SNF Proposed FY2027 Rules: CMS Suggests 2.4% Increase — Here's What Changes for You

On April 2, 2026, the Centers for Medicare & Medicaid Services (CMS) released the proposed rule for the Skilled Nursing Facility Prospective Payment System (SNF PPS) for Fiscal Year 2027 (CMS-1843-P). The headline number — a 2.4% net payment increase representing approximately $888 million in additional Medicare payments to SNFs — sounds straightforward. But beneath that top-line figure lies a more complex regulatory landscape that will reshape how skilled nursing facilities approach billing, quality reporting, and case-mix documentation over the coming year.

This article breaks down what the proposed rule means for your facility's revenue cycle, compliance obligations, and strategic planning. Whether you manage billing for a single SNF or oversee a multi-facility operation, understanding these changes now — before the June 1, 2026 comment deadline — positions you to adapt proactively. For foundational SNF billing strategies, review our guide on Overcoming SNF Billing Challenges and Boosting Revenue.

1. The 2.4% Payment Update: Breaking Down the Math

The proposed net payment increase of 2.4% is derived from two components: the SNF market basket update of 3.2%, reduced by a multifactor productivity (MFP) adjustment of -0.8 percentage points. CMS estimates this will increase aggregate Medicare Part A payments to SNFs by approximately $888 million in FY2027 compared to FY2026.

Payment Update Calculation

Component	Value	Effect
SNF Market Basket Increase	+3.2%	Reflects cost inflation for SNF inputs (labor, supplies, capital)
Multifactor Productivity Adjustment	-0.8%	Required by law; offsets market basket based on economy-wide productivity
Net Payment Update	+2.4%	Applied to all SNF PPS per-diem rates effective October 1, 2026
Estimated Dollar Impact	+$888 million	Aggregate increase in Medicare payments to SNFs in FY2027

 

Wage Index Update

CMS proposes to update the labor-related share of the SNF PPS per-diem rate from 71.9% to 72.0%. The wage index continues to use Inpatient Prospective Payment System (IPPS) hospital wage data as its basis. However, CMS is soliciting input through the proposed rule on whether alternative data sources — such as Bureau of Labor Statistics (BLS) data or SNF-specific cost reports — should be used to construct a future SNF-specific wage index.

Revenue Impact: The 2.4% increase applies uniformly to all case-mix groups under PDPM. For a typical SNF with $5 million in annual Medicare Part A revenue, this translates to approximately $120,000 in additional payments — assuming no changes in case mix, census, or length of stay.

2. PDPM Case-Mix Creep: CMS Signals Future Recalibration

Perhaps the most significant long-term signal in this proposed rule is CMS's formal Request for Information (RFI) on Patient Driven Payment Model (PDPM) case-mix creep and upcoding. While CMS is not proposing specific PDPM recalibration changes in FY2027, the RFI makes clear that adjustments are coming. Understanding the current PDPM framework and documentation requirements is essential — our comprehensive resource on Navigating PDPM Updates: How SNFs Can Optimize Reimbursement provides the strategic context your team needs.

What CMS Has Observed

• Average Case Mix Indexes (CMIs) have increased at rates exceeding what patient acuity changes would justify

• Median per-diem costs (reflecting actual resource utilization) have declined during the same period
• The gap between rising CMIs and falling costs suggests systematic upcoding, not sicker patients
• CMS specifically flags concerns about how ICD-10 diagnosis codes are being selected and documented to maximize PDPM classification

The RFI Questions

CMS is seeking stakeholder feedback on methodologies to quantify and address case-mix creep, potential PDPM recalibration approaches, whether parity adjustments (across-the-board rate reductions to offset aggregate upcoding) should be implemented, and what timeline would be appropriate for any changes. The comment deadline is June 1, 2026.

Action Item for Providers: Facilities should immediately audit their PDPM classification patterns against actual resource utilization. If your CMI has increased significantly without corresponding changes in patient acuity or staffing costs, prepare for potential scrutiny. Accurate MDS coding — not maximized coding — should be the standard. Our detailed guide on Improving MDS Accuracy: Strategies to Maximize PDPM Reimbursements  covers documentation best practices that withstand audit.

