Skilled Nursing Facility Billing Guidelines 2027: Medicare, PDPM, and Consolidated Billing

Skilled nursing facility (SNF) billing is the process of coding and submitting Medicare (and other payer) claims for services delivered to residents in an SNF. Medicare Part A generally covers a qualifying SNF stay (usually after a 3-night hospital stay) and pays a per-day rate under the PDPM payment system, while Part B may cover certain services (e.g., therapy or physician visits) when Part A isn’t available or has been exhausted. During a covered Part A stay, the SNF bundles (consolidates) most facility and ancillary services into its claim, although specified services (e.g., physician care, dialysis, and chemotherapy) are carved out and billed separately.

If your facility needs support with claims, MDS-to-claim accuracy or consolidated billing, see our skilled nursing facility billing services.

What Is SNF Billing?

SNF billing means submitting Medicare claims for the skilled nursing and rehabilitation services provided in a nursing facility. SNF care is short-term post-hospital rehabilitation. The facility itself files an institutional claim (UB-04/CMS-1450) to Medicare for covered Part A services such as nursing care, therapies, medications, and supplies. Covered Part A stays must meet Medicare’s eligibility requirements (e.g., a prior hospital stay, skilled need), and custodial care is not covered by Part A.

What Changed in SNF Billing for FY 2027?

The FY 2027 SNF PPS final rule (effective October 1, 2026) made modest updates. CMS increased the SNF payment rates by 2.4%, resulting in an estimated +$882.74 million in Medicare payments. (The 2.4% is based on a 3.2% market basket increase, offset by a 0.8% productivity adjustment.) CMS also finalized certain Quality Reporting Program changes: for example, removing two COVID-19 vaccination measures from the SNF QRP and requiring SNFs to submit MDS assessments on all residents regardless of payer to improve data completeness.

There were no changes to the PDPM case-mix classification itself, but CMS did issue a Request for Information on mitigating PDPM case-mix upcoding. SNFs should note that CMS and MACs update the consolidated billing exclusion lists annually. The 2026 update added new HCPCS codes and removed outdated chemotherapy and custom prosthetic codes. In practice, SNF administrators should monitor CMS guidance on the CMS-1450 and MDS, along with their MAC’s Part A annual update each year, for any new billing rules or code changes.

Medicare Part A vs. Part B SNF Billing

Explore the key differences between Medicare Part A and Part B SNF billing.

How PDPM Reimbursement Works

Under PDPM, each SNF resident is classified into case-mix groups based on five clinical components: Physical Therapy (PT), Occupational Therapy (OT), Speech-Language Pathology (SLP), Nursing, and Non-Therapy Ancillary (NTA). The SNF must complete a Minimum Data Set (MDS) assessment (typically on day 5 of the stay and at regular intervals) to capture the resident’s diagnoses (ICD-10 codes) and functional status (e.g., ADL scores). The ICD-10 codes on the MDS determine the resident’s clinical category, and the MDS Section G ADL scores determine the nursing case-mix index. These components together generate a 5-character HIPPS code on the claim (sometimes called a PDPM case-mix code). That HIPPS code encodes the patient’s PDPM group for each component and drives the daily payment rate. (For example, a higher nursing index or additional non-therapy services yields a higher per diem.)

Throughout the SNF stay, documentation must support the MDS coding, since any mismatch between the MDS and claim ICD-10 codes or an incorrect HIPPS code causes payment errors or denials. For a refresher on code sets, read our guide to medical billing codes: CPT, ICD-10, HCPCS and modifiers.

How SNF Consolidated Billing Works

SNF consolidated billing means that during a covered Part A stay, the SNF is financially responsible for billing (and being paid for) virtually all Medicare-covered services furnished to the resident. In practice, the SNF submits one comprehensive Part A claim that includes room and board, nursing care, rehabilitation therapy, lab tests, radiology, drugs and supplies related to the resident’s condition, and other facility services.

Any licensed or ancillary provider treating that resident (e.g., lab, therapist, DME supplier) must first check whether the resident has an active Part A SNF benefit. If so, the outside provider’s charges must be billed through the SNF’s claim. If an outside provider mistakenly bills Medicare separately for a bundled service, that claim will be denied because the SNF has already accounted for it. In short, the SNF “consolidates” most Part A services onto its bill, and outside billing is only allowed for items specifically excluded by rule. Strong eligibility verification is what keeps outside providers from billing the wrong party.

