While the 2026 Medicare Physician Fee Schedule (PFS) at first was expected to provide financial relief for nursing homes and therapy providers, the finalized rule ended up being more of a mixed bag.

Adjustments made to the PFS will result in lower payments for some physicians, especially those treating nursing homes patients, and an “efficiency adjustment” reduces payments for certain rehabilitation therapy services.

Another key change involves Accountable Care Organizations (ACOs), the 3-day stay rule and changes of ownership (CHOW): CMS will now allow ACOs to update their skilled nursing facility affiliate lists mid-year when a change of ownership is made, meaning 3-day stay waivers won’t be affected anymore. The agency hopes the update will reduce operational disruptions and maintain timely access to skilled nursing care for ACO patients.

The final PFS was released on Oct. 31 and published in the Federal Register on Wednesday.

“CMS released the final rule on Halloween night and it included some tricks and a few treats,” said Cynthia Morton, CEO of therapy provider association ADVION. “It should have been a positive for nursing homes, but the way CMS has finalized some policies, it’s not overly positive for nursing homes and their patients.”

Congress had intended for providers to receive at least a 2.5% increase in rates, but due to the way CMS finalized some policies, that won’t be the case, Morton said.

Rate setting differentials affect nursing home payouts

Physicians seeing nursing home patients in the facility will see reduced rates as CMS creates a payment differential between patients – it’s an indirect consequence considering the sector’s preference for traditional Medicare; the differential was created mainly to incentivize practitioners to seek out alternative payment models. Nursing home physician codes could see a 6% reduction, Morton said.

CMS’s new “efficiency adjustment” will impact rehabilitation therapy services provided to nursing home patients as well, she said.

“CMS claims all providers become more efficient over time and so it wants to reduce what it pays for rehab services and other services paid under the Fee Schedule,” said Morton of therapy providers. “Thankfully some codes are exempted, yet CMS indicated it wants to come back every three years to take more of an efficiency adjustment from most of the codes paid under the Physician Fee Schedule.”

The 2026 PFS rate setting consisted of a 0.75% increase to the qualifying Alternative Payment Model (APM) conversion factor, while the nonqualifying APM conversion factor saw an increase of 0.25% – this is the payment differential mentioned by Morton. Changes to the conversion factors are added to the 2.5% annual increase and an estimated 0.49% adjustment for finalized changes in work Relative Value Files (RVUs) for some services, CMS said.

The final rate for PFS increased by 3.77% and 3.26% using the qualifying and nonqualifying APM conversion factors, respectively.

In terms of coding changes within the PFS, Morton was excited to see a new remote monitoring code finalized by CMS, which is more flexible and streamlined when delivering therapy telehealth services for nursing home residents.

3-Day waiver easier for ACOs

Another change in the PFS is that ACOS can update their skilled nursing facility affiliate lists during a performance year, when the facility experiences a change of ownership. And, ACOs need to now notify CMS within 30 days of a nursing home ownership change that results in a new tax identification number (TIN).

The change aims to reduce operational disruptions for ACOs and their skilled nursing facility affiliates, enhancing timely access to skilled nursing care while providing clearer CHOW procedures.

Previously, ACOs could only modify their SNF affiliate lists during CMS’ annual change request cycle with updates effective Jan. 1 of the next performance year; there was no mechanism to add SNF affiliates mid-year. If a facility underwent a CHOW, thus altering its Medicare-enrolled TIN, it temporarily lost its eligibility to admit patients with the 3-day stay waiver attached to the old company’s TIN.

ACOs needing a 3-day rule waiver must submit to CMS a list of skilled nursing facility affiliates and provide executed agreements with the facility, according to the PFS. Participating nursing homes need to be identified by their Medicare-enrolled tax ID number (TIN) and CMS certification number (CCS) to qualify for the waiver.

The agency was quick to emphasize that this flexibility allowed to ACOs only applies to ownership changes of existing nursing home affiliates, not to adding new affiliates for an ACO mid-year.

Once approved, CMS sends the updated list of SNF affiliates for the ACO to the Medicare Administrator Contractor (MAC) for claims processing.

This update was met with positive public feedback, with some saying it would help maintain care continuity for beneficiaries. Others were supportive but would have preferred a longer notification window of 45 to 90 days for the ACO to send CMS what it needs to note the change of ownership.