Skilled Nursing Facility (SNF) Billing Services

PDPM Replaced RUG-IV: What Changed for SNF Billing

Medicare stopped paying skilled nursing facilities under RUG-IV for Part A stays on 1 October 2019. Since that date every Medicare Part A SNF claim has been priced by the Patient Driven Payment Model (PDPM). The distinction still matters in 2026, because a facility can be paid two different ways on the same day: PDPM for a resident under Medicare Part A, and a RUG-III or RUG-IV grouper for a resident under Medicaid in the states that still use one to set nursing facility per diem rates. A billing team that treats the two as interchangeable will misread its own revenue reports.

The practical difference is what drives the money. RUG-IV paid largely on therapy minutes delivered and recorded. PDPM pays on the resident’s clinical characteristics as coded on the Minimum Data Set. Therapy volume no longer sets the rate. Diagnosis coding and MDS accuracy do.

The Five PDPM Case-Mix Components

Each covered Part A day is priced as the sum of five case-mix adjusted components plus a non-case-mix component that covers room, board and administrative costs:

• Physical Therapy (PT) — driven by the clinical category derived from the primary diagnosis, combined with the function score built from Section GG of the MDS.
• Occupational Therapy (OT) — the same two drivers as PT, with its own case-mix index.
• Speech-Language Pathology (SLP) — driven by the presence of an acute neurologic condition, SLP-related comorbidities, cognitive impairment, swallowing disorder and mechanically altered diet.
• Nursing — driven by clinical category, function score, depression indicators and restorative nursing services.
• Non-Therapy Ancillary (NTA) — driven by a weighted count of comorbidity points, which is where expensive drugs and conditions are captured.

Because the primary diagnosis maps to the clinical category, an ICD-10 code chosen for convenience rather than accuracy moves real money. CMS finalised 34 changes to the PDPM ICD-10-CM code mappings for FY 2026 alone, so a mapping that was correct last year is not automatically correct this year.

Variable Per Diem: Why Day 1 and Day 30 Do Not Pay the Same

PDPM does not pay a flat rate across the stay. Three of the components are adjusted by a variable per diem schedule:

• NTA — paid at three times the component rate for days 1 through 3, then at the standard rate for the rest of the stay.
• PT and OT — paid in full through day 20, then reduced by 2 percent every seventh day for the remainder of the stay.
• Nursing and SLP — no variable adjustment; flat for the whole stay.

The consequence is that the same HIPPS code pays less on day 40 than it did on day 5. Facilities that build a revenue forecast from the day-one rate consistently over-project, and their accounts receivable ageing then looks worse than the collection performance actually is.

The HIPPS Code Is an MDS Output, Not a Coding Decision

Every Medicare Part A SNF claim carries a five-character HIPPS code. The first four characters identify the PT and OT group, the SLP group, the nursing group and the NTA group. The fifth is an assessment indicator that tells Medicare which assessment produced the code. The grouper generates all five from the MDS. Nobody on the billing team can choose them.

That makes the MDS schedule a billing schedule. The 5-day PPS assessment sets the rate for the stay. An Interim Payment Assessment is optional and changes payment from its assessment reference date forward, never retroactively. Missing an assessment window is not only a clinical documentation problem — it produces a claim that prices wrong and cannot be corrected by rebilling alone.

Consolidated Billing Is Where the Late Denials Come From

During a covered Part A stay the SNF is responsible for billing almost everything the resident receives. Outside suppliers bill the facility, not Medicare. A short list of services is excluded from consolidated billing and may still be billed directly to Medicare Part B:

• Physician professional services, and the professional component of certain other practitioner services.
• Certain dialysis services and dialysis-related supplies.
• Certain chemotherapy agents and their administration.
• Certain radioisotope services.
• Customised prosthetic devices.
• Ambulance transport in specified circumstances, and emergency services.

The failure pattern is predictable. A supplier bills Medicare directly for something that was never excluded, Medicare rejects it, and the supplier invoices the facility months later — after the Part A claim has been paid and closed. By then the cost has no revenue attached to it. Preventing it means checking supplier arrangements against the exclusion list before admission, not after the invoice arrives.

FY 2027 Medicare SNF Payment Changes Effective 1 October 2026

CMS published the FY 2027 SNF prospective payment system final rule, CMS-1843-F, at the end of July 2026. It applies to stays beginning 1 October 2026.

• Net payment update: 2.4 percent — a 3.3 percent SNF market basket update reduced by a 0.9 percent productivity adjustment, worth an estimated $882.74 million across all SNFs.
• SNF Value-Based Purchasing — an estimated $203.60 million net reduction across facilities subject to adjustment, with performance standards now finalised through the FY 2029 and FY 2030 program years.
• MDS submission for all payers — beginning in FY 2027, SNFs must submit MDS data for every resident receiving covered skilled care, regardless of who is paying.
• Quality Reporting Program removals — the two COVID-19 vaccination measures, covering healthcare personnel vaccination and residents who are up to date, are removed beginning with FY 2028.
• Shorter submission window — the SNF QRP data submission deadline drops from roughly four and a half months to about 45 days, effective FY 2029.

For comparison, the FY 2026 rule still in force through 30 September 2026 gave SNFs a 3.2 percent net update worth about $1.16 billion. Of the FY 2027 changes, the all-payer MDS requirement has the largest operational footprint: facilities that completed assessments only when Medicare Part A was paying now have to complete and transmit them for managed care and other payers too, and that workload sits directly upstream of billing.

Coverage Limits Your Billing Team Has to Track in 2026

Most SNF write-offs are not coding errors. They are eligibility errors that were visible before the claim went out.

• Three-day qualifying stay — traditional Medicare requires a medically necessary inpatient hospital stay of at least three consecutive days, not counting the day of discharge. Observation days do not count. Medicare Advantage plans and facilities operating under a waiver may apply different rules, and the plan’s rule governs.
• Benefit period — up to 100 covered days. Days 1 through 20 carry no coinsurance. Days 21 through 100 carry a daily coinsurance of $217.00 in 2026.
• Part A inpatient deductible — $1,736 in 2026, which matters when the qualifying hospital stay is being reconciled.
• Benefit period reset — a new benefit period begins only after the beneficiary has gone 60 consecutive days without inpatient hospital care and without skilled care in a SNF.
• Beneficiary notices — the SNF ABN and the Notice of Medicare Non-Coverage have to be issued on time. A missed notice turns a defensible non-covered day into a facility write-off.

Skilled nursing sits alongside several other post-acute settings, each with its own payment system. If your organisation also bills for home health, hospice or geriatrics, the same MDS discipline and eligibility checking has to be applied under three different sets of rules. Talk to our SNF billing team about where your Part A claims are pricing wrong.

Revenue Codes & Payment Structures for SNFs

Revenue coding plays a major role in claim acceptance. We manage:

Each claim is reviewed to ensure revenue codes align correctly with CPT and diagnosis data.