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Rule2025-14679

Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities; Updates to the Quality Reporting Program for Federal Fiscal Year 2026

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Published

August 4, 2025

Effective

October 1, 2025

Issuing agencies

Health and Human Services DepartmentCenters for Medicare & Medicaid Services

Abstract

This final rule finalizes changes and updates to the policies and payment rates used under the Skilled Nursing Facility (SNF) Prospective Payment System (PPS) for fiscal year 2026. This final rule also updates the requirements for the SNF Quality Reporting Program and the SNF Value-Based Purchasing Program.

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[Federal Register Volume 90, Number 147 (Monday, August 4, 2025)]
[Rules and Regulations]
[Pages 37310-37367]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-14679]

[[Page 37309]]

Vol. 90

Monday,

No. 147

August 4, 2025

Part III

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Part 413

Medicare Program; Prospective Payment System and Consolidated Billing
for Skilled Nursing Facilities; Updates to the Quality Reporting
Program for Federal Fiscal Year 2026; Final Rule

Federal Register / Vol. 90, No. 147 / Monday, August 4, 2025 / Rules
and Regulations

[[Page 37310]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 413

[CMS-1827-F]
RIN 0938-AV47

Medicare Program; Prospective Payment System and Consolidated
Billing for Skilled Nursing Facilities; Updates to the Quality
Reporting Program for Federal Fiscal Year 2026

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).

ACTION: Final rule.

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SUMMARY: This final rule finalizes changes and updates to the policies
and payment rates used under the Skilled Nursing Facility (SNF)
Prospective Payment System (PPS) for fiscal year 2026. This final rule
also updates the requirements for the SNF Quality Reporting Program and
the SNF Value-Based Purchasing Program.

DATES: These regulations are effective on October 1, 2025.

FOR FURTHER INFORMATION CONTACT:
<a href="/cdn-cgi/l/email-protection#267662766b66454b55084e4e5508414950">[email&#160;protected]</a> for issues related to the SNF PPS.
Heidi Magladry, (410) 786-6034, for information related to the
skilled nursing facility quality reporting program.
Christopher Palmer, (410) 786-8025, for information related to the
skilled nursing facility value-based purchasing program.

SUPPLEMENTARY INFORMATION:

Availability of Certain Tables Exclusively Through the Internet on the
CMS Website

As discussed in the FY 2014 SNF PPS final rule (78 FR 47936),
tables setting forth the Wage Index for Urban Areas Based on CBSA Labor
Market Areas and the Wage Index Based on CBSA Labor Market Areas for
Rural Areas are no longer published in the Federal Register. Instead,
these tables are available exclusively through the internet on the CMS
website. The wage index tables for this final rule can be accessed on
the SNF PPS Wage Index home page, at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html</a>.
Readers who experience any problems accessing any of these online
SNF PPS wage index tables should contact Patricia Taft at (410) 786-
4561.

I. Executive Summary

A. Purpose

This final rule will update the Skilled Nursing Facility (SNF)
prospective payment rates for fiscal year (FY) 2026, as required under
section 1888(e)(4)(E) of the Social Security Act (the Act). It also
implements section 1888(e)(4)(H) of the Act, which requires the
Secretary to publish specified information relating to the payment
update (see section II.C. of this final rule) in the Federal Register
before the August 1 that precedes the start of each FY. In this final
rule, we finalize several technical revisions to the code mappings used
to classify patients under the Patient Driven Payment Model (PDPM) to
improve payment and coding accuracy. This final rule updates
requirements for the SNF Quality Reporting Program (QRP) including the
removal of four standardized patient assessment data elements under the
Social Determinants of Health (SDOH) category. We also amend and codify
our reconsideration policy and process related to non-compliance
determinations that a SNF has not met QRP reporting requirements. In
addition, we provide a summary of the comments received on three
Requests for Information (RFIs) for the SNF QRP, specifically on future
measure concepts for the SNF QRP, potential revisions to the data
submission deadlines for assessment data collected for the SNF QRP, and
advancing digital quality measurement in SNFs. Finally, this final rule
updates the Skilled Nursing Facility Value-Based Purchasing (SNF VBP)
Program, including providing final performance standards, removing the
Health Equity Adjustment from the Program's scoring methodology,
applying the Program's scoring methodology to the Skilled Nursing
Facility Within-Stay Potentially Preventable Readmission (SNF WS PPR)
measure, adopting a new reconsideration process that will allow SNFs to
appeal the Centers for Medicare & Medicaid Services (CMS) decisions on
review and correction requests, and finalizing technical updates to the
SNF VBP Program's regulations text. Also, for the SNF VBP Program, we
are finalizing our proposal to remove the Health Equity Adjustment in
the Program's scoring methodology.

B. Summary of Major Provisions

In accordance with sections 1888(e)(4)(E)(ii)(IV) and (e)(5) of the
Act, this final rule updates the annual rates that we published in the
SNF PPS final rule for FY 2025 (89 FR 64048). In addition, this final
rule includes a forecast error adjustment for FY 2026. We are also
finalizing several technical revisions to the code mappings used to
classify patients under the PDPM to improve payment and coding
accuracy.
For the SNF QRP, we are finalizing our proposal to remove four
standardized patient assessment data elements under the SDOH category
beginning with residents admitted on October 1, 2025, for the FY 2027
SNF QRP. Additionally, we are finalizing our proposals to amend and
codify our reconsideration request policy and process. Finally, we are
summarizing comments received in response to three Requests for
Information (RFIs) for the SNF QRP on future measure concepts for the
SNF QRP, potential revisions to the data submission deadlines for
assessment data collected for the SNF QRP from 4.5 months after the end
of each quarter to 45 days after the end of each quarter, and advancing
digital quality measurement in SNFs.
For the SNF VBP Program, we are finalizing several updates. First,
we are providing final performance standards for the FY 2028 and FY
2029 program years to comply with the Program's statutory notice
deadline. Second, we are applying the previously finalized scoring
methodology codified at 42 CFR 413.338(e)(1) and 413.338(e)(3) of our
regulations to the SNF WS PPR measure beginning with the FY 2028
program year, which is the first year that measure will be used in the
SNF VBP Program's measure set (88 FR 53280). Third, we are finalizing
our proposal to remove the Health Equity Adjustment to simplify the
scoring methodology and provide clearer incentives for SNFs as they
seek to improve their quality of care for all residents. Fourth, we are
finalizing our proposal to adopt a reconsideration process that will
allow SNFs to seek reconsideration of a review and correction request
if they are not satisfied with CMS's decision on that request,
beginning with the FY 2027 program year. Lastly, we are finalizing our
proposal to adopt several updates to the SNF VBP Program's regulations
text to align with finalized policies.

C. Summary of Cost and Benefits

[[Page 37311]]

[GRAPHIC] [TIFF OMITTED] TR04AU25.006

II. Background on SNF PPS

A. Statutory Basis and Scope

As amended by section 4432 of the Balanced Budget Act of 1997 (BBA
1997) (Pub. L. 105-33, enacted August 5, 1997), section 1888(e) of the
Act provides for the implementation of a PPS for SNFs. This methodology
uses prospective, case-mix adjusted per diem payment rates applicable
to all covered SNF services defined in section 1888(e)(2)(A) of the
Act. The SNF PPS is effective for cost reporting periods beginning on
or after July 1, 1998, and covers virtually all costs of furnishing
covered SNF services (routine, ancillary, and capital-related costs)
other than costs associated with approved educational activities and
bad debts. Under section 1888(e)(2)(A)(i) of the Act, covered SNF
services include post-hospital extended care services for which
benefits are provided under Medicare Part A, as well as those items and
services (other than a small number of excluded services, such as
physicians' services) for which payment may otherwise be made under
Medicare Part B and which are furnished to Medicare beneficiaries who
are residents in a SNF during a covered Medicare Part A stay. A
comprehensive discussion of these provisions appears in the May 12,
1998, interim final rule (63 FR 26252). In addition, a detailed
discussion of the legislative history of the SNF PPS is available
online at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_2018-10-01.pdf">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_2018-10-01.pdf</a>.
Section 215(a) of the Protecting Access to Medicare Act of 2014
(PAMA) (Pub. L. 113-93, enacted April 1, 2014) added new section
1888(g) to the Act, requiring the Secretary to specify an all cause all
condition hospital readmission measure and an all-condition risk
adjusted potentially preventable hospital readmission measure for the
SNF setting. Additionally, section 215(b) of PAMA added section 1888(h)
to the Act requiring the Secretary to implement a VBP program for SNFs.
In 2014, section 2(c)(4) of the Improving Medicare Post-Acute Care
Transformation (IMPACT) Act of 2014 (Pub. L. 113-185, enacted October
6, 2014) amended section 1888(e)(6) of the Act, which requires the
Secretary to implement a QRP for SNFs under which SNFs report data on
measures and resident assessment data. Finally, section 111 of the
Consolidated Appropriations Act, 2021 (CAA, 2021) (Pub. L. 116-260,
enacted December 27, 2020) amended section 1888(h)(2)(A) of the Act,
authorizing the Secretary to apply up to ten measures to the VBP
program for SNFs.

B. Initial Transition for the SNF PPS

Under sections 1888(e)(1)(A) and (e)(11) of the Act, the SNF PPS
included an initial, three phase transition that blended a facility-
specific rate (reflecting the individual facility's historical cost
experience) with the Federal case mix adjusted rate. The transition
extended through the facility's first 3 cost reporting periods under
the prospective payment system (PPS), up to and including the one that
began in FY 2001. Thus, the SNF PPS is no longer operating under the
transition, as all facilities have been paid at the full Federal rate
effective with cost reporting periods beginning in FY 2002. As we now
base payments for SNFs entirely on the adjusted Federal per diem rates,
we no longer include adjustment factors under the transition related to
facility-specific rates for the upcoming FY.

C. Required Annual Rate Updates

Section 1888(e)(4)(E) of the Act requires the SNF PPS payment rates
to be updated annually. The most recent annual update occurred in a
final rule that set forth updates to the SNF PPS payment rates for FY
2025 (89 FR 64048), as amended by the subsequent correction notice (89
FR 80132).
Section 1888(e)(4)(H) of the Act specifies that we provide for
publication annually in the Federal Register the following:
<bullet> The unadjusted Federal per diem rates to be applied to
days of covered SNF services furnished during the upcoming FY.
<bullet> The case mix classification system to be applied for these
services during the upcoming FY.
<bullet> The factors to be applied in making the area wage
adjustment for these services.
Along with other revisions discussed in the proposed rule, this
final rule will set out the required annual updates to the per diem
payment rates for SNFs for FY 2026.

[[Page 37312]]

III. SNF PPS Rate Setting Methodology and FY 2026 Payment Update

A. Federal Base Rates

Under section 1888(e)(4) of the Act, the SNF PPS uses per diem
Federal payment rates based on mean SNF costs in a base year (FY 1995)
updated for inflation to the first effective period of the PPS. We
developed the Federal payment rates using allowable costs from
hospital-based and freestanding SNF cost reports for reporting periods
beginning in FY 1995. The data used in developing the Federal rates
also incorporated a Medicare Part B add-on, which is an estimate of the
amounts that, prior to the SNF PPS, would be payable under Medicare
Part B for covered SNF services furnished to individuals during the
course of a covered Medicare Part A stay in a SNF.
In developing the rates for the initial period, we updated costs to
the first effective year of the PPS (the 15-month period beginning July
1, 1998) using the SNF market basket and then standardized for
geographic variations in wages and for the costs of facility
differences in case mix. In compiling the database used to compute the
Federal payment rates, we excluded those providers that received new
provider exemptions from the routine cost limits, as well as costs
related to payments for exceptions to the routine cost limits. Using
the formula that the BBA 1997 prescribed, we set the Federal rates at a
level equal to the weighted mean of freestanding costs plus 50 percent
of the difference between the freestanding mean and weighted mean of
all SNF costs (hospital-based and freestanding) combined. We computed
and applied separately the payment rates for facilities located in
urban and rural areas and adjusted the portion of the Federal rate
attributable to wage-related costs by a wage index to reflect
geographic variations in wages.

B. SNF Market Basket Update

1. SNF Market Basket
Section 1888(e)(5)(A) of the Act requires us to establish a SNF
market basket that reflects changes over time in the prices of an
appropriate mix of goods and services included in covered SNF services.
Accordingly, we have developed a SNF market basket that encompasses the
most commonly used cost categories for SNF routine services, ancillary
services, and capital-related expenses. In the SNF PPS final rule for
FY 2025 (89 FR 64065 through 64082), we rebased and revised the SNF
market basket, which included updating the base year from 2018 to 2022.
The SNF market basket is used to compute the market basket
percentage increase that is used to update the SNF Federal rates on an
annual basis, as required by section 1888(e)(4)(E)(ii)(IV) of the Act.
This market basket percentage increase is adjusted by a forecast error
adjustment, if applicable, and then further adjusted by the application
of a productivity adjustment as required by section 1888(e)(5)(B)(ii)
of the Act and described in section III.B.4. of this final rule.
As outlined in the proposed rule, we proposed a FY 2026 SNF market
basket percentage increase of 3.0 percent based on IHS Global Inc.'s
(IGI's) fourth-quarter 2024 forecast of the 2022-based SNF market
basket (before application of the forecast error adjustment and
productivity adjustment). We also proposed that if more recent data
subsequently became available (for example, a more recent estimate of
the market basket, the productivity adjustment, and/or the forecast
error adjustment), we would use such data, if appropriate, to determine
the FY 2026 SNF market basket percentage increase, labor-related share
relative importance, forecast error adjustment, or productivity
adjustment in the SNF PPS final rule.
Since the proposed rule, we have updated the FY 2026 SNF market
basket percentage increase based on IGI's second quarter 2025 forecast
with historical data through the first quarter of 2025. The FY 2026
growth rate of the 2022-based SNF market basket is estimated to be 3.3
percent.
2. Market Basket Update Factor for FY 2026
Section 1888(e)(5)(B) of the Act defines the SNF market basket
percentage increase as the percentage change in the SNF market basket
from the midpoint of the previous FY to the midpoint of the current FY.
For the Federal rates outlined in this final rule, we use the
percentage change in the SNF market basket to compute the update factor
for FY 2026. This factor is based on the FY 2026 percentage increase in
the 2022-based SNF market basket reflecting routine, ancillary, and
capital-related expenses. Sections 1888(e)(4)(E)(ii)(IV) and
(e)(5)(B)(i) of the Act require that the update factor used to
establish the FY 2026 unadjusted Federal rates be at a level equal to
the SNF market basket percentage increase. Accordingly, we determined
the total growth from the average market basket level for the period of
October 1, 2024, through September 30, 2025, to the average market
basket level for the period of October 1, 2025, through September 30,
2026. As outlined in the proposed rule, we proposed a FY 2026 SNF
market basket percentage increase of 3.0 percent. For this final rule,
based on IGI's second quarter 2025 forecast with historical data
through the first quarter of 2025, the FY 2026 growth rate of the 2022-
based SNF market basket is estimated to be 3.3 percent.
As further explained in section IV.B.3. of this final rule, as
applicable, we adjusted the percentage increase by the forecast error
adjustment from the most recently available FY for which there is final
data and apply this adjustment whenever the difference between the
forecasted and actual percentage increase in the market basket exceeds
a 0.5 percentage point threshold in absolute terms. Additionally,
section 1888(e)(5)(B)(ii) of the Act requires us to reduce the market
basket percentage increase by the productivity adjustment (the 10-year
moving average of changes in annual economy-wide private nonfarm
business total factor productivity (TFP) for the period ending
September 30, 2026), which is estimated to be 0.7 percentage point, as
described in section IV.B.4. of this final rule.
We also note that section 1888(e)(6)(A)(i) of the Act provides
that, beginning with FY 2018, SNFs that fail to submit data, as
applicable, in accordance with sections 1888(e)(6)(B)(i)(II) and (III)
of the Act for a FY will receive a 2.0 percentage point reduction to
their market basket update for the FY involved, after application of
section 1888(e)(5)(B)(ii) of the Act (the productivity adjustment) and
section 1888(e)(5)(B)(iii) of the Act (the market basket increase). In
addition, section 1888(e)(6)(A)(ii) of the Act states that application
of the 2.0 percentage point reduction (after application of section
1888(e)(5)(B)(ii) and (iii) of the Act) may result in the market basket
percentage change being less than zero for a FY and may result in
payment rates for a FY being less than such payment rates for the
preceding FY. Section 1888(e)(6)(A)(iii) of the Act further specifies
that the 2.0 percentage point reduction is applied in a noncumulative
manner, so that any reduction made under section 1888(e)(6)(A)(i) of
the Act applies only to the FY involved, and that the reduction cannot
be taken into account in computing the payment amount for a subsequent
FY.
The following is a summary of the public comments received on the
proposed FY 2026 SNF market basket percentage increase to the SNF PPS
rates, along with our responses.
Comment: The Medicare Payment Advisory Commission (MedPAC)

[[Page 37313]]

commented that while they understand that the law requires CMS to
update the SNF PPS rates by the market basket minus a productivity
adjustment, MedPAC recommended in its March 2025 Report to Congress
that the Congress should reduce the SNF base payment rates by 3 percent
for FY 2026. MedPAC's payment adequacy analyses indicated that not
including federal relief funds, the aggregate FFS Medicare margin for
freestanding SNFs in 2023 was 22 percent, the 24th consecutive year
that this margin has exceeded 10 percent. MedPAC stated that these high
margins indicate that a reduction is needed to more closely align
aggregate payments to aggregate costs, and that even though CMS is
required by law to update the payment rates each year by the estimated
change in the market basket reduced by the productivity adjustment, the
agency is not required to make automatic forecast-error corrections.
Response: We thank MedPAC for their recommendation and agree that
current law requires us to update SNF PPS payments by the market basket
percentage increase reduced by a productivity adjustment, as directed
by sections 1888(e)(4)(E)(ii)(IV) and 1888(e)(5)(B)(ii) of the Act. We
discuss our application of a forecast error correction in section
IV.B.3 of this final rule.
Comment: Many commenters stated that they appreciate the proposed
3.0 percent market basket percentage increase for FY 2026; however,
several commenters noted that they have reservations about the adequacy
of the increase. Multiple interested parties characterized the proposed
increase as insufficient to address the current economic pressures
confronting skilled nursing facilities nationwide.
Commenters cited persistent inflationary pressures, escalating
operational expenses, and ongoing workforce shortages that continue to
create financial strain across the post-acute care sector. They noted
cost pressures across all dimensions of SNF operations, encompassing
the cost of labor, drugs, medical and non-medical supplies, utilities,
food services, insurance, and other essential operational expenses.
Commenters also stated that these rising costs are anticipated to
continue with the implementation of various regulations and economic
policies, including tariff increases. Additionally, the requirement for
Enhanced Barrier Precautions, which require glove and gown use during
high contact resident care activities for residents that are known to
have history of multi-drug-resistant organisms, has driven up supply
costs, while the reporting of infections to the national health and
safety network is driving up administrative costs. Three commenters
supported and appreciated the proposed net payment update, which they
believed appropriately reflects changes over time in prices of mixed
goods and services.
Multiple commenters expressed concern that the current market
basket methodology consistently produces SNF PPS updates that are
inadequate because the methodology fails to fully account for cost
growth pressures during periods of elevated inflation. One commenter
stated that the Employment Cost Index (ECI) used to measure changes in
labor compensation in the SNF market basket might not fully capture
growth in employment and labor costs, as it does not account for
changes driven by shifts between different categories of labor.
Commenters recommended that CMS reevaluate its market basket
methodology to ensure more precise reflection of expected growth in
SNFs' costs for both labor and goods and services.
Response: We appreciate the comments regarding the proposed FY 2026
SNF PPS market basket update. The 2022-based SNF market basket is a
fixed-weight, Laspeyres-type price index that measures the change in
price, over time, of the same mix of goods and services purchased in
the base period. Any changes in the quantity or mix of goods and
services (that is, intensity) purchased over time relative to a base
period are not measured. The proposed FY 2026 SNF market basket
percentage increase of 3.0 percent reflected the most-recent forecast
available at the time of rulemaking. As stated in the SNF PPS proposed
rule for FY 2026 (90 FR 18593), we proposed that if more recent data
subsequently became available (for example, a more recent estimate of
the market basket and/or the productivity adjustment), we would use
such data, if appropriate, to determine the FY 2026 SNF market basket
percentage increase, labor-related share relative importance, forecast
error adjustment, or productivity adjustment in the SNF PPS final rule.
Since the SNF market basket update is required to be set
prospectively, it relies on a mix of historical data for part of the
period for which the update is calculated and forecasted data for the
remainder. As a result, the market basket percentage increase reflects
expectations of trends, which may periodically differ from actual
experience due to unforeseen events. The forecasted data are provided
by IHS Global Inc. (IGI),\1\ a nationally recognized economic and
financial forecasting firm with which CMS contracts to forecast the
components of the market baskets. For this final rule, we have
incorporated the most recent historical data and forecasts provided by
IGI to capture the expected price and wage pressures facing SNFs in FY
2026. The FY 2026 market basket update in this final rule reflects
historical data through the first quarter of 2025 and forecasted data
through the third quarter of 2026. The final FY 2026 market basket
update is higher than in the proposed rule due to economic uncertainty.
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\1\ <a href="http://www.spglobal.com">www.spglobal.com</a>.
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Concerning the use of the ECI to measure changes in labor
compensation in the market basket, we believe that the ECI for Wages
and Salaries for Private Industry Workers in Nursing Care Facilities is
accurately reflecting the price change associated with the labor used
to provide SNF care. The ECI appropriately does not reflect other
factors that might affect the rate of price changes associated with
labor costs, such as a shift in the occupations that may occur due to
increases in case-mix or shifts in purchasing decisions (for instance,
to hire or to use contract labor). We believe that the prices of
employed staff and contract labor are influenced by the same factors
and should generally grow at similar rates. For this final rule, based
on the more recent IGI second quarter 2025 forecast with historical
data through the first quarter of 2025, the projected 2022-based SNF
market basket increase factor for FY 2026 reflects a projected increase
in compensation prices of 3.3 percent.
Based on IGI's second quarter 2025 forecast with historical data
through first-quarter 2025, the FY 2026 growth rate of the 2022-based
SNF market basket is 3.3 percent. By incorporating the most recent
estimates available of the market basket percentage increase, we
believe these data reflect the best available projection of input price
inflation faced by SNFs in FY 2026.
After consideration of the comments received on the FY 2026 SNF
market basket proposals, we are finalizing a FY 2026 SNF market basket
percentage increase of 3.3 percent (prior to the application of the
forecast error adjustment and productivity adjustment, which are
discussed later in this section).
3. Forecast Error Adjustment
As discussed in the June 10, 2003, supplemental proposed rule (68
FR 34768) and finalized in the August 4,

