On July 31, 2025, the Centers for Medicare & Medicaid Services (CMS) issued its final rule for the Fiscal Year (FY) 2026 Skilled Nursing Facility Prospective Payment System (SNF PPS). The final rule increases Medicare Part A payments to skilled nursing facilities by 3.2 percent. This is higher than the 2.8 percent increase that was proposed in April.
The 3.2 percent update reflects a 3.3 percent market basket increase, a 0.6 percent forecast error adjustment, and a 0.7 percent reduction for productivity. CMS estimates this will result in $1.16 billion more in payments to SNFs in FY 2026 compared to the previous year. However, this total does not account for penalties under the SNF Value-Based Purchasing (VBP) Program, which will reduce payments by about $208 million.
CMS also finalized several updates to the SNF VBP Program. These include:
- Removing the Health Equity Adjustment from the scoring formula
- Creating a new reconsideration process so providers can appeal certain CMS decisions before data is made public
- Finalizing standards for a readmission measure that will affect payments starting in FY 2028
Changes to the Patient-Driven Payment Model (PDPM) were also finalized. CMS is updating the list of ICD-10 diagnosis codes that help determine how residents are categorized for payment. These changes are intended to improve coding accuracy and reflect the most current clinical guidance.
For the SNF Quality Reporting Program (QRP), CMS is removing four resident assessment questions related to Social Determinants of Health (SDOH). Starting October 1, 2025, SNFs will no longer need to report on:
- Living situation (1 item)
- Food insecurity (2 items)
- Utility access (1 item)
CMS is also updating the QRP reconsideration process. Facilities will be allowed to ask for extensions when filing requests and CMS is broadening the reasons it will consider when evaluating those requests.
Lastly, CMS shared feedback it received on several Requests for Information included in the proposed rule. These included possible new quality measures in areas like delirium and nutrition, ways to improve the timing of data reporting, and the use of digital tools to simplify quality reporting.
Comments on a separate CMS request for ideas to reduce regulatory burden across Medicare programs are due by September 15, 2025. That information is available here.
Access the Skilled Nursing Facility Final Payment Rule in the Federal Register here. Additional information is available on the SNF VBP Program and SNF QRP webpages.
Compliance Perspective
Issue
The FY 2026 SNF PPS final rule outlines several regulatory changes that will affect skilled nursing facility operations, compliance, and reimbursement. CMS is finalizing a 3.2 percent Medicare payment increase and has confirmed updates to the SNF Value-Based Purchasing (VBP) and Quality Reporting (QRP) programs. The rule finalizes the removal of four Social Determinants of Health (SDOH) assessment items from the Minimum Data Set (MDS), introduces a new reconsideration process for both VBP and QRP, and includes 34 updates to PDPM ICD-10 code mappings. These changes may impact care planning, documentation practices, quality metrics, and payment accuracy. Facilities should ensure alignment with CMS’s finalized policies and prepare staff and systems ahead of the October 1, 2025, effective date for reporting changes.
Discussion Points
- Review and update policies to reflect the finalized payment update, PDPM ICD-10 mapping changes, and removal of the four SDOH data elements from the MDS. Include procedures for handling reconsideration requests under the new VBP and QRP processes. Facilities may also consider working with a compliance consultant to ensure policies and workflows align with updated CMS guidance and regulatory expectations.
- Train MDS coordinators, coders, clinical teams, and quality staff on the finalized changes to ICD-10 code mapping and the removal of specific SDOH items from the MDS. Provide clear guidance on documentation practices and ensure staff understand how these changes affect assessments, care planning, and quality reporting. As part of ongoing staff development, facilities may also consider supplemental training, such as the Understanding the 5-Star Rating Program course available through Med-Net Academy, to help reinforce how quality performance and documentation can impact overall facility ratings.
- Audit to validate ICD-10 coding accuracy and confirm appropriate clinical category assignment under PDPM. Targeted reviews—especially in areas identified through QAPI or tied to quality reporting—can help ensure readiness for upcoming changes. An external mock audit or coding review may offer additional insight into potential risk areas and support corrective planning ahead of the October 1, 2025, effective date.
*This news alert has been prepared by Med-Net Concepts, Inc. for informational purposes only and is not intended to provide legal advice.*