FY 2026 SNF PPS Final Rule: Implications for Skilled Nursing Operators

Key Highlights: 3.2% Medicare Rate Increase: SNF Medicare Part A payments will rise by 3.2% in FY 2026 (about $1.16 billion above FY 2025 levels)  PDPM Coding Updates: CMS is making 34 ICD-10 code mapping changes under the Patient-Driven Payment Model, requiring SNFs to update diagnosis coding by Oct. 1, 2025. VBP Program Tweaks: The final rule removes the Health Equity Adjustment from SNF VBP scoring and adds a formal performance score appeals process for providers, while finalizing new quality benchmarks. QRP & Reporting Relief: Four SDOH assessment items will be removed from the MDS, and CMS will allow extensions/appeals for SNFs falling short on quality reporting submissions. No new QRP measures in FY 2026, but CMS is exploring future metrics (e.g., delirium, interoperability). 

3.2% Payment Rate Increase: Incremental Relief CMS’s FY 2026 final rule delivers a 3.2% rate increase for SNFs, effective October 1, 2025. This update is driven by a 3.3% market basket (industry inflation index), plus a 0.6% upward adjustment for last year’s forecasting miss, minus a 0.7% productivity cut. In practical terms, Medicare Part A payments to SNFs will grow by roughly $1.16 billion year-over-year. Providers will welcome this boost amid rising labor and care costs. Although smaller than last year’s hike, it is above historical averages and should help operators stay afloat, especially considering the recent challenges in hiring as well as the expected closures and financial challenges as a result of the recent Medicaid cuts from the One Big Beautiful Bill Act.   It’s worth noting that not every facility will fully realize a 3.2% net increase. The SNF Value-Based Purchasing (VBP) program withholds 2% of Medicare payments to fund quality incentives, and CMS projects about $208 million will be kept due to VBP penalties in FY 2026. High-performing SNFs can earn a portion of that back, but lower performers will effectively see less than the full rate update. As such and as always improving quality outcomes, especially reducing rehospitalizations remains crucial for providers’ bottom lines in the upcoming unknown and challenging times post possible Medicaid cuts.  

PDPM Refinements: ICD-10 Code Updates Under the Patient-Driven Payment Model (PDPM), which pays for SNF care based on patient characteristics rather than therapy minutes, CMS is updating the clinical classification logic. The FY 2026 rule finalizes 34 changes to PDPM’s ICD-10-CM code mappings. These revisions will ensure diagnoses map to appropriate clinical categories in line with current coding guidelines. SNFs should ensure these changes are implemented by FY 2026, as certain diagnoses may now group differently for payment. Even if technical, these updates will directly affect case-mix indexes, i.e. accurate documentation and coding are still key to avoid reimbursement gaps or compliance issues. 

Value-Based Purchasing: No More Equity Adjustment, New Appeals CMS made a noteworthy policy reversal in the SNF Value-Based Purchasing (VBP) program by dropping the Health Equity Adjustment that was previously slated for inclusion in VBP scoring. In effect, no bonus points will be given for serving high-risk resident populations; i.e. all SNFs will be evaluated on the same performance criteria.  In addition, the final rule introduces a reconsideration process not unlike IDR for VBP scores and payments. If a facility suspects an error in its performance data, it can request a review before final penalties or bonuses are determined.  CMS also set performance benchmarks for future years (FY 2028 and FY 2029) and signaled that new measures, like within-stay readmissions are on the horizon. The core focus, however, remains reducing hospital readmissions and improving measurable outcomes. Providers should thus keep concentrating on quality improvement knowing that financial carrots and sticks will persist, now under a somewhat streamlined VBP framework. 

QRP Updates: Easing Reporting Burdens Changes to the SNF Quality Reporting Program (QRP) in FY 2026 are relatively provider-friendly. First, CMS will remove four Social Determinants of Health items from the Minimum Data Set assessments (one question on living situation, two on food security, one on utilities). These questions, added in the last MDS update, will no longer be required, trimming a small piece of documentation that does not directly impact quality scores or payments. Second, CMS is making it easier to avoid the 2% QRP penalty for failing to report required data. The rule creates flexibility for SNFs to request extensions or exceptions if they run into difficulties meeting reporting deadlines. Facilities that miss a reporting deadline or threshold, especially due to force majeure such as an EHR outage can now appeal under an updated policy. This provides a relief valve to prevent inadvertent technical lapses from automatically triggering penalties. Looking ahead, while no new QRP measures take effect in FY 2026, CMS has signaled interest in future metrics such as delirium, nutrition, well-being and in moving toward digital quality reporting using FHIR. Providers should use this respite to strengthen internal data processes, anticipating that CMS’s push for more timely and electronic data reporting will resume in future rules. 

Strategizing for Quality and Sustainability 

The FY 2026 SNF PPS rule strikes a balance between relief and reinforcement. The rate increase will offer some breathing room for budgets strained by workforce and inflation pressures, while the policy tweaks demonstrate a willingness to simplify rules in acknowledgment of providers’ operational challenges. 

At the same time, CMS is clearly reinforcing that quality and compliance remain paramount in that the incentives and penalties tied to performance are here to stay. All providers now face a level playing field under VBP, which is a prompt to double-down on quality improvement across the board. 

To translate these regulatory insights into actionable strategy, rather than mere dinner‑party trivia, consider harnessing Clearpol’s integrated analytics and compliance platforms. Our real‑time clinical dashboards help enhance quality and outcomes to maximize PDPM reimbursement, VBP performance all the while providing a clinician‑friendly viewport, giving operators the empirical foothold needed to convert CMS’s 200‑page prose into profit‑preserving practice. Schedule a customized walkthrough with us here and let the data do the heavy lifting while you focus on what matters: delivering dignified, high‑quality care.