backCMS Issues Final Rule for Updates to Medicare Payment Rates for Skilled Nursing Facilities Under the Skilled Nursing Facility Prospected Payment System for FY 2026
On August 4, 2025, CMS issued a final rule (Final Rule) updating payment rates, policies, and quality programs for Skilled Nursing Facilities (SNFs) under the Medicare Prospective Payment System (SNF PPS) for Fiscal Year (FY) 2026, effective October 1, 2025. The Final Rule also finalizes changes to the Patient-Driven Payment Model code mappings, SNF Value-Based Purchasing Program, and the SNF Quality Reporting Program.
For FY 2026, CMS is increasing SNF PPS rates by a net of 3.2% based on a market basket increase of 3.3%, plus a 0.6% market basket forecast error adjustment, and a negative 0.7% productivity adjustment. This amounts to an increase in SNF PPS payments of around $1.16 billion compared to payments in FY 2025.
The Final Rule also implements technical revisions to the Patient-Driven Payment Model (PDPM) code mappings that are used to classify patients into clinical categories for payment. These updates are part of CMS’s annual process to ensure that diagnostic codes align with current medical practice and coding standards. Specifically, CMS is making the following PDPM revisions:
- Adding newly effective ICD-10-CM codes to appropriate PDPM clinical categories so that SNFs can receive payment reflective of the patient’s condition.
- Reassigning existing codes to different PDPM clinical categories where CMS determined the original classification did not accurately reflect typical clinical presentation or resource needs.
- Deleting obsolete or invalid codes from PDPM mapping files when they have been retired from the ICD-10-CM system.
- Making technical corrections to code descriptions and placements in the mappings to maintain internal consistency and avoid classification errors.
Additionally, the Final Rule amends the SNF Quality Reporting Program (QRP) by removing four standardized patient assessment data elements under the Social Determinants of Health category, related to transportation, social isolations, and food and utility security, effective for residents admitted on or after October 1, 2025.
The Final Rule also codifies a formal reconsideration process for facilities determined to be non-compliant with QRP requirements and responds to public feedback regarding three requests for information CMS issued in the proposed rule regarding (1) potential new quality measures, (2) shortening data submission timelines (from 4.5 months to 45 days after each quarter), and (3) the advancing digital quality measurement.
The Final Rule also makes the following changes to the SNF Value-Based Purchasing (VBP) Program:
- Finalizes performance standards for FY 2028 and FY 2029, which define the baseline and achievement thresholds used to score SNFs on performance and determine Medicare payment adjustments.
- Begins applying the existing scoring methodology to the new Within-Stay Potentially Preventable Readmission measure beginning in FY 2028. This measure looks at readmissions to hospitals that occur during a SNF stay that are considered preventable. The Final Rule states that the addition of this measure is intended to expand the program’s focus on avoidable adverse events during SNF care.
- Removes the Health Equity Adjustment (HEA) from the VBP scoring methodology. The HEA was initially designed to adjust scores upward for facilities caring for a high proportion of dual-eligible or socioeconomically disadvantaged patients; however, the Final Rule states that CMS is removing the HEA in order to simplify scoring and improve transparency.
- Makes technical regulatory text updates to ensure consistency across VBP regulations and align them with other CMS quality program rules.
- Establishes a new reconsideration process for appeals of review and correction decisions, effective FY 2027. This will provide a formal pathway for appealing scoring and payment determinations, adding procedural safeguards for SNFs.
A copy of the Final Rule can be found here.
Reporter, Brittany Tandy, Austin, TX, +1 512 4572071, btandy@kslaw.com.
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