CMS has finalized its Fiscal Year (FY) 2027 rule for the Skilled Nursing Facility Prospective Payment System (SNF PPS), which takes effect October 1, 2026. For skilled nursing facility operators, the rule brings a modest Medicare payment increase, updates to quality reporting requirements, and several changes to the Skilled Nursing Facility Value-Based Purchasing (SNF VBP) Program. Overall, CMS expects Medicare payments to skilled nursing facilities to increase by approximately $882.7 million in FY 2027.
Medicare Payment Rates Increase for FY 2027
CMS finalized a 2.4% net payment update for skilled nursing facilities. In practical terms, this means most providers should see a positive Medicare rate update for FY 2027, although the actual impact will vary by facility depending on wage index, case mix, and other facility-specific factors. The update reflects:
- A 3.3% SNF market basket increase reflecting projected inflation in SNF operating costs.
- A 0.9 percentage point productivity adjustment required by statute.
- No forecast error adjustment because the difference between forecasted and actual FY 2025 market basket growth did not exceed CMS’s 0.5 percentage point threshold.
Taken together, CMS estimates these changes will increase overall Medicare payments to SNFs by approximately $882.74 million during FY 2027.
No Major Changes to the Patient Driven Payment Model (PDPM)
CMS did not make major changes to the Patient Driven Payment Model (PDPM). The agency finalized only technical, non-substantive updates to maintain consistency with current ICD-10 coding.
This is helpful for providers because the core PDPM framework remains stable. Facilities can continue focusing on accurate clinical documentation and coding that reflects each resident’s care needs, rather than preparing for a significant payment model redesign.
CMS Continues Monitoring “Case-Mix Creep”
CMS continues to watch for what it calls case-mix creep, meaning increases in coding intensity that may raise reimbursement without a corresponding increase in resident acuity. CMS noted significant increases in the reporting of certain conditions since PDPM was implemented, including:
- Malnutrition reporting rising from 5% to 47% of stays.
- Swallowing disorder reporting increasing from 4% to 21%.
- Depression reporting increasing from 4% to 19%.
CMS did not finalize a payment adjustment related to these trends in this rule. However, the agency requested feedback on potential future approaches, which means providers should continue to monitor this area closely.
The key takeaway for providers is to maintain strong documentation practices that clearly support all coded conditions and resident needs.
Removal of COVID-19 Vaccination Measures
Beginning with the FY 2028 SNF Quality Reporting Program, CMS finalized the removal of two COVID-19-related quality measures. This should reduce some reporting burden for facilities:
- COVID-19 Vaccination Coverage Among Healthcare Personnel.
- COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date.
CMS explained that these measures no longer align as well with current clinical guidance because vaccination decisions now rely more heavily on shared clinical decision-making. CMS also concluded that the reporting burden now outweighs the benefit of continuing these measures.
Faster Data Submission Requirements
Starting with the FY 2029 QRP, SNFs will need to submit MDS and NHSN quality data more quickly than they do today.
The current deadline of approximately 4.5 months after quarter-end will be shortened to the 15th day of the second month following the end of each quarter. For providers, this means internal reporting processes may need to be tightened so data can be reviewed and submitted on time.
Expanded MDS Reporting Requirements
Beginning with the FY 2031 QRP, SNFs must submit Minimum Data Set (MDS) assessments for all residents receiving covered skilled care, regardless of payer source. CMS estimates this change will increase industry costs by approximately $88 million annually, but the agency believes it will improve the completeness and consistency of resident quality data.
Skilled Nursing Facility Value-Based Purchasing Program Updates
CMS also finalized several updates to the SNF Value-Based Purchasing Program. These changes do not appear to fundamentally alter the program, but they are important for providers to track because VBP performance continues to affect Medicare reimbursement. Updates include:
- Establishing performance standards for FY 2029 and FY 2030.
- Revising “snapshot date” requirements for certain MDS-based measures.
- Making technical updates to program regulations.
CMS estimates that the FY 2027 SNF VBP Program will reduce aggregate SNF payments by approximately $203.6 million, underscoring the continued importance of quality performance and related operational planning.
Wage Index Policies Remain Largely Unchanged
CMS will continue using the hospital inpatient prospective payment system (IPPS) wage index as the basis for SNF wage adjustments. For now, the wage index methodology remains largely unchanged. CMS retained:
- The permanent 5% cap on annual wage index decreases, which protects facilities from large reimbursement reductions.
- Existing methodologies for urban and rural wage index calculations.
- Budget-neutral implementation of wage index changes.
CMS also used the rulemaking process to gather feedback on a possible future SNF-specific wage index, although no changes were adopted at this time.
Consolidated Billing Updates
CMS reviewed stakeholder requests to exclude several high-cost drugs and services from SNF consolidated billing requirements. No immediate exclusions were finalized. However, CMS indicated it will continue evaluating certain requests, including some related to chemotherapy agents. Requests involving orthotic devices were denied because they do not qualify under the current statutory categories for exclusion.
Looking Ahead
Overall, the FY 2027 final rule continues CMS’s current payment and quality reporting direction while setting the stage for future changes. For providers, the most important themes are:
- Increased Medicare reimbursement for SNFs in FY 2027.
- Streamlining of COVID-era reporting requirements.
- Improved timeliness of quality reporting data.
- Expanded resident assessment reporting.
- Continued scrutiny of PDPM coding practices and potential future case-mix creep adjustments.
- Ongoing exploration of a SNF-specific wage index.
For operators, consultants, and healthcare investors, the most immediate items to focus on are the 2.4% payment update, the removal of COVID vaccination reporting measures, and the need to prepare for faster quality reporting deadlines and expanded MDS submission requirements in future years. Facilities may want to begin reviewing their documentation, reporting workflows, and quality performance processes now so they are well-positioned for these upcoming changes. Our team can help you evaluate the impact through cost report preparation and reimbursement planning.