[[Page 37314]]

2003, final rule (68 FR 46057 through 46059), Sec. 413.337(d)(2)
provides for an adjustment to account for SNF market basket forecast
error. The initial adjustment for SNF market basket forecast error
applied to the update of the FY 2003 rate for FY 2004 and took into
account the cumulative forecast error for the period from FY 2000
through FY 2002, resulting in an increase of 3.26 percent to the FY
2004 update. Subsequent adjustments in succeeding FYs take into account
the forecast error from the most recently available FY for which there
is final data and apply the difference between the forecasted and
actual change in the market basket when the difference exceeds a
specified threshold. We originally used a 0.25 percentage point
threshold for this purpose; however, for the reasons specified in the
FY 2008 SNF PPS final rule (72 FR 43425), we adopted a 0.5 percentage
point threshold effective for FY 2008 and subsequent FYs. As we stated
in the final rule for FY 2004 that first issued the market basket
forecast error adjustment (68 FR 46058), the adjustment will reflect
both upward and downward adjustments, as appropriate.
Table 2 provides the forecast error adjustments applicable to the
FY SNF PPS updates for FY 2016 through FY 2026. The forecast error
adjustments would be based on the SNF market basket percentage increase
for two years prior to the FY SNF PPS update (the most recently
available FY for which there is final data at the time of rate
setting).
[GRAPHIC] [TIFF OMITTED] TR04AU25.007

For FY 2024 (the most recently available FY for which there is
final data), the forecasted or estimated increase in the SNF market
basket was 3.0 percent, and the actual increase for FY 2024 was 3.6
percent, resulting in the actual increase being 0.6 percentage point
higher than the estimated increase. Accordingly, as the difference
between the estimated and actual percentage increase in the market
basket exceeds the 0.5 percentage point threshold, under the policy
previously described (comparing the forecasted and actual market basket
percentage increase), the FY 2026 market basket percentage increase of
3.3 percent is adjusted upward to account for the forecast error
adjustment of 0.6 percentage point, resulting in a FY 2026 SNF market
basket percentage increase of 3.9 percent, which is then reduced by the
productivity adjustment of 0.7 percentage point, discussed in section
III.B.4.A of this final rule. This results in a SNF market basket
update for FY 2026 of 3.2 percent.
Table 3 shows the forecasted and actual market basket percentage
increases for FY 2024.
[GRAPHIC] [TIFF OMITTED] TR04AU25.008

The following is a summary of the public comments received on the
forecast error adjustment, along with our responses.
Comment: Multiple commenters expressed concerns about both the
timing and adequacy of the forecast error correction mechanism as
currently implemented. Commenters noted that the forecast error
correction is applied with a 2-year delay, creating operational and
financial challenges for providers who must manage immediate cost
pressures without adequate compensation during the intervening period.
A few commenters noted that this lagged approach does not fully
compensate for the inaccurate projection because CMS does not apply
additional inflation adjustments to the error correction itself,
thereby compounding the negative financial impact on providers over
time. They indicated that, as a result, the current methodology may
create a systematic underpayment.
A few commenters recommended that CMS consider implementing more
responsive and dynamic mechanisms to address inflation in real-time or
near real-time, rather than relying exclusively on retrospective
adjustments that may inadequately compensate for the immediate and
ongoing financial pressures facing SNFs. Some commenters suggested that
CMS should consider implementing prospective percentage add-ons or
alternative adjustment mechanisms to more accurately reflect the impact
of wage and benefit cost increases, particularly given the ongoing
effects of workforce challenges and new

[[Page 37315]]

regulatory requirements that may further increase operational costs.
Several commenters recommended that CMS conduct a thorough
evaluation of whether the current 0.5 percentage point threshold for
triggering forecast error adjustments remains appropriate given the
increased volatility in healthcare costs and inflation rates
experienced in recent years.
One commenter questioned what assumptions underlie the proposed FY
2026 forecast error adjustment and whether those assumptions are
consistent with past model performance and inflation volatility.
MedPAC noted that not including federal relief funds, the aggregate
FFS Medicare margin for freestanding SNFs in 2023 was 22 percent, the
24th consecutive year that this margin has exceeded 10 percent. They
stated that the high margins indicate that a reduction is needed to
more closely align aggregate payments to aggregate costs, and that
while CMS is required by statute to update the payment rates each year
by the estimated change in the market basket reduced by the
productivity adjustment, the agency is not required to make automatic
forecast error corrections.
Response: We refer readers to the FY 2004 SNF PPS final rule (68 FR
46058) for a discussion of our rationale for applying a forecast error
correction. Regarding other comments, we understand that earlier
forecast error adjustments might be preferable, but a 2-year lag is
necessary because historical data for the current FY are not available
until after the following year's update is determined. Additionally,
while we recognize the appeal of alternative approaches such as
prospective adjustments during periods of economic volatility, this
would have the potential to introduce more variable and unstable
updates. As noted by commenters, the threshold at which forecast error
adjustments are triggered is 0.5 percentage point, which is intended to
distinguish typical statistical variances from more major unanticipated
impacts.
For the FY 2026 SNF PPS update, we proposed a forecast error
adjustment of 0.6 percentage point to account for the difference
between the FY 2024 forecasted increase in the 2018-based SNF market
basket (3.0 percent) and the actual increase in the 2018-based SNF
market basket (3.6 percent)--as the difference between the estimated
and actual percentage increase in the market basket exceeds the 0.5
percentage point threshold. The FY 2024 forecast error is mostly
attributable to compensation prices (as measured by the ECIs for
Private Industry Workers in Nursing Care Facilities), which account for
about 60 percent of the SNF market basket. IGI projected the FY 2024
compensation prices would increase 3.4 percent (notably slower than the
average price growth of 6.5 percent for 2022 and 2023) but slightly
higher than the average of 3.3 percent over the 2014 to 2023 time
period. Actual FY 2024 compensation prices increased 4.3 percent. The
compensation prices forecast error was partially offset by
pharmaceutical prices, which IGI had projected to increase 2.2
percentage points faster than the actual historical data.
When developing its forecast for the ECI for Private Industry
Workers in Nursing Care Facilities, IGI considers overall economic
factors (such as overall inflation and labor market conditions that
included a rise in contract labor employment due to tight labor market
conditions) as well as industry-specific factors (including the skill
mix of the staff and the impact of minimum wage laws). IGI noted that
overall inflation was higher than expectations in 2024 with growth of
3.0 percent compared to projected growth of 2.5 percent. Overall strong
economic growth and strong job creation kept labor markets tight. In
addition, in October 2023 (3 months after the publication of the SNF FY
2024 final rule), California passed S.B. 525 (October 13, 2023) that
lifted the minimum wage for healthcare workers.\2\
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\2\ <a href="https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202320240SB525">https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202320240SB525</a>.
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After consideration of the comments received, we are finalizing the
application of the proposed forecast error adjustment without
modification. As stated previously in this section, based on IGI's
second quarter 2025 forecast with historical data through the first
quarter of 2025, the FY 2026 growth rate of the 2022-based SNF market
basket is estimated to be 3.3 percent. Accordingly, as the difference
between the FY 2024 forecasted and actual percentage change in the
market basket exceeds the 0.5 percentage point threshold, under the
policy previously described (comparing the forecasted and actual market
basket percentage increase), the FY 2026 market basket percentage
increase of 3.3 percent is adjusted upward to account for the forecast
error adjustment of 0.6 percentage point.
4. Productivity Adjustment
Section 1888(e)(5)(B)(ii) of the Act, as added by section 3401(b)
of the Patient Protection and Affordable Care Act (Affordable Care Act)
(Pub. L. 111-148, enacted March 23, 2010), requires that, in FY 2012
and in subsequent FYs, the market basket percentage under the SNF
payment system (as described in section 1888(e)(5)(B)(i) of the Act) is
to be reduced annually by the productivity adjustment described in
section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II)
of the Act, in turn, defines the productivity adjustment to be equal to
the 10-year moving average of changes in annual economy-wide, private
nonfarm business multifactor productivity (MFP) (as projected by the
Secretary of the Department of Health and Human Services (Secretary)
for the 10-year period ending with the applicable FY, year, cost-
reporting period, or other annual period).
The United States Department of Labor's Bureau of Labor Statistics
(BLS) publishes the official measure of productivity for the Unites
States. We note that previously the productivity measure referenced at
section 1886(b)(3)(B)(xi)(II) of the Act was published by BLS as
private nonfarm business multifactor productivity. Beginning with the
November 18, 2021, release of productivity data, BLS replaced the term
MFP with TFP. BLS noted that this is a change in terminology only and
will not affect the data or methodology. As a result of the BLS name
change, the productivity measure referenced in section
1886(b)(3)(B)(xi)(II) of the Act is now published by BLS as private
nonfarm business total factor productivity. We refer readers to the BLS
website at <a href="http://www.bls.gov">www.bls.gov</a> for the BLS historical published TFP data. A
complete description of the TFP projection methodology is available on
our website at <a href="https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch">https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch</a>. In addition, in the FY 2022 SNF final rule (86 FR
42429) we noted that, effective with FY 2022 and forward, we changed
the name of this adjustment to refer to it as the ``productivity
adjustment,'' rather than the ``MFP adjustment.''
Section 1888(e)(5)(A) of the Act, the Secretary shall establish a
SNF market basket that reflects changes over time in the prices of an
appropriate mix of goods and services included in covered SNF services.
Section 1888(e)(5)(B)(ii) of the Act, added by section 3401(b) of the
Affordable Care Act, requires that for FY 2012 and each subsequent FY,
after determining the market basket percentage described in section
1888(e)(5)(B)(i) of the Act, the Secretary shall reduce such percentage
increase by the productivity adjustment described in section
1886(b)(3)(B)(xi)(II)

[[Page 37316]]

of the Act. Section 1888(e)(5)(B)(ii) of the Act further states that
the reduction of the market basket percentage by the productivity
adjustment may result in the market basket percentage being less than
zero for a FY and may result in payment rates under section 1888(e) of
the Act being less than such payment rates for the preceding FY. Thus,
if the application of the productivity adjustment to the market basket
percentage calculated under section 1888(e)(5)(B)(i) of the Act results
in a productivity-adjusted market basket percentage that is less than
zero, then the annual update to the unadjusted Federal per diem rates
under section 1888(e)(4)(E)(ii) of the Act would be negative, and such
rates would decrease relative to the prior FY.
Based on the data available for the FY 2026 SNF PPS proposed rule,
the proposed productivity adjustment (the 10-year moving average of
changes in annual economy-wide private nonfarm business TFP for the
period ending September 30, 2026) was projected to be 0.8 percentage
point.
The following is a summary of the public comments received on the
productivity adjustment, along with our responses.
Comment: We received numerous comments regarding the proposed 0.8
percentage point productivity adjustment, with multiple interested
parties expressing concerns about both the magnitude of this reduction
and the underlying methodology used to calculate the adjustment. One
commenter noted that the proposed productivity adjustment represents a
significant increase compared to prior years, further reducing the SNF
PPS net payment update at a time when providers are confronting
unprecedented cost pressures and operational challenges across multiple
dimensions of their operations. One commenter stated that it is
puzzling how an indicator based on a 10-year moving average could yield
such an increase in the productivity adjustment from FY 2025 to FY
2026; however, the commenter stated they were unable to fully analyze
the projections due to a lack of transparency from CMS. In addition,
the commenter found it troubling that the productivity adjustment is
used only when it decreases Medicare payments.
Several commenters questioned the applicability of TFP to
healthcare settings. One commenter referenced a 2022 CMS memorandum
that outlined the CMS Office of the Actuary's analysis of the TFP
methodology, noting that for the most recent 10-year moving average
period, the growth of TFP for hospitals was below that observed in
other private nonfarm business industries. The commenter cited specific
findings indicating that hospitals' TFP ranged from 0.2 to 0.5 percent,
while private nonfarm business TFP measured 0.8 percent.
Commenters stated that by incorporating private nonfarm business
productivity measures in the current methodology, CMS effectively
accounts for innovation and productivity improvements from diverse
economic sectors that differ significantly from the productivity
capabilities and constraints inherent in healthcare delivery settings,
resulting in an overstated productivity adjustment that inappropriately
reduces Medicare payment rate updates.
Various interested parties emphasized that healthcare providers,
particularly SNFs, face unique operational constraints, regulatory
requirements, quality standards, and patient safety obligations that
limit their ability to achieve productivity gains comparable to other
industries. Several commenters recommended that CMS undertake a
comprehensive reevaluation of the productivity adjustment methodology
to better reflect the actual productivity capabilities and constraints
of healthcare providers, rather than applying economy-wide productivity
measures that may not be achievable or appropriate in clinical care
delivery settings where patient safety and quality of care must remain
paramount considerations.
Response: Section 1888(e)(5)(B)(ii) of the Act requires the
application of the productivity adjustment described in section
1886(b)(3)(B)(xi)(II) of the Act to the SNF PPS market basket increase
factor. As required by statute, the FY 2026 productivity adjustment is
derived based on the 10-year moving average growth in economy-wide
nonfarm business TFP for the period ending in FY 2026. We recognize the
concerns of the commenters regarding the appropriateness of the
productivity adjustment; however, we are required under section
1888(e)(5)(B)(ii) of the Act to apply the specific productivity
adjustment described here.
We have always made available on the CMS website the general method
for calculating the productivity adjustment. This includes providing a
link to the most recent BLS historical TFP data, which allows
interested parties to obtain historical TFP annual index levels for
1987 through 2024. We also provided the IGI projection model (<a href="https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/medicareprogramratesstats/downloads/tfp_methodology.pdf">https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/medicareprogramratesstats/downloads/tfp_methodology.pdf</a>), which
is used to derive annual TFP growth rates for 2025 and 2026. The annual
index level derived from this method is then interpolated to quarterly
levels, and the FY 2026 productivity adjustment is equal to the percent
change in the 40-quarter moving average projected level for the period
ending September 30, 2026, relative to the 40-quarter moving average
projected level for the period ending September 30, 2025. We believe
our methodology for the productivity adjustment is consistent with
section 1886(b)(3)(B)(xi)(II) of the Act, which states that the
productivity adjustment is equal to the 10-year moving average of
changes in annual economy-wide private nonfarm business multi-factor
productivity (as projected by the Secretary for the 10-year period
ending with the applicable FY, year, cost reporting period, or other
annual period).
At the time of this final rule, the FY 2026 productivity adjustment
reflects BLS historical TFP data through 2024 (released on March 21,
2025) and IGI's forecasted TFP growth for 2025 and 2026. The average
annual growth rate of historical TFP published by BLS for 2017 through
2024 is currently 0.9 percent and IGI is projecting average TFP growth
of about 0.0 percent for 2025 and 2026 based on IGI's second quarter
2025 forecast. Combining the historical and projected TFP data over the
entire 10-year time period results in a compound annual growth rate of
TFP of 0.7 percent for 2026. The productivity adjustment (based on the
10-year period ending with FY 2026) for the FY 2026 final rule is 0.1
percentage point lower than in the FY 2026 proposed rule, and primarily
reflects the incorporation of a revised outlook from IGI that has lower
projected economic growth over 2025 and 2026. The 0.7-percent
productivity adjustment in the FY 2026 final rule is larger than the
productivity adjustment in the prior final rules for FY 2023 and FY
2024 mainly due to the incorporation of updated BLS historical data.
In response to commenters' concerns about the productivity
adjustment only being applied if it reduces the payment update, we note
that the productivity adjustment was established under the Affordable
Care Act with a specific policy intent to encourage efficiency
improvements in healthcare delivery by linking Medicare payment updates
to economy-wide productivity gains. Section 1888(e)(5)(B)(ii) of the
Act requires that the Secretary reduce (not increase) the market basket
percentage increase by changes in economy-wide

