On July 31, 2025,  the Centers for Medicare & Medicaid Services (CMS) issued the fiscal year (FY) 2026 Prospective Payment System (PPS) and Consolidated Billing for Skilled Nursing Facilities (SNFs) final rule. CMS released a fact sheet accompanying the rule.

In this rule, CMS finalizes the following provisions:

• Increase SNF PPS payment rates by 3.2 percent,
• Update Patient Driven Payment Model code mapping,
• Remove four social determinants of health items from the SNF Quality Reporting Program,
• Remove the Health Equity Adjustment in the SNF Value-Based Purchasing Program, and
• Update the Extraordinary Circumstance Exception (ECE) policy to allow CMS to grant extensions when extraordinary events impact a SNF’s ability to meet reporting requirements.

CMS also responds to stakeholder feedback on various Requests for Information (RFI).

This final rule is scheduled to be published in the Federal Register on August 4, 2025. Provisions of the final rule are effective October 1, 2025.

SKILLED NURSING FACILITIES RECEIVE A $1.16 BILLION INCREASE IN FY 2026 PAYMENTS

Although CMS originally proposed a 2.8 percent increase for FY 2026, CMS finalizes a 3.2 percent increase to SNF payment rates. Overall, CMS estimates that payments to SNFs will increase by $1.16 billion in FY 2026, relative to FY 2025. This increase is based on a 3.3 percent market basket update plus a 0.6 percent forecast error adjustment, offset by a -0.7 percent multifactor productivity (MFP) adjustment.[1]

These financial impacts do not include SNF Value-Based Purchasing reductions, which are estimated to be $208.36 million in FY 2026.

Table 1. Unadjusted Federal Rate per Diems for FY 2026[2]

Rate Component	Physical Therapy Case-Mix	Occupational Therapy Case-Mix	Speech-Language Pathology Case-Mix	Nursing Case-Mix	Non-Therapy Ancillaries Case-Mix	Non-Case Mix
Unadjusted Per Diem – Urban	$75.73	$70.49	$28.28	$132.00	$99.59	$118.21
Unadjusted Per Diem – Rural	$86.33	$79.29	$35.63	$126.12	$95.15	$120.40

 

CMS periodically updates the base year of the market basket used to set SNF PPS payments to better reflect the expenses incurred by SNFs. CMS finalized using the 2022 base year (replacing 2018 base year) in the FY 2025 SNF PPS final rule.

CMS FINALIZES CHANGES TO THE SNF QUALITY REPORTING PROGRAM

Pages 59-97

SNFs are required to report certain quality data under the SNF Quality Reporting Program (SNF QRP). SNFs that fail to report the required quality data will continue to have an additional 2-percentage point reduction applied to their payments.

SDOH Measures to Be Removed from SNF QRP

CMS finalizes the removal of the four social determinants of health (SDOH) items which were added to the standardized patient assessment data in the FY 2025 final rule. CMS received several comments in support of the removal of these standardized patient assessment data, with commenters noting that these items can be burdensome to collect and take away from direct patient care. CMS also received many comments opposing the removal of these four elements SNF QRP, with commenters noting that this information adds value to SNFs.

Modifications to the Reconsideration Process

Since 2016, SNFs have been able to request reconsideration from CMS after receiving a letter of non-compliance with the SNF QRP requirements, if they believe the finding was made in error. SNFs must submit their reconsideration request within 30 days of receiving the letter. However, CMS may grant an extension if the SNF demonstrates “extenuating circumstances.” CMS finalizes the replacement of the term “extenuating circumstances” with “extraordinary circumstances” to clarify that an extension may be granted when a facility is affected by factors beyond its control, such as a natural or man-made disaster.

Additionally, CMS revises the criteria for approving reconsideration requests under the SNF QRP. A reversal of a CMS determination will only be granted if the SNF is found to be in full compliance with the SNF QRP requirements for the applicable program year. Full compliance also includes situations where a facility has been granted an exception or extension to the reporting requirements.

RFI on Interoperability, Well-being, Nutrition, and Delirium

CMS states it will take into account public feedback on four potential measure concepts for the SNF QRP for future years:

1. Interoperability: CMS requested feedback on approaches to assessing interoperability in the SNF setting, such as measures that address readiness for interoperable data exchange or evaluate the ability of data systems to share information securely. Commenters had mixed feedback with several supporting the development of such a measure concept, while noting the need to account for the resources that SNFs will require to achieve interoperability, and others noted their opposition to such a measure at this time.
2. Well-Being: CMS requested feedback on tools and measures that assess “overall health, happiness, and satisfaction in life,” including areas such as emotional well-being and purpose. Some commenters noted their support for the development of such a measure whereas others noted concern with implementing new measures that lack a demonstrated benefit.
3. Nutrition: CMS requested feedback on tools and frameworks that promote nutrition and activity relevant to optimal health, well-being, and overall care. Several commenters voiced their support for such a measure while others noted their support for addressing nutrition but recommended doing so using data elements currently in place. Other commenters noted their concern with this nutrition measure as it may not be reflective of SNF care.
4. Delirium: CMS requested feedback on tools and measures that assess a change in an individual’s mental state or consciousness associated with symptoms or conditions in post-acute care residents. Commenters suggested potential assessment tools for CMS to consider.

