On July 31, 2025, Centers for Medicare & Medicaid Services (CMS) issued the fiscal year (FY) 2026 Skilled Nursing Facility Prospective Payment System (SNF PPS) final rule, confirming a net 3.2% payment update and finalizing several policy changes across PDPM coding, the SNF Value-Based Purchasing (VBP) Program and the SNF Quality Reporting Program (QRP).
Here’s a breakdown of the proposal’s most important elements, the industry’s reactions and how facilities can strategically prepare for these changes.*
A 3.2% Medicare rate bump
Medicare rates for skilled nursing facilities (SNFs) wilI rise 3.2% starting October 1, 2025. That total comes from a 3.3% market basket (inflation), a +0.6% forecast-error correction, and a -0.7% productivity offset. Nationwide, CMS estimates an increase of about $1.16 billion year-over-year in Part A payments. These figures are before any bonuses or penalties from value-based purchasing. For FY 2026, CMS projects VBP payment reductions of $208.36 million across affected facilities.
How the industry reacted
Provider groups welcomed the rate increase while emphasizing ongoing cost pressures and administrative burden. The American Health Care Association (AHCA) called the 3.2% update a needed step given rising wages and operating costs. The American Hospital Association (AHA) reiterated broader concerns about payment adequacy and asked CMS to revisit key assumptions, noting that they “urge CMS to provide adequate, timely payment updates for SNFs, including by re-examining the magnitude of its market basket updates and productivity adjustments.”
Trade coverage also underscored the size of the increase and flagged the operational implications of policy tweaks summarized below.
What else changed
1) Diagnosis coding under PDPM
CMS finalized 34 updates to the ICD-10 code mappings used by the Patient-Driven Payment Model (PDPM). These are small but important alignment changes meant to improve clinical category assignment and payment accuracy. It's important to make sure software and training materials are current.
2) Value-Based Purchasing (bonuses/penalties program)
CMS simplified parts of the program and added due-process steps:
The health equity adjustment is removed from the VBP scoring formula.
A new reconsideration process lets facilities appeal CMS decisions on Review & Correction before data goes public.
The previously approved scoring method will apply to the within-stay preventable readmission measure, starting in FY 2028; CMS also set performance standards for FY 2028 and FY 2029 to meet statutory notice timelines.
3) Quality Reporting (your “2-percentage-point risk”)
For residents admitted on or after October 1, 2025, CMS will remove four questions related to Social Determinants of Health from the MDS (one on living situation, two on food, one on utilities). CMS also broadened reconsideration options (including the ability to request an extension), and summarized feedback on future topics like delirium, nutrition, well-being, and digital quality measurement — these are exploratory for now, not new requirements.
AHA supported removing the four items to reduce burden so teams can focus on what most improves quality and safety.
Dates that matter
October 1, 2025 — New rates take effect; four MDS SDOH items drop for admissions on/after this date.
FY 2028 — VBP’s within-stay preventable readmission measure begins using the previously finalized scoring approach; performance standards set for FY 2028 and FY 2029.
Action checklist for administrators
1) Re-forecast revenue
Re-run FY 2026 budgets with the +3.2% update and your local wage index; keep a separate line for VBP impacts (positive or negative).
2) Refresh PDPM tools & training
Load the 34 ICD-10 mapping changes in your EHR/billing tools; update cheat sheets and run spot audits on primary diagnosis assignment.
3) Tune your VBP workflow
Brief leaders that the health-equity add-on is gone.
Assign ownership for the new reconsideration step and pre-publication checks.
Track the within-stay preventable readmission trend line now so you’re not scrambling ahead of FY 2028.
4) Trim the MDS process
Remove the four SDOH items for admissions on/after October 1, 2025; update SOPs and your QRP compliance checklist (remember: the QRP is pay-for-reporting; missing requirements risks a 2-point cut to your annual update).
5) Keep advocating
Reference AHCA’s reaction (supportive of the update) and AHA’s calls for workable policies and burden reduction when you engage payers and policymakers. Bring concrete examples from your facility.
FAQs
What’s the exact FY 2026 Medicare rate increase for SNFs?
3.2% starting Oct 1, 2025 (3.3% inflation measure, +0.6% forecast correction, −0.7% productivity). Nationwide impact: +$1.16 billion.
Does this include VBP bonuses/penalties?
No. CMS estimates $208.36 million in VBP-related reductions across certain facilities in FY 2026; your net may differ.
What do I need to change in PDPM?
Update crosswalks and retrain teams for 34 ICD-10 mapping changes so residents are grouped correctly.
What’s new in the VBP program?
The health equity adjustment is removed; a reconsideration process is added; performance standards are set for FY 2028; the within-stay preventable readmission measure uses the finalized scoring starting FY 2028.
What changed in the Quality Reporting Program?
Four SDOH items drop from the MDS for admissions on/after October 1, 2025, and reconsideration rules are more flexible (extensions allowed).
Are there broader efforts to reduce red tape?
AHA supports streamlining while CMS also summarized feedback on future quality topics and measurement approaches. Keep an eye on CMS communications and trade coverage.
Sources
CMS, "Fact Sheet, FY 2026 SNF PPS Final Rule (CMS-1827-F)."
Skilled Nursing News, “CMS Finalizes 3.2% Skilled Nursing Medicare Rate Increase, With Updates to Quality Reporting Program.”
AHCA, “AHCA Releases Statement on FY 2026 Skilled Nursing Facility Prospective Payment System Final Rule.”
AHA, “AHA Comments on CMS Skilled Nursing Facility FY 2026 Proposed Payment Rule.”
Ready to see how a flexible workforce can help you adapt?
Handling payment updates, coding changes and reporting requirements is half the challenge — meeting workforce needs is the other. ShiftKey connects your facility with a broad network of credentialed independent professionals so you can maintain compliance and focus on resident care.
*ShiftKey's "What SNF administrators need to know about the CMS's PPS pay rule for FY 2026” is for information purposes only and should not be relied upon for legal or compliance advice.