[[Page 37317]]

productivity, therefore, only positive productivity adjustments are
applied.
As stated previously, in the proposed rule the FY 2026 productivity
adjustment was estimated to be 0.8 percentage point based on IGI's
fourth quarter 2024 forecast. For this final rule, based on IGI's
second quarter 2025 forecast, the productivity adjustment (the 10-year
moving average of changes in annual economy-wide private nonfarm
business TFP for the period ending September 30, 2026) is 0.7
percentage points.
Consistent with section 1888(e)(5)(B)(i) of the Act and Sec.
413.337(d)(2), and as outlined previously in section III.B.2. of this
final rule, the market basket percentage increase for FY 2026 for the
SNF PPS is based on IHS Global Inc.'s second quarter 2025 forecast of
the SNF market basket percentage increase, which is estimated to be 3.3
percent. This market basket percentage increase is then increased by
0.6 percentage point, due to application of the forecast error
adjustment outlined earlier in section III.B.3. of this final rule.
Finally, as outlined earlier in this section, we are applying a 0.7
percentage point productivity adjustment to the FY 2026 SNF market
basket percentage increase. Therefore, the resulting FY 2026 SNF market
basket update is equal to 3.2 percent. Thus, we apply a net SNF market
basket update factor of 3.2 percent in our determination of the FY 2026
SNF PPS unadjusted Federal per diem rates.
5. Unadjusted Federal Per Diem Rates for FY 2026
As stated in the FY 2019 SNF PPS final rule (83 FR 39162), in FY
2020 we implemented a new case-mix classification system to classify
SNF patients under the SNF PPS, the PDPM. As stated in section V.B.1.
of that final rule (83 FR 39189), under PDPM, the unadjusted Federal
per diem rates are divided into six components, five of which are case-
mix adjusted components (Physical Therapy (PT), Occupational Therapy
(OT), Speech-Language Pathology (SLP), Nursing, and Non-Therapy
Ancillaries (NTA)), and one of which is a non-case-mix component, as
existed under the previous Resource Utilization Groups, Version IV
(RUG-IV) model. We proposed to use the SNF market basket update,
adjusted as outlined previously in sections III.B.1. through III.B.4.
of this final rule, to adjust each per diem component of the Federal
rates forward to reflect the change in the average prices for FY 2026
from the average prices for FY 2025. We also proposed to further adjust
the rates by a wage index budget neutrality factor, outlined in section
III.D. of this final rule.
Further, in the past, we used the revised Office of Management and
Budget (OMB) delineations adopted in the FY 2015 SNF PPS final rule (79
FR 45632, 45634), with updates as reflected in OMB Bulletin Nos. 15-01
and 17-01 to identify a facility's urban or rural status for the
purpose of determining which set of rate tables apply to the facility.
As discussed in the FY 2021 SNF PPS proposed and final rules, we
adopted the revised OMB delineations identified in OMB Bulletin No. 18-
04 (available at <a href="https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf">https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf</a>) to identify a facility's urban or rural status
effective beginning with FY 2021. As discussed in the FY 2025 SNF PPS
proposed and final rules, we adopted the revised OMB delineations
identified in OMB Bulletin No. 23-01 (available at <a href="https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf">https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf</a>)
to identify a facility's urban or rural status effective beginning with
FY 2025.
Tables 4 and 5 reflect the unadjusted Federal rates for FY 2026,
prior to adjustment for case-mix.
[GRAPHIC] [TIFF OMITTED] TR04AU25.009

[GRAPHIC] [TIFF OMITTED] TR04AU25.010

C. Case-Mix Adjustment

Under section 1888(e)(4)(G)(i) of the Act, the Federal rate also
incorporates an adjustment to account for facility case-mix, using a
classification system that accounts for the relative resource
utilization of different patient types. The statute specifies that the
adjustment is to reflect both a resident classification system that the
Secretary establishes to account for the relative resource use of
different patient types, as well as resident assessment data and other
data that the Secretary considers appropriate. In the FY 2019 final
rule (83 FR 39162, August 8, 2018), we finalized a new case-mix
classification model, the PDPM, which took effect beginning October 1,
2019. The previous RUG-IV model classified most patients into a therapy
payment group and primarily used the volume of therapy services
provided to the patient as the basis for payment classification, thus
creating an incentive for SNFs to furnish therapy regardless of the
individual patient's unique characteristics, goals, or needs. PDPM
eliminates this incentive and improves the overall accuracy and
appropriateness of SNF payments by classifying patients into payment
groups based on specific, data-driven patient characteristics, while
simultaneously reducing the administrative burden on SNFs.
The PDPM uses clinical data from the Minimum Data Set (MDS), a core
set of screening, clinical, and functional status data elements,
including common definitions and coding categories, which form the
foundation of a comprehensive assessment for all residents of nursing
homes certified to participate in Medicare or Medicaid, consistent with
the provisions of section 1888(e)(4)(G)(i) of the Act. As outlined in
section IV.A. of this final rule, the clinical orientation

[[Page 37318]]

of the case-mix classification system supports the SNF PPS's use of an
administrative presumption that considers a beneficiary's initial case-
mix classification to assist in making certain SNF level of care
determinations. Further, because the MDS is used as a basis for
payment, as well as a clinical assessment, we have provided extensive
training on proper coding and the timeframes for MDS completion in our
Resident Assessment Instrument (RAI) Manual. As previously stated, for
an MDS to be considered valid for use in determining payment, the MDS
assessment must be completed in compliance with the instructions in the
RAI Manual in effect at the time the assessment is completed. For
payment and quality monitoring purposes, the RAI Manual consists of
both the Manual instructions and the interpretive guidance and policy
clarifications posted on the appropriate MDS website at <a href="https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/MDS30RAIManual.html">https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/MDS30RAIManual.html</a>.
Under section 1888(e)(4)(H) of the Act, each update of the payment
rates must include the case-mix classification methodology applicable
for the upcoming FY. The FY 2026 payment rates set forth in this final
rule reflect the use of the PDPM case-mix classification system from
October 1, 2025, through September 30, 2026. The case-mix adjusted PDPM
payment rates for FY 2026 are listed separately for urban and rural
SNFs, in Tables 6 and 7 with corresponding case-mix values.
Given the differences between the previous RUG-IV model and PDPM in
terms of patient classification and billing, it was important that the
format of Tables 6 and 7 reflect these differences. More specifically,
under both RUG-IV and PDPM, providers use a Health Insurance
Prospective Payment System (HIPPS) code on a claim to bill for covered
SNF services. Under RUG-IV, the HIPPS code included the three-character
RUG-IV group into which the patient classified, as well as a two-
character assessment indicator code that represented the assessment
used to generate this code. Under PDPM, while providers still use a
HIPPS code, the characters in that code represent different things. For
example, the first character represents the PT and OT group into which
the patient classifies. If the patient is classified into the PT and OT
group ``TA'', then the first character in the patient's HIPPS code
would be an ``A.'' Similarly, if the patient is classified into the SLP
group ``SB'', then the second character in the patient's HIPPS code
would be a ``B.'' The third character represents the Nursing group into
which the patient classifies. The fourth character represents the NTA
group into which the patient classifies. Finally, the fifth character
represents the assessment used to generate the HIPPS code.
Tables 6 and 7 reflect the PDPM's structure. Accordingly, Column 1
of Tables 6 and 7 represents the character in the HIPPS code associated
with a given PDPM component. Columns 2 and 3 provide the case-mix index
and associated case-mix adjusted component rate, respectively, for the
relevant PT group. Columns 4 and 5 provide the case-mix index and
associated case-mix adjusted component rate, respectively, for the
relevant OT group. Columns 6 and 7 provide the case-mix index and
associated case-mix adjusted component rate, respectively, for the
relevant SLP group. Column 8 provides the nursing case-mix group (CMG)
connected with a given PDPM HIPPS character. For example, if the
patient qualified for the nursing group CBC1, then the third character
in the patient's HIPPS code would be a ``P.'' Columns 9 and 10 provide
the case-mix index and associated case-mix adjusted component rate,
respectively, for the relevant nursing group. Finally, columns 11 and
12 provide the case-mix index and associated case-mix adjusted
component rate, respectively, for the relevant NTA group.
Tables 6 and 7 do not reflect adjustments which may be made to the
SNF PPS rates as a result of the SNF VBP Program, outlined in section
V.II. of this final rule, or other adjustments, such as the variable
per diem adjustment.
BILLING CODE 4120-01-P

[[Page 37319]]

[GRAPHIC] [TIFF OMITTED] TR04AU25.011

[[Page 37320]]

[GRAPHIC] [TIFF OMITTED] TR04AU25.012

BILLING CODE 4120-01-C

D. Wage Index Adjustment

Section 1888(e)(4)(G)(ii) of the Act requires that we adjust the
Federal rates to account for differences in area wage levels, using a
wage index that the Secretary determines appropriate. Since the
inception of the SNF PPS, we have used hospital inpatient wage data in
developing a wage index to be applied to SNFs. We will continue this
practice for FY 2026, as we continue to believe that in the absence of
SNF-specific wage data, using the hospital inpatient wage index data is
appropriate and reasonable for the SNF PPS. As explained in the update
notice for FY 2005 (69 FR 45786), the SNF PPS does not use the hospital
area wage index's occupational mix adjustment, as this adjustment
serves specifically to define the occupational categories more clearly
in a hospital setting; moreover, the collection of the occupational
wage data under the inpatient prospective payment system (IPPS) also
excludes any wage data related to SNFs. Therefore, we believe that
using the updated wage data exclusive of the occupational mix
adjustment continues to be appropriate for SNF payments. As in previous
years, we proposed to continue to use the pre-reclassified IPPS
hospital wage data, without applying the occupational mix, rural floor,
or outmigration adjustment, as the basis for the SNF PPS wage index.
For FY 2026, the updated wage data are for hospital cost reporting
periods beginning on or after October 1, 2021, and before October 1,
2022 (FY 2022 cost report data).
Section 315 of the Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554, enacted
December 21, 2000) gave the Secretary the discretion to establish a
geographic reclassification procedure specific to SNFs, but only after
collecting the data necessary to establish a SNF PPS wage index that is
based on wage data from nursing homes. To date, this has proven to be
unfeasible, due to the volatility of existing SNF wage data and the
significant amount of resources that would be required to improve the
quality of the data. More specifically, auditing all SNF cost reports,
similar to the process used to audit inpatient hospital cost reports
for purposes of the IPPS wage index, would place a burden on providers
in terms of recordkeeping and completion of the cost report worksheet.
Adopting such an approach would require a significant commitment of
resources by CMS and the Medicare Administrative Contractors (MACs),
potentially far in excess of those required under the IPPS, given that
there are nearly five times as many SNFs as there are inpatient
hospitals. While we do not believe this undertaking is feasible at this
time, we will continue to explore implementation of a spot audit
process to improve SNF cost reports to ensure they are adequately
accurate for cost development purposes, in such a manner as to permit
us to establish a SNF-specific wage index in the future. We will
continue to monitor the appropriateness of using the hospital data as a
proxy, and make adjustments in future rulemaking if we identify a
better approach to the wage index.
In addition, we continue to use the same methodology discussed in
the SNF PPS final rule for FY 2008 (72 FR 43423) to address those
geographic areas in

[[Page 37321]]

which there are no hospitals, and thus, no hospital wage index data on
which to base the calculation of the FY 2026 SNF PPS wage index. For
rural geographic areas that do not have hospitals and therefore lack
hospital wage data on which to base an area wage adjustment, we will
continue using the average wage index from all contiguous Core-Based
Statistical Areas (CBSAs) as a reasonable proxy. For FY 2026, the only
rural area without wage index data available is North Dakota. For urban
areas without specific hospital wage index data, we will continue using
the average wage indexes of all urban areas within the State of North
Dakota to serve as a reasonable proxy for the wage index of that urban
CBSA. For FY 2026, the only urban area without wage index data
available is CBSA 25980, Hinesville-Fort Stewart, GA.
In the SNF PPS final rule for FY 2006 (70 FR 45026, August 4,
2005), we adopted the changes discussed in OMB Bulletin No. 03-04 (June
6, 2003), which announced revised definitions for MSAs and the creation
of micropolitan statistical areas and combined statistical areas. In
adopting the CBSA geographic designations, we provided for a 1-year
transition in FY 2006 with a blended wage index for all providers. For
FY 2006, the wage index for each provider consisted of a blend of 50
percent of the FY 2006 MSA-based wage index and 50 percent of the FY
2006 CBSA-based wage index (both using FY 2002 hospital data). We
referred to the blended wage index as the FY 2006 SNF PPS transition
wage index. As discussed in the SNF PPS final rule for FY 2006 (70 FR
45041), after the expiration of this 1-year transition on September 30,
2006, we used the full CBSA-based wage index values.
In the FY 2015 SNF PPS final rule (79 FR 45644 through 45646), we
finalized changes to the SNF PPS wage index based on the newest OMB
delineations, as described in OMB Bulletin No. 13-01, beginning in FY
2015, including a 1-year transition with a blended wage index for FY
2015. OMB Bulletin No. 13-01 established revised delineations for
Metropolitan Statistical Areas, Micropolitan Statistical Areas, and
Combined Statistical Areas in the United States and Puerto Rico based
on the 2010 Census and provided guidance on the use of the delineations
of these statistical areas using standards published in the June 28,
2010, Federal Register (75 FR 37246 through 37252). Subsequently, on
July 15, 2015, OMB issued OMB Bulletin No. 15-01, which provided minor
updates to and superseded OMB Bulletin No. 13-01 that was issued on
February 28, 2013. The attachment to OMB Bulletin No. 15-01 provided
detailed information on the update to statistical areas since February
28, 2013. The updates provided in OMB Bulletin No. 15-01 were based on
the application of the 2010 Standards for Delineating Metropolitan and
Micropolitan Statistical Areas to Census Bureau population estimates
for July 1, 2012, and July 1, 2013, and were adopted under the SNF PPS
in the FY 2017 SNF PPS final rule (81 FR 51983, August 5, 2016). In
addition, on August 15, 2017, OMB issued Bulletin No. 17-01 which
announced a new urban CBSA, Twin Falls, Idaho (CBSA 46300), which was
adopted in the SNF PPS final rule for FY 2019 (83 FR 39173, August 8,
2018).
As stated in the FY 2021 SNF PPS final rule (85 FR 47594), we
adopted the revised OMB delineations identified in OMB Bulletin No. 18-
04 (available at <a href="https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf">https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf</a>) beginning October 1, 2020, including a 1-year
transition for FY 2021 under which we applied a 5 percent cap on any
decrease in a hospital's wage index compared to its wage index for the
prior FY 2020. The updated OMB delineations more accurately reflect the
contemporary urban and rural nature of areas across the country, and
the use of such delineations allows us to determine more accurately the
appropriate wage index and rate tables to apply under the SNF PPS.
In the FY 2023 SNF PPS final rule (87 FR 47521 through 47525), we
finalized a policy to apply a permanent 5 percent cap on any decreases
to a provider's wage index from its wage index in the prior year,
regardless of the circumstances causing the decline. We amended the SNF
PPS regulations at 42 CFR 413.337(b)(4)(ii) to reflect this permanent
cap on wage index decreases. Additionally, we finalized a policy that a
new SNF would be paid the wage index for the area in which it is
geographically located for its first full or partial FY with no cap
applied because a new SNF would not have a wage index in the prior FY.
A full discussion of the adoption of this policy is found in the FY
2023 SNF PPS final rule.
As stated in the FY 2008 SNF PPS proposed and final rules (72 FR
25538 through 25539, and 72 FR 43423), this and all subsequent SNF PPS
rules and notices are considered to incorporate any updates and
revisions set forth in the most recent OMB bulletin that applies to the
hospital wage data used to determine the current SNF PPS wage index.
OMB issued further revised CBSA delineations in OMB Bulletin No. 20-01,
on March 6, 2020 (available on the web at <a href="https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf">https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf</a>). However, we determined
that the changes in OMB Bulletin No. 20-01 do not impact the CBSA-based
labor market area delineations adopted in FY 2021. Therefore, we did
not propose to adopt the revised OMB delineations identified in OMB
Bulletin No. 20-01 for FY 2022 through FY 2024.
On July 21, 2023, OMB issued OMB Bulletin No. 23-01, which updates
and supersedes OMB Bulletin No. 20-01 based on the decennial census.
OMB Bulletin No. 23-01 revised delineations for CBSAs which are made up
of counties and equivalent entities (for example, boroughs; a city and
borough, and a municipality in Alaska; planning regions in Connecticut;
parishes in Louisiana; municipios in Puerto Rico; and independent
cities in Maryland, Missouri, Nevada, and Virginia). As stated in the
FY 2025 SNF PPS final rule (89 FR 64059), we adopted the revised OMB
delineations identified in OMB Bulletin No. 23-01 (available at <a href="https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf">https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf</a>).
OMB has not published further delineation revisions since OMB Bulletin
No. 23-01. Therefore, for FY 2026, we proposed to maintain the current
CBSA delineations. The wage index applicable to FY 2026 is set forth in
Table A and B, available on the CMS website at <a href="http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html">http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html</a>.
Once calculated, we will apply the wage index adjustment to the
labor-related share of the Federal rate. Each year, we calculate a
labor-related share, based on the relative importance of labor-related
cost categories (that is, those cost categories that are labor-
intensive and vary with the local labor market) in the input price
index. In the FY 2025 SNF final rule (89 FR 64060), we finalized a
proposal to revise the labor-related share to reflect the relative
importance of the 2022-based SNF market basket cost weights for the
following cost categories: Wages and Salaries; Employee Benefits;
Professional Fees: Labor-Related; Administrative and Facilities Support
Services; Installation, Maintenance, and Repair Services; All Other:
Labor-Related Services; and a proportion of Capital-Related expenses.
The methodology for calculating the labor-related share beginning in FY
2025 is discussed in detail in the FY 2025 SNF

[[Page 37322]]

PPS final rule (89 FR 64080 through 64081).
We calculate the labor-related relative importance from the SNF
market basket, and it approximates the labor-related share of the total
costs after taking into account historical and projected price changes
between the base year and FY 2026. The price proxies that move the
different cost categories in the market basket do not necessarily
change at the same rate, and the relative importance captures these
changes. Accordingly, the relative importance figure more closely
reflects the cost share weights for FY 2026 than the base year weights
from the SNF market basket. We calculate the labor-related relative
importance for FY 2026 in four steps. First, we compute the FY 2026
price index level for the total market basket and each cost category of
the market basket. Second, we calculate a ratio for each cost category
by dividing the FY 2026 price index level for that cost category by the
total market basket price index level. Third, we determine the FY 2026
relative importance for each cost category by multiplying this ratio by
the base year (2022) weight. Finally, we add the FY 2026 relative
importance for each of the labor-related cost categories (Wages and
Salaries; Employee Benefits; Professional Fees: Labor-Related;
Administrative and Facilities Support Services; Installation,
Maintenance, and Repair Services; All Other: Labor-Related Services;
and a portion of Capital-Related expenses) to produce the proposed FY
2026 labor-related relative importance.
For the proposed rule, the proposed labor-related share for FY 2026
was 71.9 percent and was based on IGI's fourth quarter 2024 forecast of
the 2022-based SNF market basket with historical data through third-
quarter 2024. We also proposed that if more recent data subsequently
became available (for example, a more recent estimate of the market
basket, the productivity adjustment, and/or the forecast error
adjustment), we would use such data, if appropriate, to determine the
FY 2026 SNF market basket percentage increase, labor-related share
relative importance, forecast error adjustment, or productivity
adjustment in the SNF PPS final rule (90 FR 18593). For this final
rule, as proposed, we estimate the labor-related share for FY 2026 to
be 71.9 percent based on IGI's more recent second quarter 2025
forecast, with historical data through the first quarter of 2025. Table
8 summarizes the labor-related share for FY 2026, based on IGI's second
quarter 2025 forecast of the 2022-based SNF market basket, compared to
the labor-related share that was used for the FY 2025 SNF PPS final
rule.
[GRAPHIC] [TIFF OMITTED] TR04AU25.013

To calculate the labor portion of the case-mix adjusted per diem
rate, we will multiply the total case-mix adjusted per diem rate, which
is the sum of all five case-mix adjusted components into which a
patient classifies, and the non-case-mix component rate, by the FY 2026
labor-related share percentage provided in Table 8. The remaining
portion of the rate will be the non-labor portion. Under the previous
RUG-IV model, we included tables which provided the case-mix adjusted
RUG-IV rates, by RUG-IV group, broken out by total rate, labor portion
and non-labor portion, such as Table 9 of the FY 2019 SNF PPS final
rule (83 FR 39175). However, as we discussed in the FY 2020 SNF PPS
final rule (84 FR 38738), under PDPM, as the total rate is calculated
as a combination of six different component rates, five of which are
case-mix adjusted, and given the sheer volume of possible combinations
of these five case-mix adjusted components, it is not feasible to
provide tables similar to those that existed in the prior rulemaking.
Therefore, to aid interested parties in understanding the effect of
the wage index on the calculation of the SNF per diem rate, we have
included a hypothetical rate calculation in Table 10.
Section 1888(e)(4)(G)(ii) of the Act also requires that we apply
this wage index in a manner that does not result in aggregate payments
under the SNF PPS that are greater or less than would otherwise be made
if the wage

[[Page 37323]]

adjustment had not been made. For FY 2026 (Federal rates effective
October 1, 2025), we apply an adjustment to fulfill the budget
neutrality requirement. We meet this requirement by multiplying each of
the components of the unadjusted Federal rates by a budget neutrality
factor, equal to the ratio of the weighted average wage adjustment
factor for FY 2025 to the weighted average wage adjustment factor for
FY 2026. For this calculation, we will use the same FY 2024 claims
utilization data for both the numerator and denominator of this ratio.
We define the wage adjustment factor used in this calculation as the
labor portion of the rate component multiplied by the wage index plus
the non-labor portion of the rate component. The budget neutrality
factor for FY 2026 is 1.0018.
We also proposed that if more recent data become available (for
example, revised wage data and/or updated claims data), we would use
such data, if appropriate, to determine the wage index budget
neutrality factor in the SNF PPS final rule.
The following is a summary of the public comments received on the
wage index and labor-related share along with our responses.
Comment: One commenter supported CMS's proposal to decrease the
labor-related share of the standard rate from 72.0 percent for FY 2025
to 71.9 percent for FY 2026, while another commenter expressed concern
about the effect of the wage index and labor-related share on payment.
Response: We appreciate the commenters' support and concern
regarding the change in the labor-related share. We believe it
continues to be technically appropriate to use the 2022-based SNF
market basket labor-related relative importance to determine the labor-
related share for FY 2026 as it is based on more recent data regarding
price pressures and cost structure of SNFs. The labor-related relative
importance is calculated from the SNF market basket and approximates
the labor-related portion of the total costs after taking into account
historical and projected price changes between the base year and FY
2026. The price proxies that move the different cost categories in the
market basket do not necessarily change at the same rate, and the
relative importance captures these changes.
Comment: Commenters stated support of the permanent 5-percent cap
on wage index decreases. Although there were no OMB reclassifications
in the proposed rule for FY 2026, the FY 2025 updates created
substantial variability in the net reimbursement rates.
Response: We appreciate the commenters' support of the permanent
cap on wage index decreases.
Comment: While commenters support the current wage index
methodology for FY 2026, others encourage CMS to continue to reform the
wage index policies (for example, SNF-specific wage index utilizing SNF
audited cost report and nursing wage data or basing wage index updates
on more recent data). One commenter supported the continued use of
hospital inpatient wage data that provides a more stable and
comprehensive reflection of labor costs, particularly in areas where
wage data specific to SNFs may be limited or inconsistent.
Response: We appreciate the commenters' support of the proposed
wage index policies for FY 2026. In the absence of a SNF-specific wage
index, we believe the use of the pre-reclassified and pre-floor
hospital wage data (without the occupational mix adjustment) continue
to be an appropriate and reasonable proxy for the SNF PPS. For a
detailed discussion of the rationale for our current wage index
policies and for responses to these recurring comments, we refer
readers to the FY 2023 SNF PPS final rule (87 FR 47513 through 47516)
and the FY 2016 SNF PPS final rule (80 FR 46401 through 46402).
After consideration of public comments, we are finalizing our
proposal to continue to use the updated pre-reclassification and pre-
floor IPPS wage index data to develop the FY 2026 SNF PPS wage index.

