Your Guide to the FY2026 SNF PPS Final Rule & RAI Manual v1.20.1

The Centers for Medicare & Medicaid Services (CMS) has finalized its updates for Fiscal Year 2026, marking a critical transition for Skilled Nursing Facilities (SNFs) under the Patient-Driven Payment Model (PDPM). These changes, primarily housed within the MDS 3.0 Resident Assessment Instrument (RAI) Manual version 1.20.1, are effective October 1, 2025.

For nursing home staff, the message is clear: the focus is on hyper-accurate clinical documentation and interdisciplinary teamwork as the foundation of compliant and effective care.

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1. PDPM’s Foundational Principles

PDPM determines the Medicare Part A daily payment rate based on the patient’s comprehensive clinical profile—a shift from the volume-based RUG-IV model. This model incentivizes care for medically complex residents by focusing on five case-mix adjusted components derived from the MDS:

Component

Focuses On

Key MDS Data Source

Physical Therapy (PT) & Occupational Therapy (OT)

Clinical Category (ICD-10) and Functional Status

Section GG (Functional Abilities)

Speech-Language Pathology (SLP)

Acute conditions, Cognitive Status, and Diet/Swallowing

Section C (Cognitive), Section K (Swallowing)

Nursing

Extensive Services, Special Care, and Clinical Complexity

Multiple Clinical Items (e.g., IV meds, ventilator)

Non-Therapy Ancillary (NTA)

Comorbidities and Extensive Medical Services

Section I (ICD-10 Codes)

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2. RAI Manual v1.20.1 Impact: Top Changes for Staff

The October 1, 2025 updates require staff across all departments to review and adjust their documentation practices:

A. Therapy Documentation Is Streamlined (Section O)

• The Change: CMS removes the burden of tracking daily therapy minutes for PDPM classification. Item O0420 (Distinct Calendar Days of Therapy) is removed, and O0400 (Therapies) is significantly revised. A new simplified item, O0390 (Therapy Services), is now used for reporting if therapy occurred ( minutes) on at least one day.
• Staff Action: Therapists must pivot from logging minutes for payment to focusing documentation entirely on medical necessity and quantifiable functional outcomes. The clinical record, not the MDS, remains the source of truth for skilled intervention.

 

B. Precision in Functional Coding (Section GG)

• The Change: CMS refines and clarifies guidance for Section GG (Functional Abilities) coding to ensure consistent application across all post-acute settings. Of note, the definition for “01 – Dependent” is clarified to align with the use of two or more helpers during an activity.
• Staff Action (CNAs, Nurses, Therapists): Consistency is King. All staff providing direct care must be cross-trained on the new GG clarifications. Inaccurate GG coding directly impacts the high-value PT and OT payment components.

 

C. Clinical & ICD-10 Coding Updates

• ICD-10 Mapping: The FY2026 SNF PPS Final Rule finalizes 34 technical revisions to PDPM ICD-10 code mappings. This is CMS’s annual effort to ensure the primary diagnosis (MDS item I0020B) accurately reflects a condition that requires skilled care. Many codes are shifted to “Return to Provider”, meaning they cannot be used as the primary diagnosis for PDPM classification.
• SDOH Removal: CMS is finalizing the removal of four standardized patient assessment data elements related to Social Determinants of Health (SDOH) from the MDS, beginning with the FY 2027 SNF Quality Reporting Program (QRP).
• Staff Action (MDS Coordinators, Physicians): Immediate review of the updated CMS ICD-10 crosswalk is necessary to ensure the most accurate primary diagnosis is selected for proper resident classification on the 5-day assessment.

 

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3. Maximizing Success: The Interdisciplinary Huddle

PDPM success is an IDT sport. The 10/1/25 changes make inter-departmental collaboration more critical than ever.

IDT Team

Action Required for PDPM/MDS Compliance

MDS Coordinator

Review all new ICD-10 mappings and the NTA comorbidity list before admission. Ensure all NTA-qualifying diagnoses are captured on the 5-day assessment for the high-rate initial days (Days 1-3).

Registered Nurses (RNs) / LPNs

Focus on supporting the Nursing Case-Mix by documenting extensive services (e.g., IV meds, ventilator, isolation) and ensuring complete, accurate ICD-10 documentation for complex conditions (e.g., complicated infections, cancer).

CNAs / Direct Care Staff

Be trained specifically on the Section GG coding scale (0-6) and the new two-helper rule for “Dependent” (01). Your observations are the data that drives functional payment.

Therapists (PT/OT/SLP)

Utilize the simplified Section O to spend less time counting minutes and more time documenting skilled intervention and outcomes. Ensure your use of Group/Concurrent therapy stays under the 25% cap per discipline.

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4. The Patient & Family Perspective: Transparency is Trust

PDPM’s emphasis on individualized care naturally requires family involvement. Staff should proactively communicate the model’s philosophy to manage expectations and ensure collaboration.

Family Concern

Staff Communication Strategy

CMS Rationale

“Will therapy stop early because of the new rules?”

“The new CMS payment rules focus exclusively on your loved one’s medical needs and goals, not on a fixed minute count. Our team is required to provide all medically necessary care to achieve the best possible outcome.”

PDPM is explicitly Patient-Driven. CMS payment is tied to the acuity and need for skilled services, not a volume quota.

“Why do you need so much clinical information?”

“The MDS is the official tool CMS uses to classify your loved one’s condition (ICD-10) and functional ability (Section GG). Complete information ensures we receive the resources necessary to manage their specific, complex needs.”

Accurate MDS data is the direct link to the PDPM case-mix classification, which determines facility reimbursement.

“What are the goals?”

“We use your loved one’s Discharge Function Score (from Section GG) to set measurable targets. We encourage your participation in the care planning meeting to align our professional goals with their personal goals.”

CMS QRP measures (like the Discharge Function Score) track patient outcomes, directly linking quality improvement efforts to the payment system.

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Don’t let the October 1st deadline compromise your compliance or revenue. Successful PDPM management requires consistent staff education and a facility-wide documentation standard.

Click here to download our complimentary check list to Enhance Fiscal Productivity and Compliance in Skilled Nursing Facilitieshttps://guide.skillednursingsupport.com/optin-page

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Resources Used

This article is based exclusively on official guidance from the Centers for Medicare & Medicaid Services (CMS):

• MDS 3.0 Resident Assessment Instrument (RAI) User’s Manual, version 1.20.1 (Effective October 1, 2025): The authoritative source for all MDS coding and assessment requirements.
• CMS Fiscal Year 2026 Skilled Nursing Facility Prospective Payment System (SNF PPS) Final Rule (CMS-1827-F): Finalizes the payment rate updates, PDPM ICD-10 code mapping revisions, and changes to the SNF Quality Reporting Program (QRP) and Value-Based Purchasing (VBP) programs.
• CMS PDPM Resources: CMS technical files for ICD-10 crosswalks and PDPM classification logic.

 

CMS Quality Reporting Program (QRP) and Value-Based Purchasing (VBP) Documents: Information detailing reporting requirements and payment adjustments.

Skilled Nursing Support/September 2025/Maria.messina@skillednursingsupport.com

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