ICD-10 Code Mapping — No Changes Proposed

CMS confirmed that no substantive changes to PDPM ICD-10 code mappings are proposed for FY2027. The existing clinical category assignments based on primary diagnosis codes remain in effect. However, the RFI signals that future rulemaking may revise how diagnosis codes interact with PDPM components.

3. SNF Value-Based Purchasing (VBP) Program: Expansion to Eight Measures

The SNF VBP Program undergoes its most significant expansion since inception. Beginning with the FY2027 program year, CMS expands performance assessment from four measures to eight measures, broadening the quality domains that affect payment adjustments. The 2% withhold from SNF payments continues to fund incentive payments that are redistributed based on performance scores.

FY2027 VBP Measure Set (8 Measures)

#	Measure	Domain	Data Source
1	SNF 30-Day All-Cause Readmission Measure (SNFRM)	Readmissions	Claims data
2	SNF Healthcare-Associated Infections Requiring Hospitalization (SNF HAI)	Patient Safety	Claims data
3	Total Nursing Staff Turnover	Staffing Stability	Payroll-Based Journal (PBJ)
4	Total Nursing Hours per Resident Day (Total Nurse HPRD)	Staffing Adequacy	PBJ data
5	Percent of Residents Experiencing Falls with Major Injury (Long-Stay)	Patient Safety	MDS data
6	Discharge Function Score	Functional Outcomes	MDS data
7	Number of Hospitalizations per 1,000 Long-Stay Resident Days	Acute Care Utilization	Claims data
8	Discharge to Community — Post-Acute Care (DTC PAC SNF)	Discharge Outcomes	Claims data

 

Readmission Measure Transition

Beginning October 1, 2027, CMS will transition from the current SNF 30-Day All-Cause Readmission Measure (SNFRM) to the new SNF Within-Stay Potentially Preventable Readmission (SNF WS PPR) Measure. This new measure focuses specifically on readmissions that are clinically preventable, rather than counting all readmissions regardless of cause.

For strategies to reduce readmission penalties through billing and documentation improvements, see our resource on Strategies for Reducing Readmission Penalties Through Improved Billing Practices.

4. SNF Quality Reporting Program (QRP) Updates

The proposed rule includes several changes to the SNF Quality Reporting Program that affect data submission requirements, measure sets, and reporting timelines.

Measures Being Removed (Effective FY2028 QRP)

• COVID-19 Vaccination Coverage Among Healthcare Personnel (HCP) Measure — removed as COVID-19 transitions to routine vaccination schedules

• COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date Measure — removed for the same reason

MDS Data Submission Changes

New Requirement (FY2031): CMS proposes requiring submission of Minimum Data Set (MDS) data on ALL residents receiving covered skilled care, regardless of payer. Currently, MDS submission is only required for Medicare Part A residents. This expansion will capture Medicaid and managed care residents, providing CMS with a complete picture of facility performance.

Revised Submission Timeline (FY2029): CMS proposes shortening the MDS data submission deadline from 4.5 months to no later than the 15th day of the second month after the end of the calendar quarter. This tighter timeline reduces the lag in public quality reporting by up to three months. For guidance on MDS documentation that supports accurate billing and quality metrics, review our resource on Minimum Data Set (MDS): Key to SNF Billing.

5. Staffing Requirements: Current Status After Federal Mandate Rescission

An important contextual note for FY2027 planning: in December 2025, CMS finalized the rescission of the federal minimum staffing standards that had been published in May 2024. The original rule would have required 3.48 total nursing hours per resident day (HPRD), including 0.55 RN HPRD and 2.45 nurse aide HPRD, plus 24/7 registered nurse coverage.

What Remains in Effect

• The enhanced facility assessment requirement — requiring facilities to staff based on actual resident acuity and needs — remains untouched by the rescission and continues as an independent compliance obligation

• State-level staffing requirements remain enforceable and vary significantly by jurisdiction
• The SNF VBP now includes Total Nursing Hours per Resident Day and Total Nursing Staff Turnover as quality measures — creating a financial incentive for adequate staffing even without a federal floor

Strategic Implication: While there is no longer a federal HPRD mandate, the VBP expansion means that staffing levels directly affect reimbursement through quality-based payment adjustments. Facilities that reduce staffing to cut costs may save on labor but lose more through VBP penalties — a calculation every CFO needs to model.