What Is Excluded From SNF Consolidated Billing?

Excluded services are those that can be billed separately by outside providers even when a beneficiary is in a Part A SNF stay. Generally, exclusions include physician (and other professional) services, ambulance transports, and many outpatient hospital services (e.g., CT/MRI scans, surgeries). Also excluded are renal dialysis and related EPO/Aranesp for ESRD patients, hospice care services, chemotherapy drugs and administration, radiopharmaceuticals, custom prosthetic devices, certain blood products, and preventive vaccines and screenings (like flu shots and colon cancer screenings).

While therapies and most routine SNF supplies stay on the SNF’s claim, the categories above remain payable outside. CMS publishes an annual HCPCS “exclusion file” that details exactly which codes are excluded; SNFs must consult that file each year rather than relying on hearsay.

SNF Billing Codes and Claim Requirements

SNFs submit claims on the UB-04 (CMS-1450) institutional form. Key elements include:

Type of Bill (TOB)

Use 21x (inpatient SNF Part A), 22x (outpatient SNF Part B) or 12x (rural swing-bed) as appropriate.

HIPPS Code

A 5-character code on the claim (often submitted in the HIPPS field) that reflects the resident’s PDPM case-mix classification. SNFs must ensure the HIPPS code matches the MDS assessment.

Revenue Codes

Include appropriate revenue line codes (e.g., 002x for SNF room and board, 012x for ancillary, 042x/043x/044x for PT/OT/SLP, 016x for IV drugs, etc.) with corresponding charges or units.

Occurrence Span Codes

Generally use Occurrence Code 70 (Acutely Ill Stay: Through Date) on each monthly claim to indicate the billing period. Include admission and through dates.

Patient Status

Report the SNF patient status (e.g., still in facility, discharged home, transferred) using the UB-04 patient status code.

ICD-10 Diagnosis

Enter the primary and secondary ICD-10 codes that correspond to the MDS principal and secondary diagnoses. The principal diagnosis on the claim should match the condition driving the PDPM category.

MDS Consistency

Ensure the MDS assessment dates, ICD codes, and HIPPS code align. Inconsistencies between MDS and claim (for example, a different primary diagnosis) often trigger denials.

Sequential Billing

SNFs typically bill Medicare monthly (each ~30-day slice of the stay). The first claim covers days 1–30, the next 31–60, and so on. Each claim is “linked” by admission date and patient.

No-Payment Claims

If Medicare pays $0 (e.g., the beneficiary exhausts all benefits or only a deductible is due), the SNF should still file a claim with the appropriate Revenue Code 018x (Coinsurance and Deductible – SNF) or use Type of Bill 20x (No-Pay) to report the stay. This preserves payment history and triggers Medicare’s coordination of benefits for any coinsurance portion.

Common SNF Billing Errors

SNF claims can be complex, and several mistakes frequently cause denials or underpayments. Common errors include:

Part A Eligibility Errors

Billing Part A when the resident doesn’t meet Medicare’s requirements (e.g., no 3-night hospital stay or days beyond the 100-day limit) results in denials.

PDPM Category Mistakes

Entering the wrong ICD-10 primary diagnosis on the MDS or claim can shift the patient into the wrong PDPM case-mix group. This leads to incorrect HIPPS codes and an incorrect per diem.

MDS vs. Claim Mismatch

The diagnoses and dates on the claim must agree with the MDS data. For example, if the MDS lists a principal stroke diagnosis, the claim must use that stroke code as primary. Any inconsistency often triggers a medical necessity or linkage denial.

Incorrect HIPPS Code

A typo or outdated HIPPS code (from a prior year) will cause an automatic error, since Medicare won’t recognize it. HIPPS codes should be updated annually from the CMS master list.

Bundled Services Billed Separately

Submitting separate claims for SNF-bundled items is a sure denial. For instance, billing therapy or lab tests as a standalone Part B service during an active Part A stay violates consolidated billing. SNFs should prevent duplicate billing by outside suppliers.

Missing Exclusion Documentation

If an excluded service should be billed outside (e.g., radiology at a hospital during a Part A stay), failing to include the correct exclusion modifier or conditions can cause denials. SNFs must apply the right diagnosis or modifier to qualify an item as a true exclusion. Our list of the top denial codes in medical billing shows how these denials appear on remittances.

