Rates, Reporting, and the RAI: Preparing SNFs for FY 2027

What Facilities Need to Know About Reimbursement, Quality Reporting, and Changes to MDS Coding

Skilled nursing facilities enter Fiscal Year (FY) 2027 with a 2.4 percent increase to the unadjusted federal Medicare Part A payment rates, significant changes to the SNF Quality Reporting Program (QRP), and revised MDS coding guidance effective Oct. 1, 2026. Although these updates arrive through different regulatory channels, they share a common message: reimbursement increasingly depends on accurate assessment, complete reporting, and meticulous documentation.

Not Every Facility Receives 2.4 Percent

The FY 2027 final rule increases the unadjusted federal Medicare Part A rates by 2.4 percent, with no change to the individual PDPM component case-mix group indices. However, facilities should not assume that every Medicare Part A rate will rise by exactly 2.4 percent.

The 2.4 percent figure is a national update to the unadjusted federal rate, not a guaranteed facility-specific net increase. A SNF’s actual rate and payment experience depend on the labor and non-labor portions of the rate, the facility's wage index, PDPM case-mix classification, variable per-diem adjustments, and the SNF Value-Based Purchasing (VBP) incentive payment multiplier. Changes in resident acuity and coding patterns also affect the amount ultimately paid. In addition, facilities that fail SNF QRP reporting requirements lose two percentage points from the annual payment update. For FY 2027, that means a noncompliant facility would receive a 0.4 percent update rather than 2.4 percent. The QRP reduction applies to the annual update; it is not a 2 percent reduction to the facility's entire Medicare payment rate.

Quality Reporting Carries Financial Consequences

To avoid the QRP payment reduction, SNFs must meet data reporting thresholds and submission deadlines. At least 90 percent of required MDS assessments must contain 100 percent of the required data elements without the use of dashes and required NHSN data must be submitted completely. FY 2027 payment determinations use calendar year 2025 data, while FY 2028 determinations will use calendar year 2026 data.

CMS is removing two COVID-19 vaccination measures. Beginning with the FY 2028 SNF QRP, facilities will no longer report the healthcare personnel COVID-19 vaccination measure for payment determination. For residents discharged on or after Oct. 1, 2026, SNFs will no longer collect and submit the resident COVID-19 vaccination measure; MDS item O0350 is scheduled for removal beginning Oct. 1, 2027.

QRP data submission timelines will tighten from the current 4 months to 45 days. Beginning with the FY 2029 SNF QRP, MDS data will be due by the 15th day of the second month after the end of each calendar quarter. Looking further ahead, the FY 2031 SNF QRP will require MDS reporting for all residents receiving covered skilled care as defined by CMS in the Medicare Benefit Policy Manual Chapter 8 Section 30, regardless of payer, with new or revised items identifying skilled services, skilled-stay dates, and primary payer information.

RAI Manual Revisions Require Immediate Changes

CMS released significant clarifications to the MDS 3.0 RAI User's Manual guidance in version 1.20.11 on Sept. 17, 2026. The updated RAI Manual guidance, effective Oct. 1, 2026, reinforces that state or payer instructions cannot replace, modify, or add to CMS coding requirements for federal MDS items outside Section S. States may add Section S items or require assessments beyond the federal schedule. This means that state-specific coding instructions must now be updated through the appropriate CMS process and can no longer be applied to the federal guidance for each item. Several revisions deserve focused education and audit attention.

Ethnicity and race in MDS Section A Identification Information must be asked on each new admission. On later assessments, a prior response may be used when the resident was asked less than one year earlier; after one year, the resident must be asked again. Facilities need a reliable way to track the interview date and document completion because these standardized patient assessment data elements (SPADES) may be reviewed during SNF QRP/VBP data validation and survey activities.

For Sections C Cognitive Patterns and D Mood, if multiple BIMS or PHQ-2 to 9 interviews occur during the look-back period, the MDS must reflect the interview conducted closest to the assessment reference date. This clarification makes interview timing, coordination, and source verification essential, especially when more than one staff member performs resident interviews during the 7-day look-back period.

Section M Skin Condition and Treatment guidance clarifies that a pressure ulcer or injury documented on admission, later healed, and subsequently reopened will not be coded as present on admission. It also addresses advanced wound care dressing and skin substitutes. Applying these treatments to a pressure ulcer is not a surgical procedure and does not convert the site to a surgical wound, so it cannot be coded as a surgical wound or surgical wound treatment.

Section O Special Treatments, Procedures, and Programs guidance adds another significant clarification to Respiratory Treatment coding. Resident self-administration of nebulizer treatment and maintenance or prophylactic incentive spirometry without medically necessary supervision by a respiratory therapist or respiratory nurse cannot be counted as respiratory therapy minutes. CMS also clarifies that maintenance-level or prophylactic incentive spirometry is not a skilled intervention.

Practical Readiness Agenda

While MDS coding updates take effect on Oct. 1, 2026, facilities should also prepare for future changes to the QRP. Facilities should review QRP threshold reports more often than quarterly, validate assessments before initial submission, and prepare now for shorter submission deadlines. Facilities should update audit tools for the revised resident interview, skin, and respiratory therapy guidance.
Organizations should also establish a process to identify and track non-Medicare residents receiving covered skilled care before all-payer reporting begins. Finally, leaders should model the facility-specific effect of the federal rate update, wage index, QRP status, and VBP multiplier rather than budgeting from the 2.4 percent national update alone.

Reimbursement protection, quality reporting, and MDS accuracy are inseparable. Facilities that connect education, MDS accuracy, documentation, and data monitoring will be better positioned to protect payment while supporting defensible quality reporting.

Alicia Cantinieri, MBA, BSN, RN, CHC, RAC-MT, RAC-CTA, DNS-CT, QCP, is the managing director, clinical reimbursement and regulatory compliance, Zimmet Healthcare Services Group.

Comments or question? Contact Patrick Connole at pconnole@parkplacelive.com.