E. SNF Value-Based Purchasing Program

Beginning with payment for services furnished on October 1, 2018,
section 1888(h) of the Act requires the Secretary to reduce the
adjusted Federal per diem rate determined under section 1888(e)(4)(G)
of the Act otherwise applicable to a SNF for services furnished during
a FY by 2 percent, and to adjust the resulting rate for a SNF by the
value-based incentive payment amount earned by the SNF based on the
SNF's performance score for that FY under the SNF VBP Program. To
implement these requirements, we finalized in the FY 2019 SNF PPS final
rule the addition of Sec. 413.337(f) to our regulations (83 FR 39178).
We refer readers to section VII. of this final rule for further
discussion of the updates we are finalizing for the SNF VBP Program.

F. Adjusted Rate Computation Example

Tables 9 through 11 provide examples generally illustrating payment
calculations during FY 2026 under PDPM for a hypothetical 30-day SNF
stay, involving the hypothetical SNF XYZ, located in Frederick, MD
(Urban CBSA 23224), for a hypothetical patient who is classified into
such groups that the patient's HIPPS code is NHNC1. Table 9 shows the
adjustments made to the Federal per diem rates (prior to application of
any adjustments under the SNF VBP Program as discussed) to compute the
provider's case-mix adjusted per diem rate for FY 2026, based on the
patient's PDPM classification, as well as how the variable per diem
(VPD) adjustment factor affects calculation of the per diem rate for a
given day of the stay. Table 10 shows the adjustments made to the case-
mix adjusted per diem rate from Table 9 to account for the provider's
wage index. The wage index used in this example is based on the FY 2026
SNF PPS wage index that appears in Table 9 available on the CMS website
at <a href="http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html">http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html</a>. Finally, Table 11 provides the case-mix and wage index
adjusted per-diem rate for this patient for each day of the 30-day
stay, as well as the total payment for this stay. Table 11 also
includes the VPD adjustment factors for each day of the patient's stay,
to clarify why the patient's per diem rate changes for certain days of
the stay. As illustrated in Table 11, SNF XYZ's total PPS payment for
this particular patient's stay would equal $23,570.65.

[[Page 37324]]

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[GRAPHIC] [TIFF OMITTED] TR04AU25.015

[[Page 37325]]

[GRAPHIC] [TIFF OMITTED] TR04AU25.016

IV. Additional Aspects of the SNF PPS

A. SNF Level of Care--Administrative Presumption

The establishment of the SNF PPS did not change Medicare's
fundamental requirements for SNF coverage. However, because the case-
mix classification is based, in part, on the beneficiary's need for
skilled nursing care and therapy, we have attempted, where possible, to
coordinate claims review procedures with the existing resident
assessment process and case-mix classification system outlined in
section IV.C. of this final rule. This approach includes an
administrative presumption that utilizes a beneficiary's correct
assignment, at the outset of the SNF stay, of one of the case-mix
classifiers designated for this purpose to assist in making certain SNF
level of care determinations.
In accordance with Sec. 413.345, we include in each update of the
Federal payment rates in the Federal Register a discussion of the
resident classification system that provides the basis for case-mix
adjustment. We also designate those specific classifiers under the
case-mix classification system that represent the required SNF level of
care, as provided in 42 CFR 409.30. This designation reflects an
administrative presumption that those beneficiaries who are correctly
assigned one of the designated case-mix classifiers on the initial
Medicare assessment are automatically classified as meeting the SNF
level of care definition up to and including the assessment reference
date (ARD) for that assessment.
A beneficiary who does not qualify for the presumption is not
automatically classified as either meeting or not meeting the level of
care definition but instead receives an individual determination on
this point using the existing administrative criteria. This presumption
recognizes the strong likelihood that those beneficiaries who are
correctly assigned one of the designated case-mix classifiers during
the immediate post-hospital period would require a covered level of
care, which would be less likely for other beneficiaries.
In the July 30, 1999 final rule (64 FR 41670), we indicated that we
would announce any changes to the guidelines for Medicare level of care
determinations related to modifications in the case-mix classification
structure. The FY 2018 final rule (82 FR 36544) further specified that
we would henceforth disseminate the standard description of the
administrative presumption's designated groups via the SNF PPS website
at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/
SNFPPS/

[[Page 37326]]

index.html (where such designations appear in the paragraph entitled
``Case Mix Adjustment'') and would publish such designations in
rulemaking only to the extent that we actually intend to propose
changes in them. Under that approach, the set of case-mix classifiers
designated for this purpose under PDPM was finalized in the FY 2019 SNF
PPS final rule (83 FR 39253) and is posted on the SNF PPS website
(<a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html</a>), in the paragraph entitled ``Case Mix Adjustment.''
However, we note that this administrative presumption policy does
not supersede the SNF's responsibility to ensure that its decisions
relating to level of care are appropriate and timely, including a
review to confirm that any services prompting the assignment of one of
the designated case-mix classifiers (which, in turn, serves to trigger
the administrative presumption) are themselves medically necessary. As
previously stated in the FY 2000 SNF PPS final rule (64 FR 41667), the
administrative presumption is itself rebuttable in those individual
cases in which the services actually received by the resident do not
meet the basic statutory criterion of being reasonable and necessary to
diagnose or treat a beneficiary's condition (according to section
1862(a)(1) of the Act). Accordingly, the presumption would not apply,
for example, in those situations where the sole classifier that
triggers the presumption is itself assigned through the receipt of
services that are subsequently determined to be not reasonable and
necessary. Moreover, we want to stress the importance of careful
monitoring for changes in each patient's condition to determine the
continuing need for Medicare Part A SNF benefits after the ARD of the
initial Medicare assessment.

B. Consolidated Billing

Sections 1842(b)(6)(E) and 1862(a)(18) of the Act (as added by
section 4432(b) of the BBA 1997) require a SNF to submit consolidated
Medicare bills to its Medicare Administrative Contractor (MAC) for
almost all of the services that its residents receive during the course
of a covered Part A stay. In addition, section 1862(a)(18) of the Act
places the responsibility with the SNF for billing Medicare for
physical therapy, occupational therapy, and speech-language pathology
services that the resident receives during a noncovered stay. Section
1888(e)(2)(A) of the Act excludes a small list of services from the
consolidated billing provision (primarily those services furnished by
physicians and certain other types of practitioners), which remain
separately billable under Medicare Part B when furnished to a SNF's
Part A resident. These excluded service categories are discussed in
greater detail in section V.B.2. of the May 12, 1998, interim final
rule (63 FR 26295 through 26297). Effective with services furnished on
or after January 1, 2024, section 4121(a)(4) of the Consolidated
Appropriations Act, 2023 (CAA, 2023) (Pub. L. 117-328, enacted December
29, 2022) added marriage and family therapists and mental health
counselors to the list of practitioners at section 1888(e)(2)(A)(ii) of
the Act whose services are excluded from the consolidated billing
provision.
Section 103 of the Medicare, Medicaid, and SCHIP Balanced Budget
Refinement Act of 1999 (BBRA 1999) (Pub. L. 106-113, enacted November
29, 1999) amended section 1888(e)(2)(A)(iii) of the Act by further
excluding a number of individual high-cost, low probability services,
identified by HCPCS codes, within several broader categories
(chemotherapy items, chemotherapy administration services, radioisotope
services, and customized prosthetic devices) that otherwise remained
subject to the provision. We discuss this BBRA 1999 amendment in
greater detail in the FY 2001 SNF PPS proposed and final rules (65 FR
19231 through 19232, April 10, 2000, and 65 FR 46790 through 46795,
July 31, 2000), as well as in Program Memorandum AB-00-18 (Change
Request #1070), issued March 2000, which is available online at
<a href="http://www.cms.gov/transmittals/downloads/ab001860.pdf">www.cms.gov/transmittals/downloads/ab001860.pdf</a>.
As explained in the FY 2001 proposed rule (65 FR 19232), the
amendments enacted in section 103 of the BBRA 1999 not only identified
for exclusion from this provision a number of particular service codes
within four specified categories (that is, chemotherapy items,
chemotherapy administration services, radioisotope services, and
customized prosthetic devices), but also gave the Secretary the
authority to designate certain additional, individual services for
exclusion within each of these four specified service categories. In
the FY 2001 SNF PPS proposed rule, we stated that the BBRA 1999
Conference report (H.R. Conf. Rep. No. 106-479 at 854 (1999))
characterizes the individual services that this legislation targets for
exclusion as high-cost, low probability events that could have
devastating financial impacts because their costs far exceed the
payment SNFs receive under the PPS. According to the conferees, section
103(a) of the BBRA 1999 is an attempt to exclude from the PPS certain
services and costly items that are provided infrequently in SNFs. By
contrast, the amendments enacted in section 103 of the BBRA 1999 do not
designate for exclusion any of the remaining services within those four
categories (thus, leaving all of those services subject to SNF
consolidated billing), because they are relatively inexpensive and are
furnished routinely in SNFs.
Effective with items and services furnished on or after October 1,
2021, section 134 in Division CC of the CAA, 2021 established an
additional fifth category of excluded codes in section
1888(e)(2)(A)(iii)(VI) of the Act, for certain blood clotting factors
for the treatment of patients with hemophilia and other bleeding
disorders along with items and services related to the furnishing of
such factors under section 1842(o)(5)(C) of the Act. Like the
provisions enacted in the BBRA 1999, section 1888(e)(2)(A)(iii)(VI) of
the Act gives the Secretary the authority to designate additional items
and services for exclusion within the category of items and services
related to blood clotting factors, as described in that section.
A detailed discussion of the legislative history of the
consolidated billing provision is available on the SNF PPS website at
<a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_2018-10-01.pdf">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/Legislative_History_2018-10-01.pdf</a>.
As stated in the FY 2001 SNF PPS final rule(65 FR 46790), and as is
consistent with our longstanding policy, any additional service codes
that we might designate for exclusion under our discretionary authority
must meet the same statutory criteria used in identifying the original
codes excluded from consolidated billing under section 103(a) of the
BBRA 1999: they must fall within one of the five service categories
specified in the BBRA 1999 and CAA, 2021; and they also must meet the
same standards of high-cost and low-probability in the SNF setting, as
discussed in the BBRA 1999 Conference report. Accordingly, we
characterized this statutory authority to identify additional service
codes for exclusion within the defined categories as essentially
affording the flexibility to revise the list of excluded codes in
response to changes of major significance that may occur over time (for
example, the development of new medical technologies or other advances
in the state of medical practice) (65 FR 46791).
In the FY 2001 SNF PPS proposed rule, we specifically solicited
public comments identifying HCPCS codes in

[[Page 37327]]

any of these five service categories (chemotherapy items, chemotherapy
administration services, radioisotope services, customized prosthetic
devices, and blood clotting factors) representing recent medical
advances that might meet our criteria for exclusion from SNF
consolidated billing. We stated in the FY 2001 SNF PPS proposed rule
that we may consider excluding a particular service if it meets our
criteria for exclusion. We requested that commenters identify in their
comments the specific HCPCS code that is associated with the service in
question, as well as their rationale for requesting that the identified
HCPCS code(s) be excluded.
We also stated in the FY 2001 SNF PPS proposed rule that the
original BBRA amendment and the CAA, 2021 identified a set of excluded
items and services by means of specifying individual HCPCS codes within
the designated categories that were in effect as of a particular date
(in the case of the BBRA 1999, July 1, 1999, and in the case of the
CAA, 2021, July 1, 2020), as subsequently modified by the Secretary. In
addition, as stated in the FY 2001 SNF PPS proposed rule, the statute
(sections 1888(e)(2)(A)(iii)(II) through (VI) of the Act) gives the
Secretary authority to identify additional items and services for
exclusion within the five specified categories of items and services
described in the statute, which are also designated by HCPCS code.
Designating the excluded services in this manner makes it possible for
us to utilize program issuances as the vehicle for accomplishing
routine updates to the excluded codes to reflect any minor revisions
that might subsequently occur in the coding system itself, such as the
assignment of a different code number to a service already designated
as excluded, or the creation of a new code for a type of service that
falls within one of the established exclusion categories and meets our
criteria for exclusion.
Accordingly, if we identify through the current rulemaking cycle
any new services that meet the criteria for exclusion from SNF
consolidated billing, we will identify these additional excluded
services by means of the HCPCS codes that are in effect as of a
specific date (in this case, October 1, 2024). By making any new
exclusions in this manner, we can similarly accomplish routine future
updates of these additional codes through the issuance of program
instructions. The latest list of excluded codes can be found on the SNF
Consolidated Billing website at <a href="https://www.cms.gov/Medicare/Billing/SNFConsolidatedBilling">https://www.cms.gov/Medicare/Billing/SNFConsolidatedBilling</a>.
The following is a summary of the public comments received on the
consolidated billing, along with our responses.
Comment: Commenters submitted two specific HCPCS codes representing
services that the commenters suggested would qualify for exclusion from
SNF CB. One commenter requested that CMS exclude Vyvgart Hytrulo (HCPCS
code J9334), which was approved in 2023 for the treatment of adult
patients with generalized myasthenia gravis (gMG) who are anti-
acetylcholine receptor (AChR) antibody positive, as well as for adult
patients with chronic inflammatory demyelinating polyneuropathy (CIDP).
The commenter did not specify which of the five exclusion categories
under which this service could be excluded but cited that it meets the
criteria as a high-cost, low-probability event in a SNF. Another
commenter requested that CMS exclude Imdelltra (HCPCS code J9026, a new
anticancer drug approved in 2024) in the chemotherapy category. The
commenter stated that the drug is a high-cost, low-probability anti-
cancer treatment, and represents a new technology or change in medical
practice within the statutory chemotherapy category. The commenter also
stated that CMS has previously excluded codes the commenter believes
are similar to the requested new exclusion.
Response: With regard to Vyvgart Hytrulo, this product is used to
treat myasthenia gravis, not cancer, and does not fall into any
statutory drug categories for consolidated billing (CB) exclusion. The
``high-cost, low-probability'' criterion is necessary, but
insufficient, in and of itself, to qualify a service for exclusion; the
service must also fit one of the five service categories as previously
described in this section of the preamble. Accordingly, we are not
excluding Vyvgart Hytrulo from SNF consolidated billing.
Imdelltra is a targeted immunotherapy anticancer drug, approved for
treatment by infusion of extensive stage small cell lung cancer. It
represents a newer form of cancer treatment than traditional
chemotherapy, as it targets antigens on the cancer cells and
simultaneously engages a patient's own ``T ``cells via another antigen,
activating the immune system to destroy the cancer cells. As previously
stated in prior rulemaking cycles, most recently in the FY 2025 SNF PPS
final rule (89 FR 64048), ``chemotherapy is a specific subset of cancer
treatment characterized by its systemic attacking of cell growth.'' We
further stated in the FY 2024 SNF PPS final rule (88 FR 53200) that
services that ``. . . are not actually chemotherapy drugs, but rather
either immunotherapy or other non-chemotherapy treatments for cancer,
or non-chemotherapy services related to or used in conjunction with
chemotherapy or in treatment of chemotherapy symptoms . . . do not fit
the chemotherapy category or any existing exclusion categories.''
Accordingly, we are not excluding Imdelltra, from SNF consolidated
billing.
Comment: Commenters submitted several comments that are beyond the
agency's statutory authority and/or have already been addressed in
previous rulemaking cycles. One comment reiterated a previous
recommendation that CMS develop a policy to exclude high-cost items/
services from consolidated billing. Another commenter reiterated a
previous recommendation that CMS exclude Tumor Treating Fields
(``TTFields'') therapy, but this is not chemotherapy and does not fit
existing categories. Another commenter submitted a list of medications
that they acknowledged were outside the five service categories in
which CMS has statutory authority to add exclusions, but requested CMS
to consider for future exclusion, including: costs of treatment for
residents with multiple sclerosis (MS); GLP-1 medications; migraine
medications; Aimovig, Ajovy, Emgality, Vyepti, Reyvow, Ubrelvy, and
Nurtec; and continuous glucose monitoring devices.
Response: As previously specified in this section of the preamble,
the authority afforded to us under the law to modify the list of
services excluded from SNF consolidated billing is limited to adding or
removing HCPCS codes representing high-cost low-probability services
from the five specific service categories identified in the statute.
Any of the modifications to consolidated billing and/or the SNF program
suggested by the previously mentioned comments would require an act of
Congress to modify the law.
Comment: A commenter requested that CMS consider applying
consolidated billing rules to oral chemotherapy when administered in
the SNF setting.
Response: Consolidated billing rules apply to oral chemotherapy,
and oral chemotherapy may be excluded from consolidated billing rules
in certain scenarios. The drug must otherwise meet the ``high-cost, low
probability'' standard. Furthermore, coverage must be available under
the Medicare Part B oral chemotherapy drug benefit. As stated in the FY
2019 SNF PPS final (83 FR 39181, August 8, 2018), while Medicare Part B
does provide some

[[Page 37328]]

limited coverage for certain oral chemotherapy drugs under section
1861(s)(2)(Q) of the Act, that coverage `` . . . is restricted to those
with the same indication and active ingredient(s) as a covered non-oral
anti-cancer drug.'' On the other hand, we stated in the FY SNF 2020 PPS
final rule (84 FR 38744) that the law does not provide a basis for
excluding Medicare Part-D-only chemotherapy drugs, as the statutory CB
exclusion mechanism described at subclause (II) of Sec.
1888(e)(2)(A)(i) of the Act solely encompasses those services for which
payment otherwise ``may be made under Part B.''
Comment: Commenters expressed general appreciation for CMS
soliciting public comments to identify HCPCS codes that meet the
criteria for exclusion from consolidated billing within the five
specific service categories identified in the statute. Commenters
stated that they have heard of residents being denied admission or
having care restricted due to expensive chemotherapy and other
services. One commenter stated that chemotherapy services pose a
financial barrier for rural SNFs due to their high cost and
administrative complexity. Another commenter added that services in the
five specified categories are very costly and restrict access to SNF
care. Commenters stated they would continue to try to identify HCPCS
codes that meet the requirements for exclusion.
Response: We thank commenters for their review and support.

