August 11, 2025
The Centers for Medicare & Medicaid Services (CMS) has announced its final rule updating Medicare payment policies and rates for skilled nursing facilities (SNFs) under the Skilled Nursing Facility Prospective Payment System (SNF PPS) for fiscal year (FY) 2026.
FY 2026 Final Updates to the SNF Payment Rates
For FY 2026, CMS is updating SNF PPS rates by 3.2% based on the final SNF market basket of 3.3%, plus a 0.6% market basket forecast error adjustment, and a negative 0.7% productivity adjustment, which amounts to an increase in SNF PPS payments of $1.16 billion compared to FY 2025. Note that these impact figures do not incorporate the SNF Value-Based Purchasing (VBP) reductions for certain SNFs subject to the net reduction in payments under the SNF VBP. Those adjustments are estimated to total $208.36 million in FY 2026.
Final Changes in Patient-Driven Payment Model (PDPM) ICD-10 Code Mappings
In FY 2020, CMS implemented the PDPM to improve payment accuracy and appropriateness by focusing on the patient's needs, rather than the volume of services provided.
The PDPM utilizes the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) codes in several ways, including using the person’s primary diagnosis to assign patients to clinical categories. CMS is finalizing several changes to the PDPM ICD-10-CM code mappings to allow the provision of more accurate, consistent, and appropriate primary diagnoses that meet the criteria for skilled intervention during a Part A SNF stay. In this final rule, CMS is finalizing 34 changes to the PDPM ICD-10-CM code mappings to maintain consistency with the latest ICD-10-CM coding guidance.
SNF VBP Program
The SNF VBP Program is a pay-for-performance program. As required by statute, CMS withholds 2% of SNFs’ Medicare fee-for-service (FFS) Part A payments to fund the SNF VBP Program. This 2% is referred to as the “withhold.” CMS is then required to redistribute between 50% and 70% of this to SNFs as incentive payments depending on their performance in the program. CMS applies incentive payments prospectively to all Medicare fee-for-service (FFS) Part A claims paid under the SNF PPS for the applicable program year (beginning October 1).
For the SNF VBP Program, CMS is finalizing a series of operational and administrative proposals as part of this year’s rule. Operationally, this includes finalizing statutorily required performance standards for program measures and the removal of the program’s Health Equity Adjustment from the scoring methodology. Final administrative updates include the adoption of a new reconsideration process and technical updates to the program’s regulation text.
Final Updates to the SNF VBP
- CMS is applying the program’s previously finalized scoring methodology to the SNF Within-Stay Potentially Preventive Readmission (SNF WS PPR) measure beginning with the FY 2028 program year.
- Secondly, CMS is finalizing performance standards for the FY 2028 and FY 2029 program years to comply with the program’s statutory notice deadline.
- CMS is finalizing adoption of a new reconsideration process that will allow SNFs to appeal CMS’ initial decisions for Review and Correction requests prior to CMS making any affected data publicly available.
- Finally, CMS is removing the SNF VBP Program’s Health Equity Adjustment from the Program’s scoring methodology.
SNF Quality Reporting Program (QRP)
The SNF QRP is a pay-for-reporting program. SNFs that do not meet reporting requirements are subject to a 2-percentage-point reduction in their Annual Payment Update (APU). Additionally, CMS publicly reports each SNF’s performance on measures adopted into the SNF QRP on the Care Compare website.
For the SNF QRP, CMS is finalizing its proposal to remove four standardized patient assessment data elements from the Minimum Data Set (MDS), the SNF resident assessment form, beginning with residents admitted on or after October 1, 2025. CMS is also finalizing its proposal to amend the reconsideration request policy and process. In this final rule, CMS also summarized feedback it received on three RFIs included in the FY 2026 SNF PPS proposed rule.
Final Updates to the SNF QRP
- CMS is finalizing its proposal to remove four standardized patient assessment data elements under the Social Determinant of Health (SDOH) category from the MDS beginning with residents admitted on October 1, 2025, for the FY 2027 SNF QRP. These data elements are: one item for “living situation,” two items for “food,” and one item for “utilities.”
- CMS is finalizing its proposal to amend the reconsideration policy and process. Specifically, under this finalized policy and process, CMS will allow SNFs to request an extension to file a request for reconsideration and is updating the basis on which CMS can grant a reconsideration request.
- CMS also summarized feedback it received on several RFIs included in the FY 2026 SNF PPS proposed rule, specifically: 1) future measure concepts on the topics of delirium, interoperability, nutrition, and well-being; 2) revisions to the current data submission deadlines for assessment data, which would allow CMS to provide SNFs with more timely quality data; and 3) advancing digital quality measurement and the use of Fast Healthcare Interoperability Resources® in the SNF QRP.
The Skilled Nursing Facility Final Payment Rule can be viewed at the Federal Register.
Information on the Skilled Nursing Facility VBP is available here.
Information on the Skilled Nursing Facility QRP is available here.
