CMS issued the FY 2026 Skilled Nursing Facility (SNF) Prospective Payment System (PPS) final rule on July 31, 2025.
CMS issued the FY 2026 Skilled Nursing Facility (SNF) Prospective Payment System (PPS) final rule on July 31, 2025; it was published in the Federal Register on August 4, 2025, and takes effect October 1, 2025. This rule finalizes payment and policy changes that SNF leaders must understand and prepare for.
Payment Update
- Aggregate impact: +3.2% increase in payments, equating to about +$1.16 billion for FY 2026.
- Breakdown: Market basket +3.3%, forecast error adjustment +0.6%, productivity adjustment –0.7%.
- SNF VBP impact: CMS estimates $208.36 million in reductions under the Value-Based Purchasing (VBP) program, applied separately from the PPS increase.
PDPM ICD-10 Code Mapping Updates
- CMS finalized 34 mapping changes: 33 codes moved to Return to Provider and 1 code shifted from Acute Neurologic to Medical Management.
- Practical impact: Diagnoses mapped to Return to Provider can’t serve as the primary diagnosis for PDPM clinical category assignment, though they can still be used as secondary diagnoses.
- Example: Several eating disorder codes (e.g., anorexia nervosa, bulimia) were moved to Return to Provider and can no longer drive PDPM grouping.
- Why this matters: PDPM uses primary diagnosis to assign residents to PT, OT, SLP, and NTA components, so mapping changes affect reimbursement pathways.
SNF Value-Based Purchasing (VBP) Updates
Program basics: VBP is a pay-for-performance program. CMS withholds 2% of Medicare FFS Part A payments (the “withhold”) and redistributes 50%–70% back to SNFs as incentive payments based on performance; incentives apply prospectively beginning October 1 of each program year.
Finalized changes:
- Health Equity Adjustment (HEA) removed from the VBP scoring methodology.
- The existing VBP scoring methodology will apply to the SNF Within-Stay Potentially Preventable Readmission (WS-PPR) measure starting in the FY 2028 program year.
- Performance standards are finalized for FY 2028 and FY 2029 to meet statutory notice timelines.
- New VBP reconsideration process adopted, allowing SNFs to appeal CMS’s initial decisions for Review & Correction requests before any affected data are publicly posted.
SNF Quality Reporting Program (QRP) Changes
- Program requirements: SNFs must meet QRP reporting standards or face a 2% reduction to their Annual Payment Update (APU). CMS also posts facility-level QRP results on Care Compare, making performance visible to the public.
- Standardized Patient Assessment Elements (SPADEs): CMS is removing four Social Determinants of Health (SDOH) SPADEs beginning with residents admitted on or after October 1, 2025, impacting the FY 2027 QRP. These include:
- Living situation (x1)
- Food insecurity (x2)
- Utilities (x1)
- Reconsideration policy: CMS has updated the reconsideration process, allowing facilities to request additional time to file and broadening the bases on which reconsiderations may be granted. This ensures providers have a clearer path to appeal compliance decisions before data are publicly reported.
- Future direction: In this rulemaking, CMS also summarized industry feedback on future measure development (e.g., delirium, nutrition, interoperability, and well-being), potential revisions to data submission deadlines, and advancing digital quality measurement through the use of FHIR standards.
Key Takeaways for SNFs
- Payment rates: Expect a net +3.2% ($1.16B) increase, but note separate VBP reductions.
- PDPM mapping: Ensure coding staff and MDS coordinators review the updated ICD-10 mapping file; diagnosis selection will directly affect PDPM category assignment.
- Compliance risk: F641 (Accuracy of Assessments) citations may increase if facilities use outdated codes.
- VBP & QRP: Anticipate methodology changes in FY 2027 and FY 2028; adjust QAPI and staff training accordingly.
Bottom Line: CMS’s FY 2026 final rule brings a moderate rate increase, but the real impact lies in PDPM diagnosis mapping changes and evolving VBP/QRP methodologies. SNFs should review coding practices, train staff, and align QAPI oversight to stay compliant and protect reimbursement. Don’t leave compliance or revenue at risk—partner with Polaris Group today to strengthen PDPM accuracy, prepare for evolving VBP/QRP requirements, and safeguard your financial and quality performance.