C. Payment for SNF-Level Swing-Bed Services

Section 1883 of the Act permits certain small, rural hospitals to
enter into a Medicare swing-bed agreement, under which the hospital can
use its beds to provide either acute- or SNF-level care, as needed. For
critical access hospitals (CAHs), Medicare Part A pays on a reasonable
cost basis for SNF-level services furnished under a swing-bed
agreement. However, in accordance with section 1888(e)(7) of the Act,
SNF-level services furnished by non-CAH rural hospitals are paid under
the SNF PPS, effective with cost reporting periods beginning on or
after July 1, 2002. As stated in the FY SNF 2002 PPS final rule (66 FR
39562), this effective date is consistent with the statutory provision
to integrate swing-bed rural hospitals into the SNF PPS by the end of
the transition period, June 30, 2002.
Accordingly, all non-CAH swing-bed rural hospitals have now come
under the SNF PPS. Therefore, all rates and wage indexes outlined in
earlier sections of this final rule for the SNF PPS also apply to all
non-CAH swing-bed rural hospitals. As finalized in the FY 2010 SNF PPS
final rule (74 FR 40356 through 40357), effective October 1, 2010, non-
CAH swing-bed rural hospitals are required to complete an MDS 3.0
swing-bed assessment, which is limited to the required demographic,
payment, and quality items. As stated in the FY 2019 SNF PPS final rule
(83 FR 39235), revisions were made to the swing bed assessment to
support implementation of PDPM, effective October 1, 2019. A discussion
of the assessment schedule and the MDS effective beginning FY 2020
appears in the FY 2019 SNF PPS final rule (83 FR 39229 through 39237).
The latest changes in the MDS for swing-bed rural hospitals appear on
the SNF PPS website at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/index.html</a>.

V. Other SNF PPS Issues

Technical Updates to the PDPM ICD-10 Mappings

1. Background
In the FY 2019 SNF PPS final rule (83 FR 39162), we finalized the
implementation of the PDPM, effective October 1, 2019. The PDPM
utilizes the International Classification of Diseases, 10th Revision,
Clinical Modification (ICD-10-CM, hereafter referred to as ICD-10)
codes in several ways, including using the patient's primary diagnosis
to assign patients to clinical categories under several PDPM
components, specifically the PT, OT, SLP, and NTA components. While
other ICD-10 codes may be reported as secondary diagnoses and
designated as additional comorbidities, the PDPM does not use secondary
diagnoses to assign patients to clinical categories. The PDPM ICD-10
code to clinical category mapping, ICD-10 code to SLP comorbidity
mapping, and ICD-10 code to NTA comorbidity mapping (hereafter
collectively referred to as the PDPM ICD-10 code mappings) are
available on the CMS website at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/PDPM">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/PDPM</a>.
In the FY 2020 SNF PPS final rule (84 FR 38750), we outlined the
process by which we maintain and update the PDPM ICD-10 code mappings,
as well as the SNF Grouper software and other such products related to
patient classification and billing, to ensure that they reflect the
most up to date codes. Beginning with the updates for FY 2020, we apply
non-substantive changes to the PDPM ICD-10 code mappings through a sub-
regulatory process consisting of posting the updated PDPM ICD-10 code
mappings on the CMS website at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/PDPM">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/PDPM</a>. Such non-substantive changes are
limited to those specific changes that are necessary to maintain
consistency with the most current PDPM ICD-10 code mappings.
On the other hand, substantive changes that go beyond the intention
of maintaining consistency with the most current PDPM ICD-10 code
mappings, such as changes to the assignment of a code to a clinical
category or comorbidity list, are made via notice and comment
rulemaking, because they are changes that affect policy. We stated in
the proposed rule that in the case of any diagnoses that are either
currently mapped to ``Return to Provider'' clinical category or that we
proposed to classify into this category, this is not intended to
reflect any judgment on the importance of recognizing and treating
these conditions. Rather, we believe that there are more specific or
appropriate diagnoses that would better serve as the primary diagnosis
for a Medicare Part-A covered SNF stay.
2. Clinical Category Changes for New ICD-10 Codes for FY 2026
Each year, we review the clinical categories assigned to new ICD-10
diagnosis codes and propose adding, removing, or changing the
assignment to another clinical category if warranted. We proposed to
change the clinical category assignment for the following 34 new ICD-10
codes that were effective October 1, 2024. We proposed that 33 ICD-10
codes would be changed to ``Return to Provider,'' and 1 ICD-10 code
would be changed from the ``Acute Neurologic'' category to the
``Medical Management'' category.
a. Type 1 Diabetes Mellitus
Type 1 diabetes mellitus is an autoimmune condition characterized
by insulin deficiency, leading to chronic hyperglycemia. Codes E10.A0
(Type 1 diabetes mellitus, presymptomatic, unspecified), E10.A1 (Type 1
diabetes mellitus, presymptomatic, Stage 1), E10.A2 (Type 1 diabetes
mellitus, presymptomatic, Stage 2), and E10.9 (Type 1 diabetes mellitus
without complications) were initially assigned to the ``Medical
Management'' clinical category. However, these codes refer to diagnoses
in which a patient's Type 1 diabetes is considered presymptomatic,
which means a patient has not developed symptoms, or a patient that is
not experiencing any complications associated with having diabetes. In
both cases, given the patient has not exhibited symptoms or experienced
complications from the condition,

[[Page 37329]]

testing and treatments for these diagnoses would typically occur on an
outpatient basis and not require an inpatient SNF stay in and of
themselves. Therefore, we do not believe these codes will serve
appropriately as the primary diagnoses for a Medicare Part A-covered
SNF stay. We are requiring claims reporting of primary diagnoses that
are the reason for SNF admission, to enable their mapping to clinical
categories that reflect the most accurate resource use for payment.
This does not preclude inclusion of type I diabetes mellitus diagnoses
or any related clinical needs in the beneficiary's plan of care. As a
result, we are changing the mapping of these codes from ``Medical
Management'' to the clinical category of ``Return to Provider''.
b. Hypoglycemia
Hypoglycemia, defined as blood glucose levels below 70 mg/dL, is a
common complication in individuals with diabetes mellitus or other
metabolic disorders. Codes E16.A1 (Hypoglycemia level 1), E16.A2
(Hypoglycemia level 2), E16.A3 (Hypoglycemia level 3), E16.0 (Drug-
induced hypoglycemia without coma), E16.1 (Other hypoglycemia), E16.2
(Hypoglycemia, unspecified), E16.3 (Increased secretion of glucagon),
E16.4 (Increased secretion of gastrin), E16.8 (Other specified
disorders of pancreatic internal secretion), and E16.9 (Disorder of
pancreatic internal secretion, unspecified) were initially assigned to
the ``Medical Management'' clinical category. These diagnoses are
typically treated using interventions such as, but not limited to,
blood sugar monitoring education, dietary counseling, physical exercise
education and training, and pharmacological interventions. Given these
interventions, treatment for these diagnoses would typically occur on
an outpatient basis and not require an inpatient SNF stay in and of
themselves. Therefore, we do not believe these codes will serve
appropriately as the primary diagnoses for a Medicare Part A-covered
SNF stay. We are requiring claims reporting of primary diagnoses that
are the reason for SNF admission, to enable their mapping to clinical
categories that reflect the most accurate resource use for payment.
This does not preclude inclusion of a hypoglycemia diagnoses or any
related clinical needs in the beneficiary's plan of care. As a result,
we are changing the mapping of these codes from ``Medical Management''
to the clinical category of ``Return to Provider''.
c. Obesity
Obesity is a chronic, relapsing, multifactorial disease
characterized by excessive adipose tissue accumulation that increases
the risk of metabolic, cardiovascular, and musculoskeletal disorders.
Codes E66.811 (Obesity, class 1), E66.812 (Obesity, class 2), E66.89
(Other obesity not elsewhere classified), E66.01 (Morbid (severe)
obesity due to excess calories), E66.09 (Other obesity due to excess
calories), E66.1 (Drug-induced obesity), E66.3 (Overweight), and E66.9
(Obesity, unspecified) were initially assigned to the ``Medical
Management'' clinical category. However, these diagnoses are typically
treated using interventions such as, but not limited to, lifestyle
interventions, psychosocial therapy and support, weight management
programs, and pharmacological interventions. Given these interventions,
treatment for these diagnoses would typically occur on an outpatient
basis and not require an inpatient SNF stay in and of themselves.
Therefore, we do not believe these codes will serve appropriately as
the primary diagnoses for a Medicare Part A-covered SNF stay. As a
result, we are changing the mapping of these codes from ``Medical
Management'' to the clinical category of ``Return to Provider''.
d. Anorexia Nervosa, Restricting Type
Anorexia Nervosa (AN) is a psychiatric disorder characterized by
severe food restriction, intense fear of weight gain, and distorted
body image. Patients with AN, restricting type may present with
significant weight loss, malnutrition, and/or medical complications
such as bradycardia, osteoporosis, electrolyte imbalances, and/or organ
dysfunction. Code F50.010 (Anorexia nervosa, restricting type, mild)
was initially assigned to the ``Medical Management'' clinical category.
However, this diagnosis is typically treated using interventions such
as, but not limited to, psychosocial therapy and support, nutritional
counseling, and pharmacological interventions. Given these
interventions, treatment for this diagnosis would typically occur on an
outpatient basis and not require an inpatient SNF stay in and of
itself. Therefore, we do not believe this code will serve appropriately
as the primary diagnosis for a Medicare Part A-covered SNF stay. As a
result, we are changing the mapping of this code from ``Medical
Management'' to the clinical category of ``Return to Provider''.
e. Anorexia Nervosa, Binge Eating/Purging Type
AN is a psychiatric disorder characterized by severe food
restriction, intense fear of weight gain, and distorted body image.
Individuals with AN binge eating/purging type engage in recurrent binge
eating and/or purging behaviors. Codes F50.020 (Anorexia nervosa, binge
eating/purging type, mild) and F50.021 (Anorexia nervosa, binge eating/
purging type, moderate) were initially assigned to the ``Medical
Management'' clinical category. However, these diagnoses are typically
treated using interventions such as, but not limited to, psychosocial
therapy and support, nutritional counseling, and pharmacological
interventions. Given these interventions, treatment for these diagnoses
would typically occur on an outpatient basis and not require an
inpatient SNF stay in and of themselves. Therefore, we do not believe
these codes will serve appropriately as the primary diagnoses for a
Medicare Part A-covered SNF stay. As a result, we are changing the
mapping of these codes from ``Medical Management'' to the clinical
category of ``Return to Provider''.
f. Bulimia Nervosa
Bulimia nervosa is an eating disorder characterized by recurrent
episodes of binge eating, consuming large amounts of food within a
short period, followed by self-induced vomiting, laxative misuse,
fasting, or excessive exercise. Codes F50.21 (Bulimia nervosa, mild)
and F50.22 (Bulimia nervosa, moderate) were initially assigned to the
``Medical Management'' clinical category. However, these diagnoses are
typically treated using interventions such as, but not limited to,
Cognitive-Behavioral Therapy (CBT), psychotherapy, nutritional
counseling, and pharmacological interventions. Given these
interventions, treatment for these diagnoses would typically occur on
an outpatient basis and not require an inpatient SNF stay in and of
themselves. Therefore, we do not believe these codes will serve
appropriately as the primary diagnoses for a Medicare Part A-covered
SNF stay. As a result, we are changing the mapping of these codes from
``Medical Management'' to the clinical category of ``Return to
Provider''.
g. Binge Eating Disorder
Binge eating disorder is characterized by recurrent episodes of
binge eating without compensatory behaviors such as purging, fasting,
and excessive exercise. Codes F50.810 (Binge eating disorder, mild) and
F50.81(Binge eating disorder, moderate) were initially

[[Page 37330]]

assigned to the ``Medical Management'' clinical category. However,
these diagnoses are typically treated using interventions such as, but
not limited to, CBT, psychotherapy, nutritional counseling, and
pharmacological interventions. Given these interventions, treatment for
these diagnoses would typically occur on an outpatient basis and not
require an inpatient SNF stay in and of themselves. Therefore, we do
not believe these codes will serve appropriately as the primary
diagnoses for a Medicare Part A-covered SNF stay. As a result, we are
changing the mapping of these codes from ``Medical Management'' to the
clinical category of ``Return to Provider''.
h. Pica and Rumination Disorder
Pica is an eating disorder characterized by the persistent
consumption of non-nutritive, non-food substances for at least one
month. Rumination is an eating disorder where individuals repeatedly
regurgitate food, rechew, re-swallow, or spit out, for at least one
month. Codes F50.83 (Pica in adults), F50.84 (Rumination disorder in
adults), F98.21 (Rumination disorder of infancy and childhood), and
F98.3 (Pica of infancy and childhood) were initially assigned to the
``Medical Management'' clinical category. However, these diagnoses are
typically treated using interventions such as, but not limited to,
behavioral therapy, nutritional counseling, environmental
modifications, and pharmacological interventions. Given these
interventions, treatment for these diagnoses would typically occur on
an outpatient basis and not require an inpatient SNF stay in and of
themselves. Therefore, we do not believe these codes will serve
appropriately as the primary diagnoses for a Medicare Part A-covered
SNF stay. As a result, we are changing the mapping of these codes from
``Medical Management'' to the clinical category of ``Return to
Provider''.
i. Serotonin Syndrome
Serotonin syndrome is a potentially life-threatening condition
caused by excess serotonin in the central nervous system, typically
resulting from drug interactions or overdose of serotonergic
medications. Code G90.81 (Serotonin syndrome) was initially assigned to
the ``Acute Neurologic'' clinical category. However, this diagnosis
requires specific interventions including identifying and discontinuing
causative agents, symptom management and support, pharmacological
management, patient education, and potentially emergency care or ICU
admission depending on severity. Given these treatment requirements,
care for this diagnosis typically occurs on an outpatient basis or in
an acute care hospital setting rather than requiring an inpatient Part
A SNF stay. Therefore, this code does not serve appropriately as the
primary diagnosis for a Medicare Part A-covered SNF stay while assigned
to the ``Acute Neurologic'' clinical category. Consequently, we propose
remapping this code from ``Acute Neurologic'' to the ``Medical
Management'' clinical category.
We solicited comments on the proposed changes to the PDPM ICD-10
mappings discussed earlier in this section. We received public comments
on these proposals. The following is a summary of the comments we
received and our responses.
Comment: Several commenters supported the proposed reclassification
of the PDPM mappings changes for type 1 diabetes mellitus,
hypoglycemia, obesity, anorexia nervosa-restricting type, anorexia
nervosa-binge eating/purging type, bulimia nervosa, binge eating
disorder, pica and rumination disorder, and serotonin syndrome. These
commenters agreed these mapping changes would improve billing accuracy,
promote more appropriate diagnoses for Part A skilled nursing facility
(SNF) stays, and ultimately improve patient care.
Response: We appreciate the support for these proposed ICD-10
mapping changes.
Comment: A few commenters expressed concerns with the proposed
reclassification of certain conditions from a given clinical category
to a Return to Provider status, suggesting changing the clinical
categories could potentially lead to increased claims denials and
corrections, increased administrative burdens, delays in care, or
restrictions in patient access to skilled care by remapping codes from
the Medical Management clinical category to Return to Provider.
Response: We appreciate the comments and concerns raised by the
commenters. As part of our ongoing review and refinement of the PDPM
ICD-10 mappings, including clinical review, we determined that these
diagnoses would not serve as the basis for a Part A admission to a SNF.
Treatment for these diagnoses would not require, in and of themselves,
an inpatient Medicare Part A SNF stay. Therefore, we do not believe
these codes would serve appropriately as primary diagnoses for a
Medicare Part A-covered SNF stay. We require claims reporting of
primary diagnoses that are the reason for SNF admission, to enable
their mapping to clinical categories that reflect the most accurate
resource use for payment. This does not preclude inclusion of other,
co-occurring diagnoses and any related clinical needs in the
beneficiary's plan of care.
We believe that remapping the codes in question from the Medical
Management clinical category to Return to Provider will also help
reduce billing and administrative burdens by preventing unnecessary
claim denials. Specifically, improving billing accuracy with correct
primary diagnosis codes reduces administrative burden by preventing
claim rejections that require time-intensive corrections and
resubmissions. In the event a patient is admitted with codes mapped to
Return to Provider, these codes may still be used as secondary
diagnoses when appropriate.
Comment: One commenter stated CMS should reconsider mapping ICD-10
code M62.81, Muscle Weakness (Generalized) from Return to Provider to
an alternative category and be used as a primary diagnosis.
Response: We considered this request and, as stated in the FY 2023
SNF PPS final rule (87 FR 47524), we continue to believe that M62.81
Muscle Weakness (Generalized) is nonspecific. If the original condition
has resolved but the resulting muscle weakness persists due to the
known original diagnosis, more specific codes exist that would better
account for the ongoing muscle weakness. Many musculoskeletal
conditions result from previous injury or trauma to a site or are
recurrent conditions. This symptom, without specification of etiology
or severity, does not justify being designated as a primary diagnosis
for a Medicare Part A skilled stay in a SNF. Patients with Muscle
Weakness (Generalized) may obtain a more specific diagnosis that
identifies the cause of the generalized muscle weakness. The specific
diagnosis may then be used to develop an appropriate care plan for the
patient.
Comment: A couple of commenters recommended code G90.81 (Serotonin
Syndrome) remain mapped to the Acute Neurologic clinical category
instead of being remapped to Medical Management.
Response: We appreciate the comments and concerns raised regarding
our proposal to remap code G90.81 (Serotonin syndrome) from the Acute
Neurologic clinical category to the Medical Management clinical
category. We acknowledge that commenters have noted the variable
severity of serotonin syndrome and the potential need for intensive
monitoring and medication management. While we recognize that serotonin
syndrome can

[[Page 37331]]

present with varying degrees of severity, our proposal to remap this
code to Medical Management is based on several key considerations.
The primary interventions for serotonin syndrome, including
identification and discontinuation of causative agents, symptom
management, and pharmacological interventions, are typically managed in
outpatient settings or acute care hospitals rather than requiring SNF
care under a Medicare Part A stay. The condition's management focuses
on medication adjustments and monitoring rather than the intensive
neurological rehabilitation or skilled nursing services that
characterize appropriate Medicare Part A SNF admissions for conditions
classified under the Acute Neurologic clinical category.
For Medicare Part A SNF coverage, the primary diagnosis should
reflect conditions that necessitate skilled nursing care or
rehabilitation services for a Part A SNF admission. While serotonin
syndrome may require careful monitoring, it does not inherently require
the skilled nursing interventions that justify a Medicare Part A SNF
admission as a primary diagnosis when classified within the Acute
Neurologic category versus the proposed Medical Management clinical
category.
It is important to note that remapping this code to Medical
Management does not eliminate access to SNF care when medically
necessary. Patients with serotonin syndrome may still receive
appropriate treatment in the most suitable care setting, have G90.81
used as either a primary or secondary diagnosis when relevant to their
overall care plan, and access Medicare Part A SNF services when their
primary condition requires skilled nursing care.
This remapping will improve the accuracy of primary diagnosis
coding for Medicare Part A SNF stays, reducing administrative burdens
while ensuring that patients receive care in the most appropriate
setting for their specific needs.
Comment: One commenter reported concerns that remapping eating
disorder codes to the clinical category of Return to Provider would
create gaps in care and contrast with the ``Make America Healthy
Again'' initiative. At the same time, the commenter acknowledged eating
disorders can co-occur with other needs requiring skilled care.
Response: We appreciate the thoughtful comments regarding our
proposal to remap the codes for Anorexia Nervosa, Restricting Type;
Anorexia Nervosa, Binge Eating/Purging Type, Bulimia Nervosa, Binge
Eating Disorder, and Pica and Rumination Disorder, from Medical
Management to Return to Provider. We understand the commenter's
concerns about potential care gaps and alignment with health
initiatives, and we value their acknowledgment that eating disorders
may co-occur with other conditions requiring skilled care, however they
would not formulate the basis for needing SNF admission. The primary
interventions for eating disorders as primary diagnoses, including
behavioral therapy, nutritional counseling, environmental
modifications, and pharmacological interventions, are most effectively
delivered in specialized outpatient settings or dedicated eating
disorder treatment facilities. These interventions do not typically
require the skilled nursing services that characterize appropriate
Medicare Part A SNF admissions. By remapping these codes to Return to
Provider, patients can receive care in the most clinically appropriate
and therapeutically effective environment. Requiring claims reporting
of primary diagnoses that are the reason for SNF admission enables
their mapping to clinical categories that reflect the most accurate
resource use and does not preclude their inclusion in beneficiaries'
plan of care. These eating disorder codes may continue to be used as
secondary diagnoses when clinically relevant and medically necessary.
Comment: We received comments recommending out-of-scope mapping
changes for various diagnoses, including sepsis, oral and laryngeal
cancers, secondary cancers, orthopedic surgeries and conditions, brain
tumor, hepatic encephalopathy, and speech-language pathology (SLP)
comorbidities.
Response: We appreciate the thoughtful comments and recommendations
submitted regarding potential mapping changes for various diagnoses,
including sepsis, oral and laryngeal cancers, secondary cancers,
orthopedic surgeries and conditions, brain tumor, hepatic
encephalopathy, and SLP comorbidities. While these recommended changes
fall outside the scope of the current rulemaking cycle, we recognize
their potential significance for improving the accuracy and clinical
appropriateness of our coding system. To the extent that these changes
represent substantive modifications to the ICD-10 code mappings, we
will carefully consider these comments for future rulemaking processes.
After considering the public comments, we are finalizing our
proposed changes to the clinical category assignments for these 34 new
ICD-10 codes.

