SNF Value-Based Purchasing and MDS Data Validation: Protecting Your Payment Adjustment

The Skilled Nursing Facility Value-Based Purchasing (SNF VBP) Program links a portion of each SNF's Medicare Part A payment to quality performance. For years, the program used a single measure, hospital readmissions. Under expansion authorized by Congress, the program now uses a broader measure set. The FY 2027 program year, with payment adjustments in effect from October 2026 through September 2027, is the first to score eight quality measures.

At the same time, CMS has begun validating the MDS data used to calculate MDS-based quality measures. CMS announced that MDS data validation would begin in January 2026, and SNFs selected for validation must submit medical records supporting sampled assessments. Failure to comply can trigger a 2 percent reduction in the annual payment update under the SNF Quality Reporting Program (QRP).

This article explains how SNF VBP works, which measures apply, how the data validation process operates, and practical steps SNFs can take to protect their payment adjustment. It is educational and does not replace legal or professional advice. Program details change through annual rulemaking, so facilities should confirm current requirements on CMS's SNF VBP and QRP pages.

How SNF VBP Works

The Withhold and Payback

Under Section 1888(h) of the Social Security Act and 42 CFR 413.338, CMS withholds 2 percent of each SNF's Medicare fee-for-service Part A payments to fund the program. The statute requires CMS to redistribute between 50 and 70 percent of the withheld amount as incentive payments. CMS has used a 60 percent payback percentage, with the remaining 40 percent retained by the Medicare Trust Fund. As a result, many SNFs receive back less than the full amount withheld, and lower-performing SNFs see a net payment reduction. CMS estimated in the FY 2027 final rule that the program would reduce aggregate SNF payments by about $203.6 million in FY 2027.

The Incentive Payment Multiplier

CMS scores each SNF's performance on each measure, combines the measure scores into a SNF performance score, ranks SNFs, and converts each SNF's score into an incentive payment multiplier using an exchange function. The multiplier is applied to each claim's adjusted federal per diem during the program year. A multiplier above 1 means the SNF earns back more than its withhold, while a multiplier below 1 means it earns back less.

Achievement and Improvement

For each measure, CMS awards points based on achievement, comparing the SNF's performance with national performance standards (an achievement threshold and a benchmark), and improvement, comparing the SNF's performance with its own baseline period performance. CMS uses the higher of the two scores for each measure. Performance standards are published in advance through rulemaking. In the FY 2026 and FY 2027 rules, CMS finalized numerical performance standards for future program years.

Case and Measure Minimums

CMS applies case minimum and measure minimum policies so that SNFs are scored only on measures with enough data. SNFs that do not meet the minimums may be excluded from the program for the year. Historically, low-volume SNFs received special treatment so they were not penalized for small samples. Facilities should review their reports to understand whether they are included in a given year.

Recent Methodology Changes

In the FY 2026 SNF PPS final rule, CMS removed the program's Health Equity Adjustment from the scoring methodology and updated the reconsideration policy. In the FY 2027 final rule, CMS finalized additional performance standards, updated the review and correction policy for measures calculated with MDS data, and revised the snapshot dates by which SNFs must make MDS corrections for VBP purposes, aligning them with new QRP submission deadlines.

The Measures

According to CMS's SNF VBP measures page, the program uses these measures across recent program years:

• SNF 30-Day All-Cause Readmission Measure (SNFRM), used through FY 2027.

• SNF Within-Stay Potentially Preventable Readmission Measure (SNF WS PPR), beginning in FY 2028, in place of SNFRM.

• Skilled Nursing Facility Healthcare-Associated Infections Requiring Hospitalization (SNF HAI), beginning in FY 2026.

• Total Nurse Staffing, beginning in FY 2026, based on Payroll-Based Journal data.

• Nursing Staff Turnover, beginning in FY 2026, based on Payroll-Based Journal data.

• Discharge to Community, Post-Acute Care Measure for SNFs, beginning in FY 2027.

