On April 11, 2025, CMS released its proposed rule for the fiscal year (FY) 2026 Skilled Nursing Facility Prospective Payment System (SNF PPS). The proposed rule represents a balanced approach to improving care quality while addressing the operational challenges faced by SNFs.
Key Provisions of the Proposed Rule
- Payment Rate Adjustments: The proposed rule outlines a 2.8% net increase in Medicare payments to SNFs for FY 2026. This increase is derived from the following:
- Market Basket Increase (+3%): The market basket increase reflects the estimated changes in the cost of goods and services included in the covered services for the Medicare SNF benefit, e.g, wage-related costs, supplies, ancillary services, etc.
- Forecast Error Adjustment (+0.6%): The forecast error adjustment has been in place since FY 2003 and reflects the difference in the latest available fiscal year’s forecasted market basket increase and the actual market basket increase for the same period. For FY 2024, the forecasted market basket increase was projected at 3% and the actual market basket increase was computed at 3.6%. This creates a forecast error of 0.6%, which is above the regulatory threshold of 0.5%, and is therefore added to the FY 2026 market basket increase.
- Productivity Adjustment (-0.8%): The productivity adjustment is a component of the Affordable Care Act, which has been in place since 2010. The concept of the productivity adjustment is to help ensure that rate adjustments reflect actual increases in costs versus gains in employee productivity. The figure is derived from the 10-year moving average of changes in multifactor productivity, as reported by the U.S. Department of Labor’s Bureau of Labor Statistics (BLS).
- PDPM ICD-10 Code Updates: Each year, CMS reviews the clinical category assignments for new ICD-10 codes and proposes edits to their assigned categories. For FY 2026, CMS is proposing changes to 34 new ICD-10 codes that became effective October 1, 2024. These 34 codes are those associated with the following clinical diagnosis groups:
- Type 1 Diabetes
- Hypoglycemia
- Obesity
- Anorexia
- Bulimia
- Binge Eating
- Pica & Rumination
- Serotonin Syndrome
It is important to understand the category assignments for these ICD-10 codes and the overall impact on case mix index. The accuracy of ICD-10 coding continues to be a critical focus area for providers.
- Quality Reporting Program (SNF QRP): The SNF QRP requires SNFs to report quality data on specific measures, including those related to falls, pressure ulcers, and functional assessments. The data is collected and submitted through three separate methods:
- Minimum Data Set (MDS) 3.0
- Centers for Disease Control and Prevention (CDC) National Healthcare Safety Network (NHSN)
- Medicare Fee-for-Service Claims
Providers who fail to properly submit QRP data are subject to a 2% reduction in their overall Medicare reimbursement.
For FY 2026, CMS is proposing to remove four items beginning with the FY 2027 SNF QRP. These four items were previously adopted as standardized patient assessment data and include one item for Living Situation, two items for Food, and one item for Utilities. In addition, there are proposed changes to the amendment and reconsideration policies for noncompliance with QRP. CMS is also seeking public comment on several requests for information (RFIs), specifically on:
- Future measure concepts for the SNF QRP
- Potential revisions to the data submission deadlines for assessment data collected for the SNF QRP
- Advancing digital quality measurement in SNFs
- SNF Value-Based Purchasing (VBP) Program Changes: The VBP program is designed to provide incentive payments to SNFs based on performance within defined quality measures. The VBP program has served as an example of transitioning Medicare payments toward better quality as opposed to only rewarding volume. The proposed rule for FY 2026 includes modifications to the VBP scoring policies, the introduction of a reconsideration process (which would begin in FY 2027), and the removal of the Health Equity Adjustment, which was implemented in FY 2024.
The VBP program has evolved from solely a measurement of provider readmission rates to include multiple other quality factors. Table 13 from the FY 2026 Proposed Rule (shown below) represents the VBP program measures included in the calculations for FY 2026 through FY 2029.
TABLE 13: SNF VBP Program Measures and Status in the SNF VBP Program for the FY 2026 Program Year Through the FY 2029 Program Year
| Measure | FY 2026 Program Year | FY 2027 Program Year | FY 2028 Program Year | FY 2029 Program Year |
|---|---|---|---|---|
| Skilled Nursing Facility 30-Day All-Cause Readmission Measure (SNFRM) | Included | Included | ||
| Skilled Nursing Facility Healthcare-Associated Infections Requiring Hospitalization (SNF HAI) measure | Included | Included | Included | Included |
| Total Nurse Staffing Hours per Resident Day (Total Nurse Staffing) measure | Included | Included | Included | Included |
| Total Nursing Staff Turnover (Nursing Staff Turnover) measure | Included | Included | Included | Included |
| Discharge to Community - Post-Acute Care Measure for Skilled Nursing Facilities (DTC PAC SNF) | Included | Included | Included | |
| Percent of Residents Experiencing One or More Falls With Majority Injury (Long-Stay)(Falls with Major injury (Long-Stay)) measure | Included | Included | Included | |
| Discharge Function Score for SNFs (DS Function) measure | Included | Included | Included | |
| Number of Hospitalizations per 1,000 Long-Stay Resident Days (Long-Stay Hospitalization) measure | Included | Included | Included | |
| Skilled Nursing Facility Within-Stay Potentially Preventable Readmissions (SNF WS PPR) measure | Included | Included |
- Regulatory Streamlining: On January 31, 2025, President Donald Trump issued Executive Order (EO) 14192, “Unleashing Prosperity Through Deregulation,” which outlines the administration’s goal of reducing expenditures required to comply with federal regulations. CMS is seeking public input on opportunities to streamline regulations and reduce administrative burdens on providers, suppliers, beneficiaries, and other stakeholders participating in the Medicare program.
CMS has made available an RFI on the CMS site.
Summary
As is usually the case, the key takeaway of the FY 2026 Proposed Rule surrounds the payment adjustment for FY 2026, calculated at a projected 2.8% increase (as referenced above). The overall economic impact of the proposed rule is estimated at:
- Overall Increase: Estimated $997 million increase in aggregate payments to SNFs.
- SNF VBP Program: Estimated $208.36 million in savings to Medicare for FY 2026.
While the proposed payment increase offers some financial relief to SNFs, the emphasis on regulatory efficiency and performance-based incentives also shows CMS’ continued commitment to quality care.
Providers are encouraged to review the proposed rule in detail and provide feedback during the public comment period. For more information, visit the CMS Fact Sheet on the FY 2026 SNF PPS Proposed Rule.
If you have any questions or need assistance, please contact a professional at Forvis Mazars.