MedPAC Proposes 4% Medicare Payment Cut for Skilled Nursing Facilities in FY 2027

The Medicare Payment Advisory Commission (MedPAC) has proposed a 4% reduction to the Medicare base payment rate for skilled nursing facilities (SNFs) for fiscal year 2027. This recommendation follows an analysis of Medicare payment adequacy for SNFs, considering factors such as beneficiary access, occupancy rates, and utilization trends. Despite a slight decline in the number of SNF facilities and admissions, occupancy and utilization have returned to pre-pandemic levels. MedPAC's data reveals that there were approximately 14,500 SNFs in 2024, with an average Medicare payment of $20,970 per 30.7-day stay. The commission also noted challenges in consistently gathering quality patient experience data across SNFs compared to other post-acute care settings like home health and inpatient rehabilitation. Financially, freestanding SNFs showed a strong fee-for-service Medicare margin of 24.4% in 2024, with projections indicating an increase to 25% in 2026. Margins across all payers rose by 2.1% in 2024, suggesting robust investor interest in the skilled nursing sector. However, MedPAC highlights that high margins combined with fee-for-service incentives may encourage inefficient care delivery. The commission also discussed structural issues impacting care pathways, such as the three-day hospitalization requirement for nursing home admissions, which may drive some patients to inpatient rehabilitation facilities instead of SNFs. Looking ahead, MedPAC is monitoring the implementation of the Transforming Episode Accountability Model (TEAM) starting in January 2026. TEAM aims to integrate acute and post-acute care coordination around five high-cost procedures to improve care outcomes. MedPAC further explored the complexities of adopting site-neutral payment models across post-acute care due to insufficient research and challenges in patient selection data. The commission emphasized that despite separate fee schedule updates, the post-acute care sector functions as an interconnected system, necessitating holistic oversight. These findings and recommendations from MedPAC provide critical insights into Medicare reimbursement policies affecting SNFs and highlight ongoing efforts to balance cost efficiency, quality of care, and regulatory frameworks in post-acute settings.