6. Consolidated Billing and Therapy Implications

The FY2027 proposed rule does not alter the fundamental structure of SNF consolidated billing, but the payment update affects all services delivered under this framework. Under consolidated billing, the SNF is responsible for virtually all services provided to a resident during a covered Part A stay, with payment bundled into the SNF PPS per-diem rate. For a complete overview of what falls under consolidated billing and common compliance pitfalls, see our guide on Requirements for SNF Consolidated Billing.

Key Consolidated Billing Reminders

• Physical therapy, occupational therapy, and speech-language pathology remain subject to consolidated billing regardless of whether the resident is in a covered Part A stay

• Services excluded from consolidated billing (ambulance, certain chemotherapy, dialysis, select prosthetics/orthotics) can still be billed separately by the outside provider
• The 2.4% rate increase applies to the bundled per-diem payment — meaning therapy services delivered during a Part A stay receive the benefit indirectly through the SNF's overall payment

For therapy-specific billing guidance within the SNF setting, including documentation requirements under PDPM's therapy component, see our Physical Therapy Billing Updates for 2026 and Occupational Therapy Billing Updates for 2026.

7. Common ICD-10 Codes for SNF Admissions (Connector-Verified)

Under PDPM, the primary diagnosis code drives clinical category assignment, which directly determines payment. Accurate ICD-10 coding at admission is therefore a critical revenue determinant. The following codes represent the most frequent SNF admission diagnoses and have been verified through the ICD-10 diagnostic code connector as HIPAA-valid. For guidance on prior authorization requirements that often accompany SNF admissions with these diagnoses, see our resource on Prior Authorization for SNF Services.

Orthopedic/Surgical Rehabilitation

ICD-10 Code	Description	PDPM Clinical Category
S72.001A	Fracture of unspecified part of neck of right femur, initial encounter	Non-Orthopedic Surgery / Major Joint Replacement or Spinal Surgery
Z47.1	Aftercare following joint replacement surgery	Major Joint Replacement or Spinal Surgery
Z96.641	Presence of right artificial hip joint	Non-Orthopedic Surgery (if post-surgical rehab)
M84.359A	Stress fracture, hip, unspecified, initial encounter for fracture	Non-Orthopedic Surgery

 

Medical Admissions

ICD-10 Code	Description	PDPM Clinical Category
I63.9	Cerebral infarction, unspecified	Acute Neurologic
I50.9	Heart failure, unspecified	Medical Management
J18.9	Pneumonia, unspecified organism	Medical Management
I10	Essential (primary) hypertension	Medical Management
N18.30	Chronic kidney disease, stage 3 unspecified	Medical Management

 

Cognitive/Neurological

ICD-10 Code	Description	PDPM Clinical Category
G30.9	Alzheimer's disease, unspecified	Medical Management
R26.81	Unsteadiness on feet	Medical Management (fall risk marker)

 

Important Note: N18.3 (Chronic kidney disease, stage 3) is NOT HIPAA-valid for billing transactions. Use the specific sub-codes: N18.30 (stage 3 unspecified), N18.31 (stage 3a), or N18.32 (stage 3b).

8. CMS Coverage References for SNF Services

While CMS does not maintain specific National Coverage Determinations (NCDs) for the SNF PPS broadly, two NCDs and one LCD are directly relevant to services commonly delivered in skilled nursing facilities:

Document	Title	Relevance to SNFs
NCD 70.2	Consultation Services Rendered by a Podiatrist in a Skilled Nursing Facility	Governs when podiatric consults are covered during SNF stays
NCD 70.5	Hospital and Skilled Nursing Facility Admission Diagnostic Procedures	Defines covered diagnostic procedures at admission
LCD L34562	Home Health Skilled Nursing Care — Alzheimer's Disease and Behavioral Disturbances	Relevant for SNF-to-home transitions and post-discharge coverage

 

9. Action Items for SNF Billing Teams

The proposed rule creates both immediate and medium-term action items for SNF revenue cycle teams. Addressing these proactively will position your facility for compliance and revenue optimization when the final rule takes effect October 1, 2026. Facilities should also ensure their eligibility verification processes are current to capture the full benefit of the payment update.