VI. Skilled Nursing Facility Quality Reporting Program (SNF QRP)

A. Background and Statutory Authority

The SNF QRP is authorized by section 1888(e)(6) of the Act. The SNF
QRP applies to freestanding SNFs, SNFs affiliated with acute care
facilities, and all non-critical access hospital (CAH) swing-bed rural
hospitals. Section 1888(e)(6)(A)(i) of the Act requires the Secretary
to reduce by 2 percentage points the annual market basket percentage
increase described in section 1888(e)(5)(B)(i) of the Act applicable to
a SNF for a FY, after application of section 1888(e)(5)(B)(ii) of the
Act (the productivity adjustment) and section 1888(e)(5)(B)(iii) of the
Act, in the case of a SNF that does not submit data in accordance with
sections 1888(e)(6)(B)(i)(II) and (III) of the Act for that FY. Section
1890A of the Act requires that the Secretary establish and follow a
pre-rulemaking process, in coordination with the consensus-based entity
(CBE) with a contract under section 1890(a) of the Act, to solicit
input from certain groups regarding the selection of quality and
efficiency measures for the SNF QRP. We have codified our program
requirements at Sec. 413.360.
In section VI.C. of the proposed rule, we proposed to remove four
items previously adopted as standardized patient assessment data
elements under the social determinants of health (SDOH) category
beginning with the FY 2027 SNF QRP: one item for Living Situation, two
items for Food, and one item for Utilities. In section VI.D. of the
proposed rule, we proposed to amend our reconsideration policy and
process. We also solicited public comments on several Requests for
Information (RFIs), specifically on: (1) future measure concepts for
the SNF QRP; (2) potential revisions to the data submission deadlines
for assessment data collected for the SNF QRP; and (3) advancing
digital quality measurement in SNFs.

B. General Considerations Used for the Selection of Measures for the
SNF QRP

For a detailed discussion of the considerations that we
historically used for the selection of quality, resource use, or other
measures for the SNF QRP, we refer readers to the FY 2016 SNF PPS final
rule (80 FR 46429 through 46431).
1. Quality Measures Currently Adopted for the FY 2028 SNF QRP
The SNF QRP currently has 15 adopted measures, which are set forth
in Table 12. We did not propose to adopt any new measures for the SNF
QRP.

[[Page 37332]]

For a discussion of the factors we use to evaluate whether a
measure must be removed from the SNF QRP, we refer readers to our
regulations at Sec. 413.360(b)(2) and to the FY 2019 SNF PPS final
rule (83 FR 39267 through 39269). We did not propose to remove any
measures from the SNF QRP.
[GRAPHIC] [TIFF OMITTED] TR04AU25.017

C. Removal of Four Standardized Patient Assessment Data Elements
Beginning With the FY 2027 SNF QRP

We refer readers to the FY 2025 SNF PPS final rule (89 FR 64100
through 64111) where we finalized the adoption of four new items as
standardized patient assessment data elements under the SDOH category
for addition to the Minimum Data Set (MDS).\3\ Specifically, we
finalized the following items to be added to the MDS in the FY 2025 SNF
PPS final rule: one item for Living Situation (R0310); two items for
Food (R0320A and R0320B); and one item for Utilities (R0330). As
finalized in the FY 2025 SNF PPS final rule, SNFs would be required to
report these data elements using the MDS beginning with residents
admitted on October 1, 2025, through December 31, 2025, for purposes of
the FY 2027 SNF QRP and each program year after (89 FR 64115 through
64118).
---------------------------------------------------------------------------

\3\ The MDS 3.0 is CMS's required assessment instrument used by
SNFs to collect certain data from residents upon their admission and
discharge from the SNF. See section 1899B of the Act, which requires
SNFs to use of Post-Acute Care (PAC) assessment instruments for
collecting and submitting to CMS certain standardized patient
assessment data as part of PAC quality reporting programs, including
the SNF QRP.
---------------------------------------------------------------------------

In the proposed rule, we proposed to remove these four standardized
patient assessment data elements under the SDOH category from the MDS
as we acknowledge the burden associated with these items at this time.
We continuously look for ways to balance the need for data collections
regarding quality care and the burden that such data collections may
have on SNFs and their staff. One goal we have is to facilitate
improved health care delivery by requiring different systems and
software applications to communicate and exchange data. Therefore, we
would like to work towards the workflow for these items being part of a
low burden interoperable electronic system. The focus will turn towards
how the data and associated recommendations can improve care
coordination, efficiency, reduction in errors, and resident experience.
As health information technology (IT) advances and interoperability of
data becomes more standardized, the burden to collect and share
clinical data on these and other relevant resident information will
become less burdensome, allowing for better outcomes for SNF residents
and their families. The objectives of the SNF QRP continue to be the
improvement of care, quality, and health outcomes for all residents
through transparency and quality measurement, while not imposing undue
burden on essential health providers.
We proposed that SNFs would not be required to collect and submit
the Living Situation (R0310), Food (R0320A and R0320B), and Utilities
(R0330) items using the MDS beginning with residents admitted on or
after October 1, 2025, removing the required collection and reporting
of these items that we previously finalized. We also proposed

[[Page 37333]]

that collecting these items would not be required to meet the SNF QRP
requirements to avoid a 2 percent payment reduction beginning with the
FY 2027 SNF QRP.
In the proposed rule, we calculated that removing these items from
the data collection for the FY 2027 SNF QRP would keep the 15,253 SNFs
from incurring 31,791.20 hours of administrative burden at a cost of
$2,228,563.12 (or $146.11 per SNF) at this time (90 FR 18605). We refer
readers to section IX.A.6.a. of this final rule for details on this
estimated burden reduction.
The following is a summary of the public comments received on our
proposal to remove these four standardized patient assessment data
elements collected under the SDOH category from the SNF QRP beginning
with the FY 2027 SNF QRP, along with our responses.
Comment: Several commenters supported the proposed removal of the
four SDOH assessment items, stating that they would add complexity and
administrative burden to the resident assessment process. One commenter
stated that this proposed removal would be most beneficial for rural
SNFs, who may lack dedicated administrative personnel to manage new
data collection mandates. Many of these commenters expressed concerns
that these items can be time-consuming to collect and detract from
direct resident care. A few commenters acknowledged that CMS must work
towards a balance of SNF provider burden and data collection efforts
for quality, ensuring data adds value to its program and advances
health care.
Several commenters that supported the proposed removal stated that,
while the SDOH items are an important part of discharge planning, the
SDOH items were not relevant to the SNF QRP. Two other commenters
stated the information would already be in the resident's medical
record and would thus be duplicative of collection efforts across the
care continuum, such as data collected by the hospital. A few
commenters noted that, while the data elements may impact a resident's
overall well-being, the SDOH items are reflective of issues outside the
SNF and will not be resolved during the stay. Some commenters stated
that these items do not accurately reflect the facility's outcomes, and
that SDOH screening is better addressed through community-based care
settings or discharge planning rather than SNF quality reporting.
Response: We thank commenters for their support for our proposal to
remove these four SDOH items from the standardized patient assessment
data elements collected and submitted using the MDS. We continue to
monitor the SNF QRP data collection requirements to look for ways to
reduce administrative burden, where appropriate, while maintaining a
high standard of quality care. We agree that removing these items at
this time will alleviate some of the burden on SNF providers associated
with SNF QRP data collection and submission requirements. We intend to
align the SNF QRP more closely with our overarching goal for improved
health care delivery through health IT advances and low-burden
interoperable electronic systems. As we stated in the FY 2026 SNF PPS
proposed rule (90 FR 18605), we plan to refocus efforts on how data
elements can improve care coordination, efficiency, reduction in
errors, and resident experience.
We appreciate commenters' recognition of having an appropriate
balance of burden and value in quality measurement programs, such as
the SNF QRP. By streamlining the number of data elements required for
reporting, SNFs and their staff can focus efforts and resources to
address the quality issues that matter most to their residents. As
stated in section VI.E. of this rule, we are soliciting comment on
measurement concepts that address residents' well-being while more
appropriately reflecting factors that are within practitioners' and
facilities' scope of care or where practitioners can provide actionable
advice that will help reduce the prevalence of chronic diseases,
including nutrition, increased adherence to expected daily thresholds
for physical activity, minimization of chronic stressors, and
improvements in mental health.
We also acknowledge that many SNFs already collect the information
that would otherwise be required under these four SDOH items as part of
the discharge planning process. We note that SNFs may continue
collecting information that is beneficial regardless of the
requirements of the SNF QRP, particularly if it may facilitate
discharge planning and contribute to quality improvement efforts.
Comment: One commenter suggested making the four SDOH measures
optional in the SNF QRP.
Response: We wish to clarify that we did not adopt SDOH measures.
In the FY 2025 SNF PPS final rule (89 FR 64100 through 64111), we
finalized the adoption of four new standardized patient assessment data
elements under the SDOH category for inclusion in the SNF QRP. As
previously finalized, SNFs would have collected and submitted these
standardized patient assessment data using the MDS beginning with
residents admitted on or after October 1, 2025, in accordance with
sections 1888(e)(6)(B)(i)(III) and 1899B(a)(1)(A)(i) and (b)(1) of the
Act. In the FY 2025 SNF PPS final rule (89 FR 64100), we described
these statutory requirements regarding the collection and submission of
standardized patient assessment data under the SNF QRP. While SNFs
collect and submit standardized patient assessment data using the MDS
to fulfill SNF QRP requirements at section 1888(e)(6)(B)(i)(III) of the
Act, and these data may be used to calculate SNF QRP measures as
provided in section 1889B(b)(1)(B) of the Act, these data are not in
themselves quality, resource use, and other measures specified for the
SNF QRP.
In the proposed rule (90 FR 18605 and 18606), we proposed the
removal of these four standardized patient assessment data elements
from the SNF QRP. We did not propose to modify these four SDOH items to
be optional data elements on the MDS that SNFs could voluntarily
report. Because we are finalizing our proposal to remove these four
SDOH items as proposed, they will not be added to the MDS item set for
voluntary data collection efforts. If SNFs want to voluntarily collect
them, they can do so.
Comment: We received many comments that were opposed to our
proposal to remove the four SDOH items from the SNF QRP and recommended
that CMS reconsider the proposal. These commenters stated that this
information adds value to SNFs, citing certain literature on how
screening for SDOH improves health outcomes and how this information
facilitates discharge planning and coordination of care across settings
providing a proactive approach to risks. Many of these commenters
stated that collecting these data allows SNFs to identify barriers to
care access and adherence to medical plans. Some commenters further
stated that they are already collecting SDOH data on their residents to
support efforts of nurses, social workers, and care managers. One of
these commenters stated that these items are particularly useful in
rural SNFs to address deficits in rural residents' living situations. A
few commenters stated these SDOH items were particularly important in
caring for patients with complex or chronic conditions and geriatric
patients. These commenters noted that integration of SDOH into care
planning can result in cost savings by reducing readmissions and
emergency

[[Page 37334]]

department visits while improving patients' post-care outcomes.
Response: We appreciate the commenters' concerns and feedback
regarding the importance of collecting these SDOH items from SNF
residents and acknowledge the value that commenters ascribe to the
collection of this information for discharge planning and care
coordination. We recognize commenters' experiences using SDOH data to
improve outcomes and facilitate high quality care through improved
coordination between SNF providers. We also acknowledge feedback from
commenters that healthcare outcomes may be different for those
residents experiencing unstable housing, food insecurity, or challenges
paying utilities.
However, in reviewing the data collection and reporting
requirements for the FY 2027 SNF QRP, we determined that these SDOH
items should be removed from the MDS prior to the start of data
collection and submission. We have re-evaluated the value of adding
these SDOH items to the MDS for the purposes of the SNF QRP against
their burden at this time. We considered that SNFs have not yet begun
to report these data, we do not currently have a use for these items in
the SNF QRP, and these SDOH items are not clinical items related to
direct resident care. We also have refocused our efforts on
modernization of health care and health care systems, which may support
less burdensome ways of collecting SDOH data in the future. We
continuously review and reassess the balance of data collection and SNF
provider burden for the SNF QRP, and at this time, determined these
SDOH items should be removed prior to implementation.
The objectives of the SNF QRP continue to be the improvement of
care, quality, and health outcomes for all patients through
transparency and quality measurement, while balancing burden for SNFs
and their staff. As outlined in our request for information in the FY
2026 SNF PPS proposed rule (90 FR 18608 and 18609), we are refocusing
our efforts to advance the digital quality measurement transition to
include ways for data elements, such as those related to SDOH, to be
collected as part of a low-burden interoperable electronic system.
Given these administrative goals and efforts to reduce burden for SNFs,
we do not believe that the collection of SDOH items via the MDS
assessment outweighs the cost and burden of collecting them at this
time.
At this time, we believe that halting the implementation of the
four SDOH items prior to their being added to the MDS on October 1,
2025 removes the burden these data collection and submission
requirements would impose on SNFs before most training activities, data
collection, reviews of the guidance manuals, and other implementation
tasks have occurred. To the extent SNFs may find collecting this or
similar information from their residents helpful to inform clinical
decisions and discharge planning, the removal of collecting and
reporting this information to CMS to comply with SNF QRP requirements
should not, in any way, preclude SNFs from collecting and using this
information on their own.
Comment: One commenter stated that residents are often sent to SNFs
when they are unable to live at home for reasons related to the four
SDOH items. The commenter stated that retaining the SDOH items in the
MDS would help mitigate a gap in resources that limit SNFs from
effectively addressing SDOH issues (for example, staffing inadequacies,
managed care and commercial insurance restrictions, and insufficient
reimbursement rates). The commenter stated that these items would help
local and Federal agencies better understand where funds are allocated
and how they are utilized.
Response: We acknowledge that some SNF residents may face
challenges related to SDOH that affect the resident being safely
discharged home. We wish to clarify that SNFs have not collected these
four items for the purposes of the SNF QRP to date because data
collection and submission using the MDS was set to begin with residents
admitted on or after October 1, 2025. Additionally, we interpret the
comment regarding resource gaps to say that these SDOH items could be
utilized by local and Federal agencies to illuminate limits placed on
SNFs by managed care and commercial insurance companies or to highlight
areas for staffing improvements. We do not believe that the submission
of these items to us would achieve these goals, and we wish to clarify
that the SDOH items were never intended for the purpose of informing us
about staffing challenges or private payers' insurance practices or
reimbursement rates. The purpose of the SNF QRP is to require
collection and submission of data to CMS as we have specified. Even
though we will no longer require that SNFs collect and submit these
four items to CMS using the MDS, SNFs can still collect and use SDOH
information and share this with local agencies, in compliance with
applicable laws governing confidentiality and privacy of patient/
resident information, if they believe this would be beneficial.
Comment: Another commenter specifically opposed removing the
Utilities (R0330) item on the MDS from the SNF QRP. This commenter
stated that the availability of reliable electricity is necessary for
patients who need mechanical devices, such as ventilators, CPAP
machines, and oxygen equipment, after discharge. This commenter noted
that a patient without access to electricity could not be safely
discharged to home.
Response: We agree with the commenter about the importance of
reliable electricity being available for residents who need mechanical
devices, such as ventilators, CPAP machines, and oxygen equipment,
after discharge. We disagree, however, that if the Utilities (R0330)
item is removed from the MDS item set, then SNFs would not question the
resident about and consider this information in their discharge plan.
SNFs are already required by our regulation at Sec. 483.21(c)(1) to
develop and implement an effective discharge planning process,
including ensuring that the discharge needs of each resident are
identified and result in the development of a discharge plan for each
resident (Sec. 483.21(c)(1)(i)). On this basis, we believe that if it
were necessary for residents to have electricity to use mechanical
devices after discharge from the SNF, then the SNF would be required to
address and consider such need as part of their planning process for
safely discharging a resident to home.
Comment: One commenter recommended that, rather than removing these
four SDOH items, CMS should invest in reducing the manual burden
associated with collecting and submitting these items by using
automation via interoperable systems (for example, electronic health
record (EHR)-based application programming interfaces (APIs) as
suggested by the Fast Healthcare Interoperability Resources[supreg]
(FHIR[supreg]) Roadmap and Trusted Exchange Framework and Common
Agreement\TM\ (TEFCA\TM\)). The commenter stated that the SDOH items
support more equitable care coordination, and that facilitating the
analysis and collection of data via more interoperable means is a
critical step forward. One commenter disagreed that the burden of
reporting outweighed the benefit of these items, stating that
prospective losses in care efficiency and adverse outcomes may outweigh
such minimal savings.
Response: We agree with the commenters that the exchangeability of
information is important for a

