CMS has released its proposed rule for the FY2027 skilled nursing facility prospective payment system, including significant recalibration of the Patient Driven Payment Model (PDPM) case-mix classification system. The proposed changes would adjust 34 ICD-10 diagnosis code mappings and update component weights based on 2024 utilization data, potentially redistributing approximately $400 million in Medicare payments among facilities depending on patient mix.
Proposed Code Mapping Changes
The most impactful proposed changes involve reclassification of certain diagnosis codes that CMS believes are currently misaligned with actual resource utilization. Specifically, several codes related to debility, aftercare following orthopedic procedures, and rehabilitation following stroke would shift to different clinical categories, affecting both nursing and therapy component payments.
Facilities treating high volumes of post-acute rehabilitation patients would generally see payment decreases under the proposal, while those serving medically complex long-stay populations would see increases. CMS estimates that approximately 35% of facilities would experience payment changes exceeding 2% in either direction.
Component Weight Updates
Beyond code mapping changes, CMS proposes updating the PDPM component weights to reflect actual 2024 resource utilization patterns. The agency found that certain nursing components have been consistently over-resourced relative to costs, while non-therapy ancillary (NTA) and therapy components have been under-resourced for specific patient populations.
The proposed nursing component weights would decrease by an average of 1.8%, while NTA component weights would increase by 2.3%. Therapy component adjustments vary by patient classification, with increases for patients requiring intensive rehabilitation and decreases for maintenance-level therapy.
Budget Neutrality
As required by statute, the PDPM recalibration is proposed as budget neutral, meaning aggregate payments would remain unchanged. However, budget neutrality at the national level masks significant redistribution at the facility level. Winners and losers in the recalibration depend heavily on each facility’s patient population characteristics.
CMS has released facility-level impact files that allow operators to model the proposed changes against their actual patient mix. Industry groups strongly encourage all facilities to complete this analysis during the comment period and submit specific concerns about proposed changes that would disproportionately affect their patient populations.
Industry Response
The American Health Care Association has expressed concern about the proposed therapy component reductions, arguing they could discourage appropriate rehabilitation services. AHCA’s analysis suggests that facilities with strong rehabilitation programs would face average payment reductions of 2.4%, potentially threatening the viability of programs that help residents return to community settings.
Conversely, organizations representing facilities serving high-acuity, medically complex populations have generally supported the recalibration, arguing it corrects long-standing underpayment for resource-intensive care.
Timeline and Process
The comment period for the proposed rule closes March 15, 2026. CMS is required to publish the final rule by August 1, with changes taking effect October 1 for the start of FY2027. Given the significant payment implications, the comment period is expected to generate substantial industry input, potentially leading to modifications in the final rule.
Operators should use the next several weeks to analyze the proposed changes’ impact on their facilities, coordinate with state associations and national organizations on comment submissions, and begin planning for potential payment changes in FY2027 budgets.