Support for the skilled nursing sector continues to flow from the government, both state and federal, and CMS finalized its FY2026 SNF Prospective Payment System rate increase of 3.2%, based on the final SNF market basket increase of 3.3% plus a 0.6% market basket forecast error adjustment and a negative 0.7% productivity adjustment, amounting to an increase in SNF PPS payments of $1.16 billion compared with FY2025. That is down from the 4.2% increase in reimbursement from the previous fiscal year but up from CMS’s initial proposed increase of 2.8%, announced back in April. And it comes after numerous states have already started to reconcile their Medicaid rates more closely with the realities of how skilled nursing businesses operate. Not all facilities will see much relief, but many will see some, and it could be enough to keep them in business. With such small operating margins, every little bit counts.
We will see whether states continue to respond to higher care costs with their own reimbursement increases, or put more of the onus on the federal government to help SNFs operate profitably, but ever since the pandemic, the signs have generally pointed to the government not abandoning the skilled nursing sector but rather understanding the value that it brings (and can continue bring) to the whole care continuum as a lower cost center for care. And that belief has helped boost SNF prices and lower cap rates in recent years, according to our LevinPro LTC data. But one stroke of a pen can change a lot, too, so we know the sector will not rest easy. And we are looking forward to the Zimmet Reimbursement Rozetta Stone conference next week in Connecticut to unpack the latest CMS changes and possible changes on the horizon.