RFI on Data Submission Deadline

In the proposed rule, CMS also requested feedback on a potential future reduction of the SNF QRP data submission deadline from 4.5 months to 45 days. This would allow SNFs to use more timely quality data. Commenters had mixed feedback on the proposal, with several proposing alternative timeframes and others noting barriers to compliance that CMS should address through implementing a more flexible policy. CMS will not finalize any changes to data submission deadline at this time.

CMS MAKES TECHNICAL UPDATES TO THE PDPM ICD-10 MAPPINGS

Pages 49- 59

The Patient-Driven Payment Model (PDPM) is a case-mix classification model used for classifying SNF patients in a covered Part A stay, finalized by CMS in the FY 2019 final rule. This model is designed to improve the overall accuracy and appropriateness of SNF payments by classifying patients into payment groups based on specific, data-driven patient characteristics. The PDPM uses the International Classification of Diseases, 10^th Revision, Clinical Modification (ICD-10) codes to assign patients to clinical categories based on the person’s primary diagnosis.

CMS finalizes changes to the PDPM ICD-10 code mappings, including changing the clinical category assignment for 34 new ICD-10 codes that were effective October 1, 2024. Most of these codes were mapped from “medical management” category to the “return to provider” category.

Return to Provider means that CMS believes that there are more specific or appropriate diagnoses that would better serve as the primary diagnosis for a Part-A covered SNF stay. Some commenters expressed concern with the reclassification of these conditions due to potential for increase in claim denials, increase in administrative burdens, delays in care or restrictions in patient access to skilled care. CMS responded that remapping of the codes is aimed to help reduce billing and administrative burdens by preventing unnecessary claim denials and improving claims accuracy.

CMS UPDATES THE SNF VALUE-BASED PURCHASING PROGRAM

Pages 104- 122

Since October 1, 2018, CMS has provided incentive payments to all SNFs paid under the SNF PPS based on their score in the SNF Value-based Purchasing Program (SNF VBP). These payments are funded by a 2-percent payment withhold. The incentive payment functions as a multiplier that is applied to all Fee-For-Service Part A claims paid under the SNF PPS.

In this final rule, CMS finalizes the removal of the Health Equity Adjustment (HEA) beginning in FY 2027 to streamline regulations and establish clearer incentives for providers. This change also removes the variable payback percentage tied to HEA performance. CMS notes that many commenters did not support the proposal to remove the HEA.

In an effort to ensure accurate publicly available data and SNF performance scores, CMS finalizes proposal to allow SNF providers the ability to appeal decisions rendered under the existing review and correction process. SNFs currently have two opportunities to submit review and correction requests, however once CMS responds, these decisions are final. Providers will now be able to appeal an initial CMS review and correction decision prior to CMS making any affected data public.

Lastly, CMS will apply the previously finalized scoring methodology to the SNF Within-Stay Potentially Preventive Readmission (WS PPR) measure beginning with the FY 2028 SNF VBP program year as proposed without modification.

CMS RESPONDS TO PROVIDER FEEDBACK ON ADVANCING DIGITAL QUALITY MEASUREMENT IN SNFS

Pages 97-103

In the proposed rule, CMS requested wide-ranging provider feedback on the state of information technology (IT) in SNFs to advance the digital quality measurement (dQM) transition. CMS sought input on topics including existing electronic health record adoption and utilization, submission of quality data submission to CMS, the use of third-party IT vendors, privacy and data standards (especially the Fast Healthcare Interoperability Resources® (FHIR®) standard), barriers to adoption, and recommendations for future CMS standards and resources.[3] CMS also sought to gauge potential interest in provider and vendor pilots on electronic transmission of assessments to CMS, and in the proposed rule CMS briefly discussed a potential future SNF VBP requirement for interoperable information exchange.

Many stakeholders noted their support for this dQM transition, with several recommending a “glide path” implementation approach. A few commenters noted their concern about differing levels of EHR and IT resources found throughout SNFs. 

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This Applied Policy® Summary was prepared by Simay Okyay McNutt with support from the Applied Policy team of health policy experts. If you have any questions or need more information, please contact her at sokyay@appliedpolicy.com or at (202)-558-5272.

[1] The MFP adjustment is a 10-year moving average of changes in annual economy-wide private nonfarm business multifactor productivity.

[2] See Tables 5 and 5 at page 24 of the unpublished final rule.

[3] Full list of questions is available on pages 99-101 of the unpublished final rule.