Immediate (Before June 1, 2026 Comment Deadline)

• Review the PDPM case-mix RFI and submit comments if your organization has a position on recalibration methodology

• Audit current PDPM classification patterns: compare CMI trends to actual resource utilization and patient acuity
• Identify any ICD-10 coding practices that could be characterized as upcoding rather than accurate documentation

Short-Term (Before October 1, 2026)

• Update fee schedules and financial projections to reflect the 2.4% payment increase

• Prepare for expanded VBP measure tracking — ensure PBJ staffing data, MDS functional scores, and claims-based readmission metrics are being monitored
• Train MDS coordinators on the distinction between accurate documentation and maximized classification
• Review consolidated billing exclusion lists for any annual updates

Medium-Term (FY2027-2029)

• Plan for the MDS submission deadline change (from 4.5 months to ~2.5 months post-quarter, beginning FY2029)

• Prepare systems for all-payer MDS data submission requirement (effective FY2031)
• Model VBP scoring scenarios across all eight measures to identify the largest improvement opportunities
• Monitor CMS guidance on SNF WS PPR readmission measure transition (effective October 2027)

For ongoing Medicare denial management strategies specific to SNF Part A claims, our guide on Understanding Medicare Denials and Appeals addresses the most common rejection reasons and successful appeal approaches.

Frequently Asked Questions

Q: How much will the SNF FY2027 payment increase be and when does it take effect?

A: CMS proposes a net 2.4% payment increase to SNF PPS rates, effective October 1, 2026 (the start of Federal Fiscal Year 2027). This is based on a 3.2% market basket increase minus a 0.8% multifactor productivity adjustment. The estimated total impact is $888 million in additional Medicare payments to skilled nursing facilities.

Q: Is CMS changing PDPM for FY2027?

A: CMS is not proposing specific PDPM changes in FY2027. However, the proposed rule includes a formal Request for Information (RFI) on how to address case-mix creep and potential upcoding under PDPM. CMS has observed that average CMIs are rising faster than patient acuity justifies while per-diem costs are declining. This RFI strongly signals that PDPM recalibration or parity adjustments are being planned for future rulemaking.

Q: How does the expanded SNF VBP program affect my facility's payments?

A: The SNF VBP program expands from 4 to 8 measures in FY2027. CMS continues to withhold 2% of SNF payments to fund the incentive pool, then redistributes based on performance scores across all eight measures. Facilities scoring well can earn back more than the 2% withhold; poor performers receive less. The new measures include staffing hours, staff turnover, falls with injury, discharge function, hospitalizations, and discharge to community.

Q: What are the new MDS data submission requirements?

A: Two changes are proposed: First, beginning with FY2029, the submission deadline shortens from 4.5 months to no later than the 15th day of the second month after the quarter ends (approximately 2.5 months). Second, beginning FY2031, MDS data must be submitted for ALL residents receiving covered skilled care, regardless of payer — not just Medicare Part A residents.

Q: Did CMS reinstate the federal staffing mandate for nursing homes?

A: No. The federal minimum staffing standards (3.48 HPRD with 0.55 RN HPRD and 24/7 RN coverage) were rescinded in December 2025. However, the enhanced facility assessment requirement remains in effect, and the expanded VBP program now includes staffing-related measures (Total Nursing Hours per Resident Day and Total Nursing Staff Turnover) that create financial incentives for adequate staffing.

Q: When is the comment deadline for the FY2027 SNF proposed rule?

A: Comments on the proposed rule (CMS-1843-P) are due by June 1, 2026. This is particularly important for the PDPM case-mix RFI, as CMS is actively seeking stakeholder input on methodologies to address upcoding. The final rule is expected to be published in August 2026, with provisions taking effect October 1, 2026.