The Centers for Medicare and Medicaid Services (CMS) released a proposed rule on Friday outlining Medicare payment policy and rate updates for skilled nursing facilities under the Skilled Nursing Facility (SNF) Prospective Payment System (PPS) for fiscal year 2026, as part of its annual update requirements.

For fiscal 2026, CMS plans to increase SNF PPS rates by 2.8%. This reflects a proposed 3.0% SNF market basket update, a 0.6% adjustment for forecast error, and a negative 0.8% productivity adjustment.

It’s important to note too that these figures do not include reductions tied to the SNF Value-Based Purchasing (VBP) program, which will lower payments for some facilities, the federal agency said in a press release. In fiscal 2025, these VBP-related cuts are projected to amount to $196.5 million.

As a comparison, providers saw a 4.2% increase in reimbursement at the start of this fiscal year.

The proposed rule also seeks public input through requests for information, as the agency explores how CMS can deliver quality data to skilled nursing facilities in a more timely manner.

This proposed rule would not only change and update policies and payment rates used under the SNF PPS for fiscal 2026, but also aims to update the requirements for the SNF Quality Reporting Program (QRP) and SNF VBC.

“We are also including three Requests for Information (RFIs) for the SNF QRP, specifically on future measure concepts for the SNF QRP, potential revisions to the data submission deadlines for assessment data collected for the SNF QRP, and advancing digital quality measurement in SNFs,” the 105-page long CMS proposed rule stated.

The agency also plans to adopt a new reconsideration process that will allow SNFs to appeal CMS’ decisions on review and correction requests, as well as technical updates to the SNF VBP Program’s regulation text.

SNF VBC program changes

CMS is proposing several updates to the VBP program and QRP for fiscal  2026, including changes to scoring policies, the introduction of a reconsideration process for review and correction requests as well as removing the Health Equity Adjustment to streamline the program and enhance clarity, the agency noted. 

As a reminder, the VBP program withholds 2% of Medicare Part A payments from SNFs, redistributing a portion as performance-based incentives. CMS also intends to apply the current scoring method to the SNF Within-Stay Potentially Preventive Readmission (SNF WS PPR) measure starting in FY 2028 and is releasing estimated performance standards for fiscal years 2028 and 2029.

For the SNF QRP, which penalizes noncompliant SNFs with a 2% payment reduction, CMS proposes removing data related to four social determinants of health elements – one on living situation, two on food, and one on utilities – effective October 1, 2025.

Additionally, CMS seeks to revise the reconsideration policy to allow SNFs more flexibility in filing requests and broaden the criteria for granting them. CMS is also soliciting feedback on new quality measure concepts such as delirium, nutrition, interoperability, and changes to data submission deadlines to improve timeliness, and advancing digital quality measures.

These proposals aim to simplify program operations, improve care quality, and enhance the utility of reported data, the agency noted.

PDPM changes

CMS is proposing updates to the ICD-10 code mappings used in the Patient-Driven Payment Model (PDPM) to improve the accuracy and consistency of primary diagnoses for SNF care. Implemented in fiscal 2020, PDPM focuses on patient needs rather than service volume and uses ICD-10 codes to classify patients into clinical categories.

The proposed changes aim to align PDPM mappings with current ICD-10 coding guidance, allowing providers to assign more appropriate diagnoses that support skilled intervention during a Medicare Part A SNF stay, CMS noted in the fact sheet.

How SNF pay hike is being received

Clif Porter, president and CEO of the American Health Care Association and National Center for Assisted Living (AHCA/NCAL), said he was pleased with the increase, citing rising expenses for nursing homes.

“We applaud CMS for proposing a net Medicare increase of 2.8 percent for skilled nursing facilities this next fiscal year,” Porter said in an emailed statement. “As costs for goods, services, and labor continue to rise, skilled nursing providers need reliable resources and government rates to keep pace.”

However, Porter also noted that two-thirds of nursing home residents lean on other means of financial support such as Medicaid, alongside a growing reliance on Medicare Advantage (MA) by short-term patients, and urged Washington to consider similar payment updates for all programs serving long-term care.

“We will continue to encourage policymakers to consider this tapestry of government programs that contribute to our providers’ ability to maintain access, enhance quality care, and invest in improvements. Our nation’s leaders must ensure that our Medicare and Medicaid programs are strong, so that nursing homes can continue to care for America’s seniors and the most vulnerable,” Porter said.