The Big Picture: Effective Oct. 1, 2025, skilled nursing facilities will see a payment increase of 3.2%, which is slightly higher than the 2.8% included in the proposed rule the Centers for Medicare & Medicaid Services issued earlier this year. Inpatient rehabilitation facilities will see a payment increase of 2.6%, matching what CMS proposed in the FY 2026 IRF rule. Additionally, CMS finalized rolling back social determinants and health equity measures, as expected.
In short, the final rules differ little from what CMS proposed in April just after new CMS administrator Mehmet Oz, MD, MBA, was confirmed, and the agency continues to inquire about the same issues in the recently released home health and physician fee schedule proposed rules.
For a review of both final rules, register for the “APTA Regulatory, Legislative, and Payment Updates, October 2025” webinar on Oct. 9 at 2:30 p.m. ET.
In-depth review:
CMS Fact Sheets: SNF Fact Sheet; IRF Fact Sheet
Exceptions for Quality Report in Texas: CMS is granting exceptions under certain Medicare quality reporting and value-based purchasing programs to SNFs and IRFs located in areas affected by the Texas Severe Storms, Straight-line Winds, and Flooding disaster declaration to assist these providers and facilities while they direct their resources toward caring for their patients and addressing potential infrastructural challenges affecting their health care operations. Additional flexibilities have been provided by CMS.
For SNFs: Higher than Proposed Payment Increase
CMS finalized a 3.2% increase, slightly higher than the 2.8% from the proposed rule, which is approximately $1.16 billion in additional funding to SNFs in 2026. The increase reflects a 3% market basket increase and a 0.6% forecast error adjustment, less a 0.7% productivity adjustment.
Changes to the SNF Value-Based Purchasing Program
CMS finalized the removal of the Health Equity Adjustment from the SNF VBP Program scoring methodology beginning with the FY 2024 program year. The adjustment would have increased VBP payments for SNFs that provide high-quality care and services for high proportions of dually eligible beneficiaries. The agency cites the inability of the adjustment to meaningfully reward SNFs for achieving high performance as the reason for removal.
The agency also finalized its proposal to apply the VBP Program’s previously finalized scoring methodology to the SNF Within-Stay Potentially Preventive Readmission measure beginning with the FY 2028 program year.
The agency finalized adoption of a new reconsideration process that will allow SNFs to appeal CMS’ initial decisions for Review and Correction requests prior to CMS making any affected data publicly available.
For IRFs: Payment Bump As Proposed
CMS finalized the 2.6% payment increase to the IRF prospective payment system for 2026, or an additional $340 million which is based on a 3.3% market basket update and a 0.7% productivity adjustment. Accordingly, with the update applied to the finalized 2025 rate, the standard payment conversion factor for 2026 is $19,371.
Wage Index Updates With Limited Effects
CMS finalized a continuation of the three-year phase out of the rural adjustment. This policy caps any decreases to an IRF’s wage index – not payment – at 5% on an annual basis for facilities that will lose their rural status (and corresponding rural adjustments).
IRF-Patient Assessment Instrument
CMS summarized comments on removing measures and other ways to reduce the burden of filling out the IRF-PAI, including how to implement “skip patterns” for unplanned discharges.
IRF and SNF Updates to the Quality Reporting Program
CMS applied several of the administration’s well-publicized policies to both the IRF and SNF Quality Reporting Programs in the final rules, having framed them as efforts to reduce administration burden. Those priorities include deemphasizing and removing Biden-era COVID-19 actions and CMS’ existing work to identify, assess, and address heath equity issues including the social determinants of health.
CMS finalized its proposal to remove two measures from the IRF QRP. Beginning with the FY 2026 IRF QRP, the COVID-19 Vaccination Coverage Among Healthcare Personnel measure will be removed. Starting with the FY 2028 IRF QRP, the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date measure will be removed, and submission of data on this measure will be optional beginning Oct. 1, 2025.
CMS finalized the removal of the four new social determinants of health items in both the IRF and SNF settings that it approved last year to be collected upon admission. This includes one item for living situation, two items for food, and one item for utilities. In response to commenters, the agency argues that SDOH items are not clinical items related to direct resident care. CMS posited these removals as necessary for the agency to modernize the health care system. CMS speculates that these items could be supported by future interoperable electronic systems but are too burdensome at this time. The agency adds that SNFs are free to collect and use this information on their own if preferred.
CMS acknowledged receipt and provided a summary of feedback received on its request for information on four concepts for future measure development in the Quality Reporting Program: interoperability, well-being, nutrition, and delirium. However, it did not respond to specific comments at this time.
CMS finalized its proposal to amend the reconsideration policy and process for facilities appealing a determination of noncompliance with the QRP reporting requirement. CMS will permit facilities to request reconsideration within 30 days of noncompliance, and CMS to grant, an extension to file a request for reconsideration of noncompliance determination if, during the 30-day period the facility was affected by an extraordinary circumstance beyond the control of the facility (for example, a natural or man-made disaster).
Second, CMS finalized its proposed updates to the bases on which CMS can grant a reconsideration request, providing that CMS will grant a timely request for reconsideration, and reverse an initial finding of noncompliance, only if CMS determines that the facility was in full compliance with the QRP requirements for the applicable program year.