Washington, D.C. — Federal regulators are taking a hard look at how nursing homes have been coding patient conditions under Medicare’s payment system, and operators are being warned that the answer could shave real dollars off their margins.
The Centers for Medicare and Medicaid Services is examining what industry insiders call “case mix creep” — a sharp rise in how often skilled nursing facilities report conditions like malnutrition, depression, and swallowing disorders under the Patient Driven Payment Model. The agency wants to know whether those increases reflect better clinical documentation or something less innocent.
One number jumped out during a recent industry webinar: malnutrition coding alone climbed from 5% to 47%, according to Tara Altenritter, director of solution management for Netsmart’s Simple platform. That kind of jump is exactly what CMS is now asking about.
What’s actually on the table
The scrutiny is happening inside the agency’s proposed 2.4% Medicare payment bump for skilled nursing facilities in fiscal 2027, a rule released in early April. On paper, the bump translates to about $888 million in added payments — a 3.2% market basket adjustment offset by a 0.8% productivity cut.
But those numbers aren’t locked in. CMS has built room into the rule to revise the adjustment factors for physical, occupational, and speech-language therapy if coding patterns don’t justify current payment levels. The speech adjustment alone is on track for a 5.87% reduction.
For operators serving medically complex residents, that’s not academic.
“If a facility is bringing in $1.8 million to $2.2 million a year, the non-therapy ancillary component makes up about 25% of the PDPM payment,” Altenritter said. “That’s $45,000 to $65,000 less — it’s someone’s salary.”
The clock is ticking
The comment period closes June 3, and industry consultants are urging operators not to stay silent. Joe Price, a regulatory strategist for Netsmart, told attendees that CMS is genuinely asking whether the coding shifts reflect improved screening tools and clinical focus, not just upcoding.
“There may be some bad players out there that are upcoding, but for the most part we’re just documenting better,” Altenritter said. Operators who want to push back, she added, need to send CMS specific, real-world examples from their own facilities.
That window is narrow. Anyone hoping to shape the final rule has less than two weeks left to weigh in.
A bigger shift behind the rule
Case mix isn’t the only thing on the table. The proposed rule would also shorten Minimum Data Set submission timelines from four-and-a-half months to 45 days, and expand reporting to cover Medicare Advantage and other non-traditional Medicare residents — not just Part A patients.
That’s a major change. More than 54% of Medicare beneficiaries are now in MA plans, and that share could climb to 65% within five years. Facilities currently report data on only about 45% of their residents.
For operators, the message from Washington is starting to look familiar: prove the numbers, or expect Medicare to trim them.
