Fact Sheets

Fiscal Year 2021 Payment and Policy Changes for Medicare Skilled Nursing Facilities (CMS-1737-F)

On July 31, 2020, the Centers for Medicare & Medicaid Services (CMS) issued a final rule [CMS-1737-F] for Fiscal Year (FY) 2021 that updates the Medicare payment rates and the value-based purchasing program for skilled nursing facilities (SNFs). CMS is publishing this final rule consistent with the legal requirements to update Medicare payment policies for SNFs on an annual basis. In recognition of the significant impact of the COVID-19 public health emergency, and limited capacity of health care providers to review and provide comment on extensive proposals, CMS has limited annual SNF rulemaking required by statute to essential policies including Medicare payment to SNFs.

The final rule includes routine technical rate-setting updates to the SNF prospective payment system (PPS) payment rates, and adopts the revised Office of Management and Budget (OMB) statistical area delineations.  In addition, the rule applies a 5 percent cap on wage index decreases from FY 2020 to FY 2021. In response to stakeholder feedback, we are also finalizing changes to the International Classification of Diseases, Version 10 (ICD-10) code mappings, effective October 1, 2020. Finally, this rule includes minor administrative changes related to the SNF Value-Based Purchasing (VBP) Program, further described below.

This fact sheet discusses several major provisions of the final rule: the changes to SNF payment policy under the SNF PPS and the SNF VBP Program. This final rule includes revisions that reflect our commitment to shifting Medicare payments from volume to value, with the continued implementation of the Patient Driven Payment Model (PDPM) and the SNF VBP, and to improve program interoperability, operational quality and safety.

Strengthening Medicare

CMS projects that aggregate Medicare program payments to SNFs will increase by $750 million, or 2.2 percent, for FY 2021 compared to FY 2020. This estimated increase is attributable to a 2.2 percent market basket increase factor, adjusted by a 0.0 percentage point productivity adjustment.

In this final rule, we are also adopting revised geographic delineations provided by OMB to identify a provider’s status as an urban or rural facility and to calculate the wage index, applying a 5 percent cap on any decreases in a provider’s wage index from FY 2020 to FY 2021.

Updates to PDPM Clinical Diagnosis Mappings

CMS’ PDPM is an innovative and historic change in how we pay for care that is more focused on patient characteristics, rather than volume, under the SNF PPS and is used for classifying patients in a covered Medicare Part A SNF stay into case-mix groups. Implemented on October 1, 2019, PDPM, among other factors, ICD-10 codes to classify SNF patients into payment groups. Each year, CMS considers recommendations from stakeholders on changes to the ICD-10 code mappings used under the PDPM. In this final rule, in response to these stakeholder recommendations, we are finalizing changes to the ICD-10 code mappings, effective October 1, 2020. We encourage stakeholders to continue to provide this essential feedback on the ICD-10 code mappings so that we may continue to improve and refine our payment methodology.

SNF Value-Based Purchasing (VBP) Program

The SNF VBP Program began distributing incentive payments to SNFs beginning with payments for services furnished on or after October 1, 2018. The SNF VBP Program scores SNFs on their performance on a single claims-based all-cause all-condition hospital readmission measure. In order to fund value-based incentive payments under the program for a fiscal year, the law requires that CMS reduce the adjusted Federal per diem rate otherwise applicable to each SNF for the fiscal year by 2 percent, and then redistribute between 50 to 70 percent of that total reduction as incentive payments based on SNF performance. Because of this legislative requirement, the Program results in Medicare savings.

In the FY 2021 SNF PPS final rule, CMS is finalizing updates to the SNF VBP Program regulation text at 42 CFR § 413.338 so that it reflects previously finalized policies, and is also updating the 30-day Phase One Review and Correction deadline for the baseline period quality measure quarterly report.  CMS is also announcing performance periods and performance standards for the FY 2023 program year. CMS made no changes to the measures, SNF VBP scoring policies, or payment policies.

For more information

The final rule displayed on July 31, 2020, at the Federal Register’s Public Inspection Desk and will be available under “Special Filings,” at

Additional information is available at: