Navigating PDPM Updates: How SNFs Can Optimize Reimbursement

Skilled Nursing Facilities (SNFs) are entering FY 2026 with essential updates from CMS that directly affect payments and compliance. Starting October 1, 2025, CMS has announced a 3.2% increase in SNF Prospective Payment System (PPS) rates which adds up to about $1.16 billion more in federal payments.

However, facilities will also see an estimated $208 million reduction under the SNF Value-Based Purchasing (VBP) Program. This means that while there is more money available, payment adjustments will depend on the quality of care and performance.

Alongside these payment changes, the Patient-Driven Payment Model (PDPM) is also being updated. In fact, all these updates highlight the need for SNFs to focus on accurate coding, strong documentation, and compliance with PDPM guidelines.

In this blog, we will explain the latest PDPM updates and explore practical strategies SNFs can use to optimize reimbursement in FY 2026.

Overview of PDPM

The Patient-Driven Payment Model is the Medicare payment system used for Skilled Nursing Facilities. It was introduced in October 2019 to replace the older RUG-IV model, which paid facilities based on the number of therapy minutes provided. This approach has been modified by the PDPM, with a focus on the clinical conditions and care needs of each resident, rather than therapy volume. As a result, payments are now determined across five key components:

• Physical Therapy (PT),
• Occupational Therapy (OT),
• Speech-Language Pathology (SLP),
• Nursing, and
• Non-Therapy Ancillaries (NTA).

Importance of PDPM

The PDPM model is quite crucial as it ties reimbursement directly to the acuity and complexity of residents for encouraging SNFs to provide care that truly matches patient needs. This means that accurate documentation and proper coding are more critical than ever for facilities. When SNFs understand and apply PDPM correctly, they not only secure fair Medicare reimbursement but also improve resident outcomes, reduce compliance risks, and remain competitive as value-based care becomes the standard.

Latest PDPM Updates for FY 2026

Every year, CMS reviews and updates PDPM coding and reimbursement rules to reflect new clinical standards and coding guidelines. Therefore, CMS finalized several important PDPM updates for FY 2026, which will take effect for SNF stays beginning October 1, 2025. These changes focus on ICD-10 code mappings, coding accuracy, and aligning payment categories with the true purpose of skilled care.

• Revised ICD-10 Code Mappings

CMS finalized 34 changes to PDPM ICD-10-CM mappings. This means that many diagnosis codes will no longer qualify as appropriate primary diagnoses for Medicare Part A SNF stays. For example, codes related to obesity, hypoglycemia, anorexia, bulimia, and diabetes without complications have been moved to a “Return to Provider” status. These conditions are considered too vague or unlikely to justify a skilled nursing stay on their own. This update emphasizes the importance of selecting a diagnosis that clearly indicates why a resident requires skilled services.

• Consistency with ICD-10-CM Guidelines

These updates are designed to align PDPM with the latest ICD-10-CM coding rules. In fact, CMS is aiming to reduce confusion, prevent inappropriate billing, and make sure SNFs are reimbursed based on the actual care needs of residents by ensuring consistency. As a result, providers should download the 2026 ICD-10-CM conversion tables from CMS to update their systems and prepare coding staff for the changes.

• Impact on Case-Mix and Reimbursement

As PDPM payments are tied to case-mix groups, incorrect or outdated coding can lead to lower reimbursement. Facilities must pay close attention to diagnosis selection during the Minimum Data Set (MDS) admission assessment. Using disallowed codes could result in reduced payments or even claim denials. These mapping changes reinforce the need for accurate documentation and skilled justification for every Part A stay.

How can SNFs Optimize Reimbursement Under the New PDPM Rules?

With the FY 2026 updates in place, SNFs need to take proactive steps to protect their Medicare revenue and avoid costly compliance issues. Here are the most effective strategies-

• Accurate and Updated Coding

SNFs must ensure that clinical and billing staff are trained on the latest ICD-10-CM mapping changes. Facilities should stop using codes that CMS has moved to “Return to Provider” and instead work with physicians to identify a precise, clinically defensible primary diagnosis that supports skilled care. Moreover, regular refresher training and access to updated coding tools can help avoid mistakes that lead to denied claims or lost revenue.

• Stronger Documentation Practices

PDPM relies heavily on what is documented in the MDS and resident charts. Every diagnosis, treatment, and clinical service must be supported by proper documentation. SNFs should develop workflows that encourage nurses, therapists, and physicians to document care in real-time. Strong documentation not only supports reimbursement but also reduces audit risks and improves resident care planning.

• Internal Audits and Compliance Monitoring

Conducting regular internal audits of MDS assessments, admission diagnoses, and claims can help catch problems before they impact reimbursement. In fact, internal audits are especially useful for identifying trends, such as repeated use of disallowed codes or incomplete documentation. As a result, SNFs can maintain compliance and protect revenue by addressing these issues early.

• Utilize Technology and PDPM Tools

Modern EHR systems often include PDPM calculators and mapping updates that can automatically guide staff toward compliant coding choices. Facilities should make sure their systems are updated with CMS’s FY 2026 PDPM changes. Additionally, analytics tools can highlight reimbursement opportunities by comparing resident acuity levels to actual payments to help SNFs capture revenue they might otherwise miss.

• Staff Training and Education

As PDPM rules change frequently, ongoing training is essential. SNFs should schedule regular staff education sessions on coding, documentation, and compliance requirements. In fact, training should include not just MDS coordinators but also nurses, therapists, and physicians who play a role in diagnosis selection and documentation.

• Align Therapy and Clinical Care

PDPM rewards facilities that provide therapy and clinical care tailored to residents' needs, rather than focusing on volume. SNFs should ensure therapy plans are aligned with physician diagnoses and resident care goals. This strengthens care delivery, supports compliance, and improves outcomes that are now tied to value-based purchasing metrics.

How 24/7 MBS Supports SNFs with PDPM and Beyond

Skilled Nursing Facilities often struggle to keep pace with constant changes in Medicare rules, PDPM updates, and documentation requirements. 24/7 Medical Billing Services helps solve this challenge by offering end-to-end revenue cycle management tailored for SNFs. Instead of simply handling claims, the team takes a proactive approach by monitoring CMS updates, analyzing the financial impact of new policies, and guiding facilities on how to adapt quickly.

Moreover, their expert team not only manages SNF billing and coding but also tracks key performance metrics, including denial rates, days in accounts receivable (AR), and reimbursement trends. This data-driven approach enables SNFs to identify areas where they may be losing revenue and to strengthen their compliance.

FAQs

Q1. How often does CMS release PDPM updates?

CMS typically updates PDPM rules annually with the new fiscal year.

Q2. What financial risks come with poor PDPM management?

Facilities risk revenue loss, compliance issues, and higher audit exposure.

Q3. Can outsourcing PDPM billing benefit SNFs?

Outsourcing SNF billing and coding services brings expertise, reduces errors, and helps facilities focus on care.

Q4. What is the best strategy to stay ready for CMS changes?

Regular monitoring of policy updates and adapting workflows quickly keeps SNFs compliant.