• Long Stay Hospitalization measure, beginning in FY 2027.

• Discharge Function Score, beginning in FY 2027.

• Percent of Residents Experiencing One or More Falls with Major Injury (Long-Stay), beginning in FY 2027.

Data Sources

The measures draw on different data. Readmission, infection, discharge to community, and hospitalization measures rely largely on Medicare claims. Staffing measures rely on Payroll-Based Journal submissions. The Discharge Function Score relies on Section GG functional items on the MDS, and the long-stay falls measure relies on MDS falls items. These MDS-based measures are where MDS accuracy directly affects VBP scores.

Why Each Data Source Matters

• Claims-based measures depend on accurate claims and good care transitions.

• Staffing measures depend on complete and accurate Payroll-Based Journal reporting, including correct job categories and hours for employees and contract staff.

• MDS-based measures depend on accurate, timely, and complete MDS assessments.

MDS Data Validation

The Legal Basis

Section 1888(h)(12) of the Social Security Act requires CMS to apply a data validation process to SNF VBP measures. CMS specified in the FY 2024 and FY 2025 SNF PPS final rules that it would implement a data validation process for MDS-based measures. CMS stated that validation would apply to MDS-based measures beginning with the FY 2027 program year.

Selection

According to CMS's data validation frequently asked questions, SNFs are selected randomly from eligible facilities and can be selected only once per fiscal year. CMS places selection notices in the MDS 3.0 Provider Preview Reports folders in the Internet Quality Improvement and Evaluation System (iQIES), and CMS has indicated that notices are released quarterly. Facilities should check their iQIES folders regularly so they do not miss a notice.

What Selected SNFs Must Submit

Based on CMS's frequently asked questions:

• Point of contact information is due within five business days of the selection notice.

• Medical records supporting up to 10 sampled MDS assessments are due within 45 calendar days of the initial selection notice, by 11:59 p.m. on the 45th day. If the 45th day falls on a weekend or federal holiday, the deadline moves to the next business day.

• Records must be submitted as one PDF per sampled resident, bundled into a single file with the required naming convention, through the secured portal rather than by email.

• Facilities should include only the sections and date ranges specified in the notice, and should exclude Social Security numbers, face sheets, and documents outside the requested range.

Results

Selected SNFs receive a SNF Data Validation Summary Report showing results for each measure and MDS item, by sampled assessment. A disagreement means reviewers could not find documentation supporting the MDS value reported. CMS describes the report as informational and states that SNFs are not penalized for their validation results.

Consequences of Not Submitting

Although validation results themselves are not penalized, failing to submit records is. According to CMS, noncompliance may result in a 2 percent reduction in the SNF's annual payment update under the SNF QRP. CMS identified the FY 2025 performance year as affecting the FY 2027 SNF QRP program year and the FY 2026 performance year as affecting the FY 2028 SNF QRP program year. A SNF that submits some but not all records receives a summary report noting noncompliance, and a SNF that submits nothing receives a failure-to-submit letter, with a noncompliance notice also coming from its Medicare Administrative Contractor.

Reconsideration

A SNF may request reconsideration within 30 days of the date on the noncompliance letter by email to the SNF QRP reconsiderations mailbox, with the required subject line and its CMS Certification Number. Requests after the deadline are not accepted.

Why Validation Results Still Matter

Even though validation results are informational, a high disagreement rate is a warning. It suggests that MDS items driving quality measures, and potentially PDPM payment, are not supported by documentation. The same documentation weaknesses could appear in medical review, state case-mix audits, or survey. SNFs should treat validation results as a free external audit and act on them.

Review and Correction

CMS provides SNFs with quarterly confidential feedback reports in iQIES and with reports during review and correction periods. For the FY 2027 program year, CMS's timeline showed a baseline period report, a performance period report disseminated in June, and a performance score report in late July, each with a review and correction window. SNFs can submit correction requests to the SNF VBP Help Desk with the required subject line and information.