[[Page 37335]]

comprehensive plan of care. We intend to work towards the workflow and
data exchange for data elements being part of a less burdensome
interoperable electronic system. We appreciate the commenters'
suggestion to retain the items until a more efficient health IT
infrastructure and data collection framework is in place. However, all
data collection requirements have inherent burden associated with
collection and we strive to balance that burden with the value of
measuring the quality of care that residents receive. Data collection
for these four SDOH items would be burdensome on SNFs and there is no
current or planned use for the data in the SNF QRP at this time. As
previously stated, SNFs can continue to collect this information to
inform discharge planning but, for the purposes of the SNF QRP, we are
finalizing our proposal to remove these four SDOH items from the MDS
before implementation begins. This means that SNFs would not need to
collect and submit this information to meet the requirements of the SNF
QRP. With alleviation of this data collection requirement, SNFs could
redistribute their resources toward efforts to improve or enhance
clinical care, health IT, or other areas as determined by the SNF.
Comment: One commenter stated that CMS provided extensive support
and rationale for adopting these four items in the FY 2025 SNF PPS
final rule, developing a policy that was well-vetted and examined in
detail. This commenter stated that CMS has not provided any reasoning
or explanation in our proposal in the FY 2026 SNF PPS proposed rule as
to why these are no longer important or how circumstances have changed
to necessitate their removal. Other commenters stated that removal of
these items prior to implementation is premature and that keeping them
would support alignment of payment, data, and accountability mechanisms
to improve care.
Response: In the proposed rule, we explained that the removal of
these items is a result of our focus on balancing the need for data
collection regarding quality care and the burden of these data
collections on SNFs and their staff (90 FR 18605). We would like to
reiterate that SNFs and their staff independently may determine to
screen their residents for factors that may affect their clinical
decision-making, even in the absence of a reporting requirement. We did
not intend to suggest with our proposal to remove these items from SNF
QRP requirements that SNFs should cease collecting this or similar
information for other purposes, such as the SNF's resident-specific
assessment of needs in developing a discharge plan as required by Sec.
483.21(c)(1)(i). Rather, we are removing the four SDOH items from the
MDS to reduce the burden of data collection and submission for the SNF
QRP. Reducing the burden of SNF QRP requirements would enable SNFs and
their staff to focus their efforts on clinical decision making by
preserving clinicians' flexibility to address social risk factors in
other ways that are tailored to the needs of and make the most sense
for their resident populations.
We understand implementation efforts to collect and submit any data
elements for the purposes of meeting SNF QRP requirements is inherently
burdensome for SNFs and their staff, particularly adopting and
implementing new data elements since they involve adjustments to health
IT systems and EHRs, workflows, and staff trainings. We are always
reviewing and reassessing this balance of data collection and SNF
provider burden for the SNF QRP.
For the four SDOH items, we reconsidered the value of their
collection and submission to us for the purposes of the SNF QRP against
their burden at this time. We specifically considered that these items
are not clinical in nature. While they reflect certain aspects of a
resident's health that may inform clinical decisions, they are not
factors within the scope of care a SNF and its staff provides.
Furthermore, if maintained on the MDS, there is currently no use for
these items in risk adjustment models, reporting of SNF measure
results, or the development of new quality measures. We proposed
removal of the four SDOH items from the MDS because SNFs have not
started data collection for these items yet, we are not utilizing the
information for any purpose at this time, and there is an agency-wide
refocusing on modernization of health care and health care systems and
on engaging SNFs and their staff with these health IT efforts. We are
working towards developing less burdensome data collection methods as
we believe leveraging technological advances and data modernizations
can streamline standardization of the MDS in ways that support
interoperable patient data and reduce time spent collecting this data
by SNFs and their staff. We strive to collaborate with SNFs and their
staff in these efforts as exhibited in our request for information on
advancing digital quality measurement (dQM) in the FY 2026 SNF PPS
proposed rule (90 FR 18608 and 18609). This collaboration includes
reducing the burden of paperwork for participating in the SNF QRP,
where possible, to support SNFs in moving towards health data
technology and interoperability that promotes spending more time with
residents. SNFs are welcome to continue collecting this information to
inform care coordination and discharge planning.
Comment: A few commenters opposed our proposal to remove the SDOH
items. They noted that these items are critical for risk adjustment and
evaluating SNF performance across demographic groups.
Response: We wish to clarify that these four SDOH items are not
currently being used for risk adjustment for any SNF QRP measures, and
we do not currently utilize them for evaluating SNF performance across
demographic groups. Furthermore, as we stated earlier, there are no
current plans for utilizing the four SDOH items in risk adjustment
models or to report SNF performance stratified by these elements,
either publicly or in confidential feedback reports. While we finalized
the adoption of the four SDOH items in the FY 2025 SNF PPS final rule
(89 FR 64100 through 64111), SNFs have not begun to report these data.
Because data collection has not begun and we do not have an active use
for these items, we have re-evaluated the value of adding them to the
MDS at this time.
Comment: A few commenters stated that the SDOH items provide
important insights into housing, food, and utility insecurity, which
affect patient outcomes and that removing these SDOH items is counter
to national efforts aimed at improving health outcomes, including the
agency's current goals related to the development of patient nutrition,
physical activity, and well-being measures. The commenters noted that
the SDOH items could be utilized to support the Make America Healthy
Again initiative's core mission of a more efficient, prevention-focused
health care system through the treatment of expensive complications
that could be prevented through early identification of risks.
Response: We disagree but understand why SNF providers believe that
removal of these items is counter to our national efforts aimed at
improving health outcomes. In response to comments about the agency's
goals related to nutrition and well-being, we do not believe these four
SDOH items are the only foundational items needed for future measure
development related to nutrition. As we finalized in the FY 2025 SNF
PPS final rule (89 FR 64103), the two Food items (R0320A and R0320B)
each assess one particular

[[Page 37336]]

aspect of nutrition: food availability and food security. These items
do not encompass other relevant, meaningful information to improve
residents' health outcomes, including healthy nutrition, sleep, and
physical activity levels. In addition, we believe there are other
existing items on the MDS that could support the development of measure
concepts we are considering in the future. For example, the MDS
includes nutrition items in Section K and Section I. To reiterate, at
this time, we are removing these SDOH items to refocus efforts and
resources towards a less burdensome interoperable system for SNFs
participating in the SNF QRP and existing MDS items, such as the
standardized patient assessment data elements in Section K that were
finalized in the FY 2020 SNF PPS final rule (84 FR 38791 through
38795), provide a foundation for building out nutrition measures.
We are soliciting comment on ways to improve patient well-being
across the Medicare programs and we remain committed to identifying the
needs of residents and supporting SNFs in addressing those risks in a
way that best accounts for residents' clinical circumstances with
minimal burden. We also remain committed to supporting SNFs and their
staff in addressing health risks and needs of at-risk populations such
as those experiencing challenges with maintaining healthy nutrition and
physical activity levels and managing or improving chronic stressors,
mental health concerns, and chronic diseases.
Comment: A few commenters opposed to the removal of the four SDOH
items from the SNF QRP were concerned that many healthcare facilities
across the country have already made substantial investments to
incorporate the screening of these SDOH items, including setting up
systems, EHRs, and workflows. These commenters stated that this would
amount to more than ongoing implementation costs, and that hospitals
and other settings expecting to report these items have already
expended the necessary resources to set up their systems and referral
programs. These commenters stated that removing these measures does not
negate their prior investments and may result in additional resources
to rework their systems.
Similarly, a few commenters who supported the removal had concerns
about the proposed effective date for removal, stating that there may
be challenges for health IT companies to revise and deploy system
updates to the MDS in time to meet potential compliance requirements,
particularly if CMS does not finalize the proposal to remove. One of
these commenters noted that this results in a significant risk of
wasted resources, including design, coding, testing, and integration,
that could be spent elsewhere to serve SNF providers and patients.
These commenters encouraged CMS to consider mechanisms to provide
earlier clarity in future rulemaking to prevent similar inefficiencies.
Response: We acknowledge the commenters' concerns and understand
the time and resources that SNFs may have spent anticipating the
requirement to collect these items as part of the SNF QRP. Since the
inception and initial development of the SNF QRP, interested parties
have requested we provide draft specifications for the upcoming release
of the revised MDS as early as possible. We have been responsive to
this request and aim to provide as much information as possible when
that information is available. For our proposal to remove the four SDOH
items, we posted two sets of draft MDS data specifications so SNFs and
their staff could understand what would need to be done if the proposal
was finalized. However, we would like to emphasize that the information
released consists of draft MDS data specifications, not final
specifications, and that the MDS data specifications cannot be
finalized until CMS policies are finalized after the final rule is
released.
We also note that the time and resources spent to build technical
infrastructure accounts for only a portion of the overall cost we
considered, which also includes training activities, continuous data
collection, reviews of the guidance manuals, and other implementation
tasks. Collecting these SDOH items is not a one-time task but an
ongoing requirement for every SNF resident admitted to the facility. As
a result, we believe removing these items before data collection begins
will still save SNFs and their staff time, money, and resources.
After consideration of the public comments, we are finalizing our
proposal to remove four standardized patient assessment data elements
(one item for Living Situation (R0310); two items for Food (R0320A and
R0320B); and one item for Utilities (R0330)) collected under the SDOH
category from the SNF QRP beginning with the FY 2027 SNF QRP without
modification.

D. Reconsideration Request Policy and Process

1. Background
In the FY 2016 SNF PPS final rule (80 FR 46460 and 46461), we
finalized the SNF QRP Reconsideration policy and process whereby a SNF
may request reconsideration of an initial determination that the SNF
did not comply with the SNF QRP reporting requirements, warranting the
reduction of the SNF's annual market basket percentage by 2 percent for
the applicable FY as required by section 1888(e)(6)(A) of the Act. In
that rule, we stated that the SNF may file a request for
reconsideration if they believe that the finding of noncompliance is
erroneous, have submitted a request for extension or exception that has
not yet been decided, or have been granted an extension or exception
(80 FR 46460). We further finalized that, as part of the SNF's request
for reconsideration, the SNF must submit all supporting documentation
and evidence demonstrating full compliance with all SNF QRP reporting
requirements for the applicable FY, that the SNF requested an extension
or exception for which a decision has not yet been made, that the SNF
has been granted an extension or exception, or the SNF has experienced
an extenuating circumstance as defined in the FY 2016 SNF PPS final
rule for the ECE policy (80 FR 46459) but failed to file a timely
request of exception (80 FR 46460). We finalized that we would not
review any reconsideration request that fails to provide the necessary
documentation and evidence along with the request (80 FR 46460).
In the FY 2016 SNF PPS final rule, we provided that a SNF generally
must submit its request for reconsideration within 30 days from the
date of initial notification of noncompliance (80 FR 46460). However,
we finalized that, in very limited circumstances, we may grant a
request by a SNF to extend the 30-day deadline for their
reconsideration requests (80 FR 46460). We stated that, to extend the
deadline, SNFs would have to request an extension and demonstrate that
``extenuating circumstances'' prevented the filing of the
reconsideration request by the 30-day deadline (80 FR 46460).
We finalized other procedural requirements for SNFs to request a
reconsideration in the FY 2016 SNF PPS final rule, including submission
of their request via electronic mail to CMS (80 FR 46460 and 46461). We
also provided that, if a SNF is dissatisfied with our decision
regarding their reconsideration request, the SNF may file an appeal

[[Page 37337]]

with the Provider Reimbursement Review Board (80 FR 46461).
In the FY 2018 SNF PPS final rule (82 FR 36606; 82 FR 36634 and
36635), we codified the SNF QRP's reconsideration policy, as previously
finalized, at Sec. 413.360(d). Subsequently, we have finalized minor
amendments to Sec. 413.360(d)(1) and (d)(4) to reflect updates to our
methods for communicating our notifications of noncompliance and
reconsideration request decisions (83 FR 39270 and 39271; 83 FR 39290;
84 FR 38817; 84 FR 38832 and 38833).
Section 413.360(d) addresses how we send our written notification
of noncompliance to a SNF, the process for a SNF to request
reconsideration, what information a SNF must include with its
reconsideration request (for example, reason(s) for requesting
reconsideration, including all supporting documentation), that we will
not consider a reconsideration request unless the SNF has complied
fully with the procedural requirements, and how we notify the SNF of
our final decision regarding its reconsideration request.
In the proposed rule, we sought to clarify the inconsistencies in
our preamble and regulation text regarding SNF requests for
reconsideration.
2. Allow SNFs To Request an Extension To File a Request for
Reconsideration
As previously stated, in the FY 2016 SNF PPS final rule, in limited
circumstances, we may grant a request by a SNF to extend the deadline
to submit its reconsideration request, so long as the SNF requested the
extension and demonstrated that extenuating circumstances existed that
prevented it filing a reconsideration request by the 30-day deadline
(80 FR 46460). We did not codify this policy, permitting SNFs to
request an extension to file their reconsideration request, at Sec.
413.360(d). In implementing this finalized policy, we have recognized
two areas where further clarity would be beneficial to SNFs.
First, we have not clearly defined or explained the term
``extenuating circumstances'' as used in our reconsideration policy. In
contrast, we use the term ``extraordinary circumstances'' in our
Extraordinary Circumstances Exception and Extension (ECE) policy, at
Sec. 413.360(c). We did explain ``extraordinary circumstances'' in
detail when we originally finalized this ECE policy in the FY 2016 SNF
PPS final rule (80 FR 46459).
On this basis, we proposed to remove the term ``extenuating
circumstances'' as used currently in our reconsideration policy and
replace it with ``extraordinary circumstances.'' Specifically, we
proposed that a SNF may request, and CMS may grant, an extension to
file a reconsideration request if the SNF was affected by an
extraordinary circumstance beyond the control of the SNF (for example,
a natural or man-made disaster). By modifying the basis by which a SNF
may request an extension to file a reconsideration request in this
manner, we also proposed to incorporate our prior explanation regarding
the meaning of extraordinary circumstances, as set forth in the FY 2016
SNF PPS final rule (80 FR 46459) as part of our Extraordinary
Circumstance Exception and Extension (ECE) policy.
Second, we recognized areas in our policy where SNFs may benefit
from clearly demarcated deadlines. Although we believe a SNF would have
an interest in requesting for an extension to file a reconsideration
request prior to the deadline, our policy currently does not specify a
deadline for a SNF to submit its request for such an extension (80 FR
46460). Our policy also provides that, to support such request, the SNF
must demonstrate that extenuating circumstances existed that prevented
filing the reconsideration request by the 30-day deadline (80 FR
46460). However, we have not specified a temporal relationship between
when the extenuating circumstances occurred and the reconsideration
request deadline. We believe SNFs may benefit from further specificity
regarding these requirements for submitting a request to extend the
deadline to file a reconsideration request.
On this basis, we proposed to amend our reconsideration policy at
Sec. 413.360(d) to permit a SNF to request, and CMS to grant, an
extension to file a request for reconsideration of a noncompliance
determination if, during the period to request a reconsideration as set
forth in Sec. 413.360(d)(1), the SNF was affected by an extraordinary
circumstance beyond the control of the SNF (for example, a natural or
man-made disaster). We proposed that the SNF must submit its request
for an extension to file a reconsideration request to CMS via email to
<a href="/cdn-cgi/l/email-protection#673429213635373502040809140e03021506130e08091427040a14490f0f1449000811">[email&#160;protected]</a> no later than 30 calendar days from
the date of the written notification of noncompliance. We proposed that
the SNF's extension request, submitted to CMS, must contain all of the
following information: (1) the SNF's CCN; (2) the SNF's business name;
(3) the SNF's business address; (4) certain contact information for the
SNF's chief executive officer or designated personnel; (5) a statement
of the reason for the request for the extension; and (6) evidence of
the impact of the extraordinary circumstances, including, for example,
photographs, newspaper articles, and other media. We proposed this
process at Sec. 413.360(d)(5).
We further proposed that we will notify the SNF in writing of its
final decision regarding its request for an extension to file a
reconsideration of noncompliance request via an email from us. We
proposed to notify the SNF in writing via email because this will allow
for more expedient correspondence with the SNF, given the 30-day
reconsideration timeframe. We proposed this process at Sec.
413.360(d)(6).
We are considering similar proposals across all post-acute care
setting quality reporting programs to more closely align the
reconsideration processes. On average, over the last 3 years, we have
received 202 reconsideration requests annually from SNFs. If all these
SNFs submitted an extension to file a reconsideration request to us, we
estimated 51 hours total of administrative burden at an increased cost
of $2,391.90 for these SNFs in the proposed rule (90 FR 18606). We
refer readers to section IX.A.6.b. of this final rule for details on
this estimated increase in burden.
The following is a summary of the public comments received on the
proposals to amend the SNF QRP reconsideration policy to permit SNFs to
request an extension to file a reconsideration request at Sec. Sec.
413.360(d)(5) and (d)(6), along with our responses.
Comment: Several commenters expressed their support for this
proposal. A few commenters noted their support and appreciation for CMS
increasing clarity and consistency among program policies. One
commenter agreed that flexibility with requesting reconsideration,
including filing extensions, will help SNFs better manage disasters.
Response: We thank commenters for their support.
Comment: A few commenters were supportive of our efforts to clarify
the reconsideration request process but expressed some concerns.
Several of these commenters had concerns regarding shortening the
request timeframe to 30 days. Two of these commenters stated that
during an emergency, facility leadership must focus on patient safety.
They stated that CMS should allow for flexible, case-by-case deadline
extensions. One of these commenters suggested that the extensions be
case-by-case but not exceed 4.5 months. Another commenter suggested the
reduction to 30 days may

[[Page 37338]]

be insufficient as a hospital may still be dealing with a disaster
during that time frame and suggested that CMS should set the minimum
timeframe at no less than 60 days.
Response: We appreciate the commenters' concerns and
recommendations, though we find aspects of the comments to be unclear.
We interpret the commenters to mean that they believed our proposed 30-
day deadline would apply to the exception and extension (ECE) process
for data submission, rather than the reconsideration process following
a determination of noncompliance. To clarify, the ECE policy--which
applies during the reporting period--allows SNFs 90 days from the date
of an event occurring due to extraordinary circumstances to request an
exception or extension for data submission (Sec. 413.360(c)(2)). We
did not propose to modify that 90-day timeframe under this proposal or
otherwise in the FY 2026 SNF PPS proposed rule.
We wish to clarify that this proposal does not reduce the window
for a SNF to request an exception or extension for data submission
during the reporting year. Rather, this proposal only speaks to the
annual Reconsideration request process. Because our policy did not
specify a deadline for a SNF to submit its request for such an
extension (80 FR 46460), we are providing a clear timeframe of 30 days
for this process.
We proposed to establish and codify that SNFs impacted by an
extraordinary circumstance beyond the control of the SNF have 30
calendar days from the date of the written notification of
noncompliance to submit a request for an extension to file a
reconsideration request; this would be separate from the ECE policy
that applies to SNFs. SNFs would still have 90 days to submit an
exception and extension request from the time of an event occurring due
to extraordinary circumstances (Sec. 413.360(c)(2)), and 30 days from
the initial notification of noncompliance to submit a request for
reconsideration (Sec. 413.360(d)(1)).
This proposal introduces a new, clearly defined process for
requesting an extension to file a reconsideration request--something
not previously codified. We interpret the commenters' concern as
reflecting the absence of a clear process in the past, and we believe
formalizing a 30-day timeframe will help ensure transparency and
consistency across SNFs.
We further believe that this process helps reduce administrative
burden in the context of extraordinary circumstances. By enabling SNFs
to request more time to prepare a reconsideration submission when
needed, this proposal is designed to offer flexibility--not restrict
it.
Regarding commenters' requests to extend the timeframe, we believe
that the 30-day timeframe for requesting an extension to file a
reconsideration request is appropriate for the SNF QRP. This 30-day
timeframe allows for the opportunity to resolve issues early in the
process when we have dedicated resources to considering all
reconsideration requests before payment changes are applied to SNFs
annual payment. It also aligns with the reconsideration extension
request deadlines being proposed for the IRF QRP (90 FR 18551 through
18553) and LTCH QRP (90 FR 18350 through 18352).
Comment: A couple commenters were supportive of the proposed
changes but expressed concerns about the overall reconsideration
process. One of these commenters expressed concerns over the estimated
increase in burden for SNFs that request an extension to file a
reconsideration request. This commenter suggested that CMS streamline
the process through simplifying the application process, providing
clearer guidance on documentation types, or offering technical
assistance to SNFs unfamiliar with the process. Another of these
commenters agreed with clarifying the process and recommended that CMS
issue subregulatory guidance on expectations and documentation
requirements.
Response: We appreciate the commenters' concerns and
recommendations. This proposed policy update does not add any
additional burden to the majority of SNFs; only those who request an
extension to file a reconsideration request. Permitting a SNF to
request an extension to file a reconsideration may ultimately relieve
burden for the SNF faced with extraordinary circumstances by giving
them more time to put together their reconsideration application if
such an event were to occur. Regarding the comments recommending that
we issue subregulatory guidance to clarify expectations and
documentation requirements, we are committed to ensuring transparency
and will consider whether additional guidance is needed to support SNF
providers in understanding and meeting these requirements. We will
continue to engage with interested parties and evaluate the need for
subregulatory materials to facilitate consistent application and
compliance across SNFs.
Comment: One commenter opposed the proposal to replace
``extenuating circumstances'' with ``extraordinary circumstances'' as
they noted ``extenuating'' provides a flexible standard that matches
the variability of SNF environments. This commenter stated it was
unlikely that SNFs are taking advantage of the standard outside of when
it is necessary. They recommended that CMS keep the reconsideration
process fair, accessible, and grounded in a standard that allows good
faith challenges to succeed.
Response: As stated in the proposed rule, we have not clearly
defined or explained the term ``extenuating circumstances'' as used in
our reconsideration policy (90 FR 18606). Conversely, we use the term
``extraordinary circumstances'' in our Extraordinary Circumstances
Exception and Extension (ECE) policy, at Sec. 413.360(c). We did
explain ``extraordinary circumstances'' in detail when we originally
finalized this ECE policy in the FY 2016 SNF PPS final rule (80 FR
46459). We believe aligning this language across the two processes
provides increased clarity for SNFs regarding the requirements for
submitting a reconsideration request and allows for acceptable
flexibility.
Additionally, we want to align with other post-acute quality
reporting programs' policies and processes regarding
reconsideration.4 5 Our intent is to allow for the SNF QRP,
as well as the IRF QRP and LTCH QRPs, to file a reconsideration request
in the event of extraordinary circumstances beyond the control of the
facility (for example, a natural or man-made disaster).
---------------------------------------------------------------------------

\4\ Medicare Program; Inpatient Rehabilitation Facility
Prospective Payment System for Federal Fiscal Year 2026 and Updates
to the IRF Quality Reporting Program: <a href="https://www.federalregister.gov/documents/2025/04/30/2025-06336/medicare-program-inpatient-rehabilitation-facility-prospective-payment-system-for-federal-fiscal#h-35">https://www.federalregister.gov/documents/2025/04/30/2025-06336/medicare-program-inpatient-rehabilitation-facility-prospective-payment-system-for-federal-fiscal#h-35</a>.
\5\ Medicare Program; Hospital Inpatient Prospective Payment
Systems for Acute Care Hospitals and the Long-Term Care Hospital
Prospective Payment System and Policy Changes and Fiscal Year 2026
Rates; Requirements for Quality Programs; and Other Policy Changes:
<a href="https://www.federalregister.gov/documents/2025/04/30/2025-06271/medicare-program-hospital-inpatient-prospective-payment-systems-for-acute-care-hospitals-and-the">https://www.federalregister.gov/documents/2025/04/30/2025-06271/medicare-program-hospital-inpatient-prospective-payment-systems-for-acute-care-hospitals-and-the</a>.
---------------------------------------------------------------------------

After consideration of the public comments, we are finalizing our
proposal to amend the SNF QRP reconsideration policy to permit SNFs to
request an extension to file a reconsideration request, and to codify
this proposed policy and process at Sec. Sec. 413.360(d)(5) and
(d)(6), without modification.