Incorrect No-Pay Claims

When Part A days run out, or Medicare pays $0 due to deductibles, using the wrong type of bill (e.g., submitting 21x when it should be 20x no-pay) can confuse processing. SNFs must file the appropriate “zero-pay” claim if required.

Untimely Filing or Corrections

Medicare generally requires claims within 1 year of service. Late filings or delays in correcting a rejected claim can cause permanent denials or loss of benefits.

SNF Billing Workflow Checklist

Here’s how the skilled nursing facility billing process works.

1. Confirm eligibility and qualifying stay. Verify the resident had a 3-day hospital stay and was formally admitted to the SNF. Check the Medicare Part A start date and remaining available days.
2. Determine Part A vs. Part B status. At each period, confirm whether services fall under Part A (covered SNF stay) or must be billed as Part B/outpatient.
3. Complete and validate the MDS assessment. Ensure the initial 5-day MDS (and any subsequent PPS assessment) is accurate. ICD-10 diagnoses must be documented and supported by the medical record.
4. Assign PDPM categories and HIPPS code. Using the MDS, derive the patient’s case-mix groups. Generate the HIPPS code from the PDPM grouper and ensure it is entered on the claim.
5. Identify bundled vs. excluded services. Therapies and routine SNF items are bundled, but flag any excluded services (physician, dialysis, etc.) for separate billing. Make sure outside providers submit charges through the SNF when required.
6. Reconcile outside-provider services. Confirm which labs, X-rays, or DME charges occurred. If any are payable outside Part A (e.g., ambulance, radiology at the hospital), prepare those claims or payments; if they should be included, ensure the SNF claim incorporates the cost or offset.
7. Validate the claim against documentation. Check the UB-04: correct type of bill, ICD-10, HIPPS, and revenue lines. Ensure ICD-10 codes on the claim match the MDS and physician orders. Verify occurrence and span dates.
8. Submit, monitor, and correct. File the claim electronically and track remittance promptly. If there are any rejections or denials, research the cause and resubmit corrected claims. Maintain logs of claim statuses and adjust processes to prevent repeat errors.

How to Reduce SNF Billing Denials

Some of the best ways to prevent skilled nursing facility billing denials are detailed here. For a broader playbook, see our guide on how to reduce denials in medical billing.

Eligibility Verification

Check hospital discharge requirements and Part A benefit periods before billing. Denials often happen when a patient is not truly eligible.

Documentation Audits

Regularly review charts to ensure that skilled services (nursing and therapy) are adequately documented. Include physician orders, daily notes, therapy plans, and ADL scores in resident records. Our medical billing audit checklist can help structure these reviews.

MDS and Coding Reviews

Perform MDS coding audits to catch wrong ICD-10 selections or inaccurate ADL levels, which can misclassify PDPM groups. An internal or external auditor can help validate PDPM coding quarterly.

Stay Current on Exclusions

Keep an eye on the annual CMS HCPCS exclusion files for consolidated billing. Train staff (and vendors) on the latest excluded codes so outside claims are billed properly.

Claim Edits and Scrubbing

Use billing software or services tuned to SNF PPS edits. For example, checks on HIPPS validity, Part A date range, and type-of-bill consistency can flag errors before submission. Track results with the revenue cycle management KPIs that matter most, such as clean claim rate and denial rate.

Communicate with Providers

Regularly remind physicians, therapists, and suppliers of the consolidated billing rules. Ensure everyone knows to send charges through the SNF during an active Part A stay. Facilities short on staff can also consider outsourcing medical billing to a team experienced in SNF PPS.

Conclusion

Understanding the latest SNF billing guidelines for 2027 helps skilled nursing facilities manage Medicare claims accurately and reduce avoidable denials. From verifying Part A eligibility and applying PDPM reimbursement rules to following SNF consolidated billing requirements, every step matters. Regular MDS reviews, accurate coding, complete clinical documentation, and timely claim submissions improve billing efficiency. Facilities should also review current CMS guidance and consolidated billing exclusion lists to stay up to date. With a consistent billing process and trained staff, SNFs can reduce costly errors.

Frequently Asked Questions