Review and correction is limited to errors in CMS's calculations. It is not an opportunity to submit new or corrected MDS or Payroll-Based Journal data after the applicable deadlines. That is why the snapshot dates for MDS corrections and the Payroll-Based Journal submission deadlines matter so much: once they pass, the underlying data are locked for VBP purposes.

Protecting Your Payment Adjustment

Know Your Numbers

• Download quarterly confidential feedback reports from iQIES and review them with leadership.

• Compare your measure results with achievement thresholds and benchmarks.

• Identify which measures are pulling your score down.

• Estimate the financial effect of your multiplier on Medicare Part A revenue.

Strengthen MDS Accuracy

• Train MDS and clinical staff on Section GG coding at admission and discharge, because the Discharge Function Score depends on it.

• Code falls and injuries accurately in Section J for long-stay residents, and investigate every fall.

• Audit a sample of assessments each month for documentation support.

• Submit assessments on time, and make corrections before CMS snapshot dates.

Strengthen Payroll-Based Journal Reporting

• Reconcile Payroll-Based Journal submissions with payroll and agency invoices.

• Use correct job codes.

• Include contract and agency staff hours.

• Submit by the quarterly deadline.

• Track turnover and retention.

Improve Clinical Outcomes

• Strengthen care transitions to reduce readmissions and long-stay hospitalizations.

• Use early warning tools to identify changes in condition.

• Strengthen infection prevention to reduce healthcare-associated infections requiring hospitalization.

• Implement falls prevention programs.

• Focus therapy and nursing care on functional improvement and safe discharge to the community.

Prepare for Data Validation

• Assign responsibility for monitoring iQIES folders for selection notices.

• Maintain a written procedure for responding within five business days and 45 calendar days.

• Make sure medical records for the MDS look-back period are complete, signed, and retrievable, including nursing notes, therapy documentation, and incident reports.

• Practice assembling a record packet for a sample resident.

• Review the record packet before submission to confirm it includes the requested sections and excludes prohibited information.

Common Mistakes

• Missing a selection notice because no one checks the iQIES folder.

• Submitting records after the 45-day deadline.

• Submitting incomplete records that do not support coded MDS items.

• Waiting until the review and correction period to fix MDS errors.

• Underreporting staffing hours in Payroll-Based Journal.

• Coding Section GG discharge performance without documentation.

• Treating VBP as a quality department issue rather than an organization-wide priority.

Questions Leadership Should Ask

• What is our current incentive payment multiplier, and what is it worth in dollars?

• Which measures are below the achievement threshold?

• Who monitors iQIES for VBP reports and data validation notices?

• Do we have a written plan for responding to data validation selection?

• How often do we audit MDS documentation for Section GG and falls?

• Are our Payroll-Based Journal submissions complete and reconciled?

• What are we doing to reduce readmissions and long-stay hospitalizations?

A Hypothetical Example

A SNF's quarterly feedback report shows its Discharge Function Score well below the achievement threshold. An internal audit finds that discharge Section GG items were frequently coded without supporting therapy or nursing documentation and that some discharge assessments were completed late. At the same time, its Payroll-Based Journal submissions had omitted agency nurse hours. The SNF trains staff on discharge Section GG coding, adds a documentation review before discharge assessments are finalized, reconciles staffing data with agency invoices, and assigns the MDS coordinator to monitor iQIES for validation notices. When the SNF is later selected for data validation, it submits complete records on time, and its validation report shows few disagreements.

How the Measures Connect to Daily Operations

Each VBP measure reflects work done every day in the building. Readmission and hospitalization measures reflect how well the facility identifies changes in condition, communicates with physicians, and manages chronic conditions such as heart failure, chronic obstructive pulmonary disease, and infections. The infection measure reflects infection prevention practices, antibiotic stewardship, and early recognition of sepsis. Staffing and turnover measures reflect recruitment, scheduling, onboarding, and workplace culture. The Discharge Function Score reflects the effectiveness of therapy and restorative nursing in improving function, as well as the accuracy of Section GG coding at admission and discharge. The falls measure reflects fall risk assessment, environmental safety, medication review, and supervision for long-stay residents.