[[Page 37339]]

3. Update the Bases on Which CMS Can Grant a Reconsideration Request
As previously stated, in FY 2016 SNF PPS final rule (80 FR 46460),
the SNF may file a request for reconsideration if they believe that the
finding of noncompliance is erroneous, have submitted a request for
extension or exception that has not yet been decided, or have been
granted an extension or exception (80 FR 46460). We further finalized
that, as part of the SNF's request for reconsideration, the SNF must
submit all supporting documentation and evidence demonstrating full
compliance with all SNF QRP reporting requirements for the applicable
FY, that the SNF requested an extension or exception for which a
decision has not yet been made, that the SNF has been granted an
extension or exception, or the SNF has experienced an extenuating
circumstance as defined in the FY 2016 SNF PPS final rule for the ECE
policy (80 FR 46459) but failed to file a timely request of exception
(80 FR 46460). We also finalized in the FY 2016 SNF PPS final rule that
we would not review any reconsideration request that fails to provide
the necessary documentation and evidence along with the request (80 FR
46460).
As previously stated, we codified our reconsideration policy at
Sec. 413.360(d) in the FY 2018 SNF PPS final rule (82 FR 36606; 82 FR
36634 and 36635). Section 413.360(d)(2)(vi) requires that a SNF's
request for reconsideration include the reason(s) for requesting
reconsideration including all supporting documentation. Section
413.360(d)(3) provides that we will not consider a reconsideration
request unless the SNF has complied fully with the requirements of
Sec. 413.360(d)(2), governing submission of its reconsideration
request. We will notify the SNF in writing regarding our final decision
on its reconsideration request in accordance with Sec. 413.360(d)(4).
We believe it would be beneficial for SNFs if we codify our specific
bases for granting a reconsideration request in our regulation at Sec.
413.360(d).
We proposed to modify our reconsideration policy to provide that we
will grant a timely request for reconsideration, and reverse an initial
finding of non-compliance, only if CMS determines that the SNF was in
full compliance with the SNF QRP requirements for the applicable
program year. We stated that we would consider full compliance with the
SNF QRP requirements to include us granting an exception or extension
to SNF QRP reporting requirements under our ECE policy at Sec.
413.360(c) (90 FR 18607). However, to demonstrate full compliance with
our ECE policy, we stated that the SNF would need to comply with our
ECE policy's requirements, including the specific scope of the
exception or extension as granted by us (90 FR 18607).
We proposed to revise Sec. 413.360(d)(4) to modified policy in our
regulation. We proposed that the remainder of the text at Sec.
413.360(d)(4) would remain the same. We noted that we are considering
similar proposals across all post-acute care quality reporting programs
to more closely align the reconsideration policies and processes.
We solicited comments on our proposals to amend, and codify at
Sec. 413.360(d)(4), the bases by which we grant a reconsideration
request under the SNF QRP Reconsideration policy.
The following is a summary of the public comments received on the
proposal to amend, and codify at Sec. 413.360(d)(4), the bases by
which we grant a reconsideration request under the SNF QRP
Reconsideration policy, along with our responses.
Comment: One commenter requested that CMS account for technical
errors made while fulfilling compliance requirements and consider a
materiality threshold for technical errors that do not impact care
quality.
Response: We appreciate the suggestion to account for technical
errors made in good faith when fulfilling compliance requirements and
to consider a materiality threshold for errors that do not impact care
quality. While we recognize that some facilities may experience
unintended technical issues during data submission, we believe it is
critical to maintain consistent standards to ensure the accuracy and
completeness of quality data across SNFs. We will consider whether
there are opportunities to clarify how technical errors are evaluated
within the reconsideration process, while continuing to prioritize data
integrity and fair application of reporting requirements.
We are finalizing our proposals to amend the bases by which we
grant a reconsideration request under the SNF QRP Reconsideration
policy and codify this policy at Sec. 413.360(d)(4), with a minor
technical modification to refer to the regulated entity in the singular
instead of plural form (that is, the SNF instead of SNFs).

E. SNF QRP Measure Concepts Under Consideration for Future Years--
Request for Information (RFI): Interoperability, Well-Being, Nutrition
& Delirium

In the FY 2026 proposed rule, we solicited comments on the
importance, relevance, appropriateness, and applicability of each of
the quality measure concepts under consideration listed in Table C13
for future years in the SNF QRP. As we review new measure concepts, CMS
will prioritize outcome measures that are evidence-based. In the FY
2025 SNF PPS proposed rule (89 FR 23468 through 23469), we included an
RFI on a set of principles for selecting and prioritizing SNF QRP
measures, identifying measurement gaps, and suitable measures for
filling these gaps. We refer readers to the FY 2025 SNF PPS final rule
(89 FR 64112 through 64114) for a summary of the public comments
received in response to the RFI.
We refer readers to the FY 2026 SNF PPS proposed rule (90 FR 18607
through 18608) for a description of each of the quality measure
concepts under consideration for this RFI. The following is a summary
of the comments received on the RFI regarding four concepts for future
measures for the SNF QRP, along with our response received public
comments on this RFI.
[GRAPHIC] [TIFF OMITTED] TR04AU25.018

[[Page 37340]]

1. Interoperability
Comments: Several commenters supported a measure of
interoperability, saying that seamless exchange of information across
case settings is critical for timely care and safety and improves care
coordination and communication. These commenters noted the effort to
capture the extent of adoption of these systems is a step towards
encouraging interoperability. Commenters noted the importance of
interoperability between communicating parties, across care settings,
and its importance for data collection and use.
Several commenters stressed the importance of understanding the
current state of data interoperability among SNFs. Two commenters
stated that SNFs may have trouble with interoperable data exchange
because of their reliance on certified EHR technology (CEHRT) and
uneven adoption across PAC settings. A couple of these commenters noted
the broad range of capabilities across SNFs, stating that some use
advanced EHRs while others rely on paper records. These commenters also
stated that the scale and complexity required for true interoperability
is a barrier as crucial details, such as maintaining an up-to-date SNF
provider directory, need to be addressed first. Another commenter
stated that some licensed healthcare professionals have limited data
capture in EHR systems, and that limitation can cause their
contributions to care quality and outcomes to be overlooked. Two more
commenters emphasized that adoption of EHR in residential settings is
limited, modernization remains slow, and that CMS may be overestimating
the readiness and abilities of SNFs related to interoperability.
Additional commenters stated CMS needs to consider the lack of uniform
standards in EHR systems and the inconsistent data formatting before
they implement an interoperability measure. A sixth commenter shared
that a limited number of hospitals are able to send interoperable
health information to SNFs and work arounds using not standardized or
interoperable approaches are commonplace when sharing between care
partners. Finally, one commenter stated that workforce readiness
impacts achieving interoperability, as frontline staff often default to
manual processes over electronic ones.
A few commenters were concerned that SNFs do not currently have the
financial or technical infrastructure to support robust
interoperability. A few commenters noted that SNFs were not eligible
for incentives under the Health Information Technology for Economic and
Clinical Health (HITECH) Act (Pub. Law 111-5) and without those
incentives there are significant financial barriers to health IT
adoption. Commenters recommended that CMS should provide financial/
technical support, identify sustainable funding mechanisms, or develop
incentives and grant opportunities specifically targeting rural and
nonprofit SNFs to accelerate interoperability while avoiding unfunded
mandates. One commenter recommended providing additional funding
through the New Technology Add-on Payments Program or through the Civil
Money Penalty Reinvestment Program. Other commenters suggested CMS
build upon the HITECH model to provide support for those previously
excluded from the model.
Several commenters wrote in opposition to an interoperability
measure at this time. One commenter suggested that CMS should focus
initial interoperability efforts on upstream partners, like hospitals
and state health departments, before implementing measures for SNFs.
Another commenter opposed a future interoperability measure stating
that the measure would increase administrative burden in a way that
nursing homes are not equipped to undertake at this time. A second
commenter opposed adding new measures that increase burden without
demonstrated improvement in outcomes. A third commenter opposed the
creation of the measure, as interoperability requirements are already
governed by the Information Blocking regulations. This commenter
recommended CMS focus on quality-of-care measures and stated that a
measure of interoperability would not necessarily help clinicians
improve their care quality. A fourth commenter expressed that the
variation in technology use at SNFs does not inherently reflect
variation in the quality of care being provided.
Commenters recommended that the developed measure focus on
measuring implementation of interoperability. One commenter recommended
that CMS consider existing interoperability measures of successful
implementation of interoperability. A second commenter stated that CMS
might consider measuring participation in the federal health IT
initiative. Another commenter recommended that CMS should utilize
existing items already collected in the MDS when developing the new
measure. A couple of commenters recommended CMS examine the
effectiveness of previous policies and encouraged alignment with other
interoperability programs in different QRPs. Two commenters mentioned
an instrument they had developed that could assess adoption of EHRs and
suggested the instrument could be helpful to CMS in understanding where
SNFs are with EHR adoption. A few commenters provided support for the
Post-Acute Care InterOperability (PACIO) project,\6\ noting its promise
in advancing interoperable health data exchange in post-acute care, and
recommended CMS continue their support of the project. A few of these
commenters suggested CMS consider a phased approach and pair the
measure with resources, support, and financial incentives. Another
commenter recommended that Automated Dispensing Cabinets be added
within the scope of the measure as optimizing medication management in
a vulnerable population is important. Lastly, a commenter recommended
that an interoperability measure should be informed by the use of
automated exchange metrics to support validation and reporting of the
measure, instead of manual attestation of interoperability by
facilities. This commenter also recommended an interoperability measure
that captures workflow transformations in a facility, such as the
number of paper or manual processes that have been converted to
interoperable exchanges. This commenter recommended the measure use a
stepwise approach that measures performance based on the SNFs level of
interoperability maturity.
---------------------------------------------------------------------------

\6\ For more information on the Post-Acute Care InterOperability
(PACIO) project, see: <a href="https://pacioproject.org/">https://pacioproject.org/</a>.
---------------------------------------------------------------------------

Several commenters stated that CMS should not penalize SNFs based
on the measure of interoperability and that the goal of the measure
should be to collect information and identify gaps and challenges. One
commenter recommended that the developed measure should only be used
for public reporting or quality improvement organizations support
purposes, stating there is value in being able to compare
interoperability capabilities and value in quality improvement
organizations having the necessary information to identify and support
SNFs in their digital development. Other commenters believe that public
reporting should include context about the facility's infrastructure,
progress toward interoperability, and commitment to quality. A third
commenter believes CMS should not publicly report data for individual
SNFs but instead suggest state or regional aggregated reporting.

[[Page 37341]]

One commenter recommended several steps they believe are necessary
to facilitate interoperability growth before holding SNFs accountable
through public reporting and penalties associated with an
interoperability measure. These steps included collaborating with
interested parties to establish how CMS will determine a SNF's digital
capabilities, focusing on intentional and incremental approaches to
adopting policy and health IT specifications, considering the
complexities of relationships with other healthcare partners, and
recognizing the differences in patient populations and care needs
2. Well-Being
Comments: Several commenters supported well-being as a future
concept under the SNF QRP and expressed the value in having a measure
that captures patient states holistically and informs patient's needs
and goals. A few commenters cautioned CMS that well-being will be
difficult to define and encouraged the assessment of well-being through
validated measures. One commenter emphasized that a measure on well-
being should exist alongside SDOH measures and not supplant them.
Another commenter supported the measure but cautioned that it seemed
more subjective and therefore difficult to standardize, and that CMS
should utilize existing well-being related data and existing measures.
One commenter stated that the use of existing tools should be
standardized. Another commenter voiced similar concerns, citing the
possibility for redundancy and expanding beyond the scope of the IMPACT
Act. One commenter stated that a clarified goal is required to
determine the best tool to capture data for a well-being measure.
A few commenters provided recommendations for CMS to include
palliative care for SNF patients within a well-being measure, and to
tailor the measure to be modifiable based on the patient's clinical
situation and their goals, preferences, and living situation after
leaving SNF care. Other commenters recommended roles and staff members
that may be best suited to implement and track factors related to well-
being (for example, recreational therapists, occupational therapists,
registered dietician nutritionists, social workers, and activity
planning staff).
A few commenters questioned whether a single, standardized item
could meaningfully capture a resident's emotional or psychosocial
status and recommended that CMS consider reinstating the full Patient
Health Questionnaire-9 (PHQ-9) interview, which was recently scaled
back. One commenter recommended setting it up as a patient-reported
outcome. Other commenters recommended other measures and tools, for
example, PROMIS[supreg] (Patient-Reported Outcomes Measurement
Information System) measures and the Ambulatory Palliative Care
Patients' Experience of Feeling Heard and Understood (``Feeling Heard
and Understood'') quality measure within the Merit-based Incentive
Payment System (MIPS) or pointed to using data already collected by
SNFs (for example, items in Section GG in the MDS). One commenter
recommended CMS consider the impact of pain on patient well-being.
Some commenters cautioned against implementing new measures without
demonstrated improvement in outcomes. One commenter emphasized that
this puts smaller and more rural SNFs at risk of penalties for
community-level factors they cannot influence, and another commenter
stated that factors related to SDOH and well-being are not reflective
of the quality of care delivered in the facility and are out of the
SNF's control. Other commenters stated potential increases in burden on
SNF and their staff.
3. Nutrition
Comment: A few commenters voiced their support of the nutrition
measure. One commenter stated the importance of nutrition screenings
and individualized input. Another commenter emphasized the role of
nutrition in protecting independence, functional ability, and quality-
of-life through proper preventative care and therapy. Other commenters
stated that it is important to address nutrition but encouraged CMS to
use data elements already in place to assess nutrition thereby reducing
SNF provider burden.
A couple of commenters recommended staff that would be best suited
to implement the measure (for example, registered dieticians,
nutritionists, speech language pathologists for the treatment of
swallowing and feeding disorders). Another commenter supported
measuring nutrition, citing that malnutrition can worsen health
conditions and lead to higher rates of hospital readmissions, and
encouraged CMS to prioritize measures that link nutrition status to
care plans, leverage interdisciplinary workflows, and minimize
redundancy. Some commenters recommended tools for CMS's consideration.
Another commenter recommended that a nutrition measure should consider
the amount of money facilities spend on food per resident, the
nutritional content of food in nursing homes, food safety, resident
satisfaction, and job satisfaction of support staff. Another commenter
supported the measure if it utilizes existing nutrition-related data
and existing measures.
Some commenters had concerns about the measure concept. One
commenter cautioned CMS that nutrition measures will require additional
considerations that vary by patient, including quantity of sleep and
type of physical activity. A few commenters had concerns about cultural
preferences, dietary restrictions, and lifelong eating patterns that
are outside the SNFs control. One commenter stated that SNFs should not
be penalized based on nutritional outcomes.
Other commenters opposed the nutrition measure as it may not be a
meaningful reflection of the SNF care given to residents. A few
commenters opposed nutrition, stating that it is not aligned with the
purpose and scope of a SNF stay. Another commenter stated that the
concept is vague, and it does not clearly differentiate between the
needs of beneficiaries requiring short-term or long-term care, or the
needs of the beneficiary after they have returned to the community.
They recommended several SNF 5-Star quality measures that address the
concept of nutritional status for use in the SNF QRP. Another commenter
stated that this overlaps with existing measures and would increase
burden.
4. Delirium
Comment: Several commenters supported a delirium measure in the SNF
QRP, stating it offered clinical value, and that delirium is alarmingly
common in SNFs. One commenter recommended using Digital Quality
Measures (dQMs) to help track the symptoms.
A few commenters stated that the adoption of a delirium measure in
the SNF QRP could leverage existing items on the MDS, such as the
validated Confusion Assessment Method (CAM). One commenter voiced
limitations on how the CAM will cover fewer symptom domains than
specialized tools and that there could be reliability concerns with
untrained staff administering the assessments. Another commenter voiced
similar concerns, stating restrictive reporting requirements of the MDS
mean the CAM is completed too infrequently to capture or monitor for
delirium in real-time. A few commenters suggested assessment tools for
CMS to consider including the Delirium-O-Meter, CAM-S Confusional State
Examination, Delirium

[[Page 37342]]

Observation Scale, Delirium Rating Scale, Memorial Delirium Assessment
Scale and INTERACT (Interventions to Reduce Acute Care Transfers).
A few commenters cautioned that delirium frequently arises from
factors outside the direct control of the SNF (for example, resulting
from infection, illness, medication changes, or even a change in the
environment) and may not accurately reflect SNF performance. While SNF
staff need to closely monitor and address symptoms of delirium, it
should not be a condition for which quality is measured. Though
supportive of a delirium measure, one commenter cautioned that
detection is often underreported, and they recommended that delirium
incidence alone should not be the quality metric as this would be
inaccurate. Another commenter noted that a delirium measure should
promote the SNF working with the hospitals prior to discharge to the
SNF, since patients often have delirium upon SNF admission.
Several commenters opposed including delirium in future concepts
under the SNF QRP. Some commenters stated that reporting the measure
may add reporting burden and that delirium is difficult to monitor and
quantify, which would impact the feasibility of this concept as a
standardized quality measure. One commenter noted the impact that
additional QRP measures generally could have

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