PDPM (Patient Driven Payment Model) is the Medicare reimbursement system that determines how much your skilled nursing facility gets paid for each Part A resident. Implemented in October 2019, PDPM replaced the old RUG-IV system by shifting payment away from therapy volume and toward patient characteristics — diagnoses, functional status, and clinical complexity. In 2026, CMS has updated the ICD-10 code mappings that drive PDPM classifications, and facilities that haven’t adjusted their processes are at risk of underpayment or audit exposure.
PDPM calculates your Medicare Part A per diem rate using five payment components: Physical Therapy (PT), Occupational Therapy (OT), Speech-Language Pathology (SLP), Nursing, and Non-Therapy Ancillary (NTA). Each component is driven by specific resident characteristics captured on the MDS assessment.
The process works like this: Your MDS coordinator completes the assessment. The primary diagnosis on the MDS gets mapped to a clinical category using CMS’s ICD-10 mapping file. That clinical category, combined with other assessment data, determines the case-mix group for each of the five components. The case-mix groups generate a HIPPS code. The HIPPS code determines the per diem payment.
Every step in that chain matters. If the ICD-10 code maps to the wrong clinical category — because CMS changed the mapping and your team didn’t catch it — your HIPPS code is wrong, and your payment is wrong.
In the FY 2026 final rule (published August 4, 2025, effective October 1, 2025), CMS finalized technical revisions to 34 ICD-10 clinical coding categories used under PDPM.
What does that mean? 33 ICD-10 codes were moved from the “Medical Management” clinical category to “Return to Provider.” The affected diagnoses include Type 1 Diabetes Mellitus, Hypoglycemia, and Obesity. One additional code was moved from “Acute Neurologic” to “Medical Management.”
This matters to you for many reasons. The most prevalent being that the clinical category directly drives the case-mix group, which drives the per diem rate. A resident whose primary diagnosis was previously classified as “Medical Management” may now fall under “Return to Provider” — a different category with different payment implications. Multiply that across your Medicare census, and the revenue impact is significant.
CMS published the FY 2027 SNF PPS proposed rule on April 7, 2026, with comments due June 1, 2026. Expect additional ICD-10 mapping revisions and further refinement of case-mix calculations. If you haven’t reviewed the proposed changes for codes that affect your resident population, do it before the comment period closes.
Beyond the mapping changes, CMS finalized a net 3.2% increase in SNF PPS payment rates for FY 2026, totaling approximately $1.16 billion in additional payments industry-wide. However, Value-Based Purchasing reductions are estimated to claw back $208 million of that increase. Your facility’s actual benefit depends on your VBP performance scores.
PDPM isn’t a one-time implementation. It evolves every fiscal year as CMS updates code mappings, recalibrates case-mix indexes, and refines the model. Facilities that treat PDPM as “set it and forget it” discover the hard way that their revenue has quietly shifted — or worse, that an audit reveals systematic coding discrepancies.
If you need help understanding how the FY 2026 changes affect your specific resident mix, or if you want a second set of eyes on your MDS-to-billing process, that’s exactly what we do.
Contact us for a free consultation or call 407-977-8878.
— Nicole
Chances are that you’re leaving revenue on the table. This quick resource guide will help ensure that your office is getting the most from your existing business so you can maximize your revenue without adding a single resident.
