Article | What providers need to know
Navigating changes to Medicare skilled nursing facility reimbursement rates
CMS finalizes FY 2026 SNF payment rule
Sept. 15, 2025 · Authored by Edward A. Klik, Kristopher Pattison
Loading...
Article | What providers need to know
Sept. 15, 2025 · Authored by Edward A. Klik, Kristopher Pattison
On July 31, 2025, CMS issued the final rule for the FY 2026 Skilled Nursing Facility Prospective Payment System (CMS-1827-F). The only notable change from the proposed rule is an increased net payment update of 3.2%, up from 2.8% originally proposed. All other provisions, such as PDPM ICD-10 code mappings, SNF VBP updates and QRP changes, were finalized as proposed.
The article below originally published June 2025 with the proposed ruling has been updated in September 2025 to reflect the final rule, with proposed vs final references where applicable.
On April 30, 2025, the Centers for Medicare & Medicaid Services (CMS) released the Fiscal Year (FY) 2026 Skilled Nursing Facility (SNF) Prospective Payment System (PPS) Proposed Rule (CMS-1827-P). This annual update to Medicare skilled nursing facility reimbursement rates and quality program expectations outlines several operational changes that SNF operators must prepare for before the October 1 implementation. While most provisions were finalized as proposed, CMS increased the net payment update from 2.8% to 3.2% in the final rule. This rule also confirms updates to the Patient-Driven Payment Model (PDPM) primary diagnosis mappings, Value-Based Purchasing (VBP) incentives and Quality Reporting Program (QRP) requirements that will impact provider strategy.
CMS proposed a 2.8% net increase in Medicare Part A SNF PPS payment rates for FY 2026. The final rule increased this to 3.2%, composed of a 3.3% market basket increase, a 0.6% forecast error adjustment and a -0.7% productivity adjustment. CMS projects this increase will result in an additional $1.16 billion in Medicare payments to SNFs in FY 2026. Compared to recent fiscal years, which saw 4.0% (FY 2024) and 4.2% (FY 2025) rate increases, this update may feel underwhelming to operators still grappling with inflationary cost pressures and wage growth. However, this increase aligns with historical norms and reflects a return to a more stable reimbursement environment.
It is important to note that this rate increase does not include SNF VBP payment reductions, which are proposed to total $208.36 million in FY 2026. Facilities that underperform in VBP metrics may see these increases offset, or negated entirely, depending on quality scores.
One of the more impactful changes proposed and finalized for FY 2026 is the remapping of certain ICD-10 diagnosis codes used in PDPM. CMS finalized 34 changes to the ICD-10 code mappings to improve accuracy and consistency in assigning primary diagnoses for skilled care. These changes include the removal of several codes such as diabetes without complications, obesity, anorexia, bulimia and hypoglycemia from primary diagnosis eligibility. These codes are considered too vague or unlikely to justify a skilled inpatient stay under Medicare Part A.
This change is consistent with CMS’s stated goal to promote accurate, clinically appropriate coding. It also validates the long-standing guidance provided by many advisors that the primary diagnosis used in Minimum Data Set (MDS) assessments must be the reason for which skilled services are rendered. For SNFs, this underscores the need for rigorous documentation and training around diagnosis selection, as improper coding could lead to missed reimbursement opportunities or failed audits.
The SNF VBP Program continues to evolve with the addition of more nuanced performance measures. Historically, the program’s incentive structure was based primarily on hospital readmission rates. Starting in FY 2026 and continuing into FY 2027 and FY 2028, CMS is expanding the program’s scope by incorporating new claims-based and assessment-based measures such as staffing levels, healthcare-associated infections, falls with injury, discharge function scores and successful community discharges.
CMS proposed and finalized the elimination of the Health Equity Adjustment that previously provided extra scoring consideration to facilities serving a high proportion of dual-eligible residents. Instead, all SNFs will be evaluated against the same performance standards. CMS confirmed that the redistribution percentage will remain at 60%. CMS also finalized a new reconsideration process, giving SNFs the opportunity to appeal VBP scoring decisions before this impacts Medicare rates. Additionally, performance standards for FY 2028 and FY 2029 have been finalized. CMS will replace the SNF All-Cause Readmission (SNFRM) measure with the Within-Stay Potentially Preventable Readmission (SNF WS PPR) measure starting in FY 2028.
CMS proposed and finalized the removal of four Social Determinants of Health (SDOH) data elements related to a patient’s living situation, food security and utility access. While relatively small in scope, the removal of these items simplifies the patient assessment process. These include one item related to housing, two related to food access and one related to utility access.
More significant, however, was CMS’s proposal to reduce the data correction window from 4.5 months to just 45 days. This change aimed to provide more timely quality reporting to SNFs and stakeholders but also place additional pressure on facilities to ensure assessments are accurate upon submission. A shortened correction period would mean facilities would need tighter internal controls to identify and remedy assessment issues in near-real time. CMS did not finalize the proposed reduction of the data correction window from 4.5 months to 45 days. That provision remains under consideration. CMS did, however, expand the reconsideration request policy for the QRP, allowing facilities to request deadline extensions and providing broader criteria for approval.
Failing to meet QRP requirements or failing a QRP validation audit, results in a 2% reduction to the Annual Payment Update (APU), making verifiable compliance a financial imperative.
As CMS continues to raise the bar on documentation, data quality and value-based outcomes, SNFs must align both operational and financial strategies to maintain reimbursement integrity and support sustainable growth. At Baker Tilly, we help skilled nursing providers make sense of the complexities within Medicare reimbursement and turn them into opportunities.
Our healthcare advisors offer tailored solutions to support facilities in optimizing their PDPM practices, evaluating MDS assessments and preparing for the growing role of quality-based metrics in future payment adjustments. We routinely conduct five-star report analyses and Medicare rate diagnostics to help facilities identify discrepancies between acuity levels and reimbursement, uncover missed revenue opportunities and implement strategies to elevate performance.
For facilities that may be underperforming, now is the time to act. The metrics being tracked today will influence payments for years to come. Identifying and correcting gaps in documentation, assessment procedures or coding logic is not just about compliance; it’s about protecting the financial and reputational health of your organization.
The FY 2026 SNF PPS final rule signals CMS’s continued movement toward more dynamic, data-driven approaches to Medicare skilled nursing facility reimbursement rates. While the base rate increase offers modest relief, the broader implications lie in the quality and accuracy of how care is documented and reported.
With the rule finalized, SNFs should prepare for October 1 implementation. Baker Tilly encourages all SNFs to review these updates in full and consider how they may affect operations and strategy in the coming fiscal year.
If your facility needs help evaluating the potential impacts of the FY 2026 rule, reviewing your PDPM coding strategy or strengthening your value-based performance, Baker Tilly is here to help. Our team of healthcare professionals is ready to work alongside you to uncover opportunities, address risks and prepare your organization for the future of Medicare skilled nursing facility reimbursement rates.
