact SNFs’ ability to equitably provide high-quality care. Payer mix and quality divergence at the SNF-level may portend patient-level disparities as vulnerable patients are more likely to use SNFs with a higher Medicaid payer mix and lower clinic...