Updates to the federal Minimum Data Set (MDS) are set to recalibrate how nursing homes document resident care and how those data feed into public quality ratings — changes operators say could drive down star ratings and raise penalty risks beginning in fiscal year 2026.
Starting with assessments on Oct. 1, 2025, the Centers for Medicare & Medicaid Services (CMS) will implement refinements aimed at tightening coding accuracy across functional status, behavioral health and resident safety. CMS says the move will align measures more closely with the true clinical picture. But industry analyses warn facilities could see a 10% to 20% uptick in negative quality measure rates as stricter documentation surfaces risks that were previously undercounted.
What’s changing
The updates recalibrate 16 quality measures that rely on MDS data and are used for public reporting and payment programs. Refined prompts are expected to heighten sensitivity in areas such as functional status (Section GG), falls with major injury, pressure ulcers and antipsychotic use.
There is no formal grace period for providers. However, CMS has delayed the first public reporting refresh reflecting the new specifications until early 2026, giving facilities a short window to adjust coding practices before changes appear on the Care Compare website.
CMS leaders frame the shift as overdue. These MDS refinements ensure that quality measures reflect the true clinical picture, empowering residents and families with accurate data while holding providers accountable for safe care, CMS Administrator Chiquita Brooks-LaSure said in an August statement tied to the final payment rule.
Why it matters for ratings and revenue
Quality measures flow directly into the Five-Star Quality Rating System and other programs that influence referrals and reimbursement. Industry testing across several hundred facilities suggests an average double-digit drop in performance on short-stay measures under the new specifications, according to analyses shared by providers and consultants. One multi-state operator that piloted the changes reported an 18% rise in documented pressure ulcer rates after more detailed skin assessments were required.
Financial exposure could grow. The FY 2026 Skilled Nursing Facility Prospective Payment System includes a 3.2% base-rate increase, but facilities that see measure performance slip risk Value-Based Purchasing penalties of up to 2% of Medicare payments, potentially offsetting the raise.
Industry pushback — and CMSs rationale
Provider groups warn of unintended consequences. Were seeing a documentation tsunami — facilities are already stretched thin, and these changes could tank star ratings overnight without proportional support, said David Gifford, MD, a senior quality executive at a national nursing home association. LeadingAges regulatory team cautioned that safety-net and non-profit providers could be disproportionately hit if the system doesnt adequately adjust for resident complexity.
Regulators point to persistent data integrity concerns. A 2024 audit by the Department of Health and Human Services Office of Inspector General identified widespread MDS coding errors and underreporting of certain adverse events, including falls, underscoring the need for tighter standards. Inaccurate MDS coding undermines the entire quality ecosystem, OIG leaders said at the time.
Readiness gaps — and what operators can do now
Facilities and vendors are racing to update software and retrain teams. Major EHR providers have told clients to expect new MDS workflows before year-end, though operators say training challenges will extend into 2026. According to industry sources, a typical 100-bed facility could face hundreds of thousands of dollars in additional costs tied to education, audits and system upgrades.
Consultants recommend immediate steps: conduct internal audits on high-impact measures (falls, pressure ulcers, antipsychotic use and rehospitalizations), refresh coding competencies for Section GG and related areas, and coordinate with software vendors to validate measure calculations against CMS specifications. With state survey agencies set to enforce the new guidelines in early 2026, early adoption may blunt rating declines.
The road ahead
Public reporting incorporating the revised measures is slated to begin in the first quarter of 2026, with broader integration into Care Compare later that year. Advocacy groups are pushing for additional risk adjustment and transitional safeguards, arguing that the changes, while well-intended, could widen disparities without targeted support.
Even so, some analysts note that operators who move quickly to tighten documentation and care processes could emerge stronger — converting sharper measurement into proof points for quality, and potentially capturing market share as consumers and hospitals scrutinize performance.