For this reason, VBP improvement plans work best when they assign ownership of each measure to the leaders who influence it. The director of nursing may own readmissions and falls, the infection preventionist may own the infection measure, human resources may own turnover, and the rehabilitation director and MDS coordinator may share the Discharge Function Score.

The Link Between VBP, QRP, and Survey

The SNF VBP Program, the SNF Quality Reporting Program, and survey and certification are separate programs, but they draw on overlapping data. QRP is a pay-for-reporting program: SNFs that do not submit required quality data face a 2 percent reduction in their annual payment update. VBP is a pay-for-performance program that adjusts payment based on results. Some measures, such as the Discharge Function Score, appear in both programs. MDS data also feed Nursing Home Care Compare and the Five-Star Quality Rating System, which consumers and referral sources use to choose facilities.

Data validation sits at the intersection. The same MDS records that support VBP and QRP measures support PDPM payment and survey findings. Weak documentation that shows up in validation is likely to show up elsewhere, too.

Building a VBP Dashboard

A simple internal dashboard can help leadership track progress between CMS reports. Useful elements include:

• Monthly hospital transfers and readmissions, with root cause reviews.

• Infection-related hospital transfers.

• Staffing hours per resident day and turnover, calculated from internal payroll data.

• Discharge destinations and community discharge rates.

• Admission and discharge Section GG scores and change.

• Long-stay falls with major injury.

• MDS timeliness and internal audit accuracy.

• Payroll-Based Journal submission status.

Internal measures will not match CMS calculations exactly, because CMS uses risk adjustment and specific measure specifications, but trends can show whether improvement efforts are working.

Key Takeaways

• SNF VBP withholds 2 percent of Medicare Part A payments and returns 60 percent of the pool based on performance.

• The program now uses eight measures, including MDS-based Discharge Function Score and long-stay falls.

• MDS data validation began in 2026, with 45 calendar days to submit records for up to 10 assessments.

• Failing to submit records can trigger a 2 percent QRP annual payment update reduction.

• Accurate MDS and Payroll-Based Journal data, timely corrections, and clinical improvement protect your adjustment.

Planning for Future Program Years

CMS updates SNF VBP every year through the SNF PPS proposed and final rules, which are usually released in the spring and summer. Each rule may add or replace measures, publish performance standards, change scoring details, or adjust deadlines. Facilities should review each proposed rule, consider submitting comments, and update their internal plans when the final rule is published. Because baseline and performance periods run well before the program year in which payment is adjusted, today's performance affects payment one to two years from now. Improvements made now protect future multipliers, while problems left unaddressed will show up in later payment years.

Frequently Asked Questions

How much is withheld under SNF VBP?

Two percent of Medicare fee-for-service Part A payments, with 60 percent of the total withheld amount redistributed as incentive payments.

How many measures does SNF VBP use?

The FY 2027 program year is the first to use eight measures. Beginning in FY 2028, SNF WS PPR takes the place of SNFRM.

Which measures use MDS data?

The Discharge Function Score and the long-stay Falls with Major Injury measure.

What happens if we are selected for data validation?

You must provide point of contact information within five business days and submit records for up to 10 sampled assessments within 45 calendar days.

Are SNFs penalized for validation results?

CMS states that validation results are informational and not penalized, but failing to submit records can lead to a 2 percent reduction in the annual payment update under the SNF QRP.

Conclusion

The expanded SNF VBP Program makes quality data, including MDS and staffing data, central to Medicare payment, and CMS's MDS data validation process adds a new layer of scrutiny. SNFs that monitor their reports, code MDS items accurately, report staffing completely, improve clinical outcomes, and respond to validation notices on time will protect their payment adjustment and their QRP annual payment update.

How HealthBridge Can Help

HealthBridge is a healthcare management consulting firm that helps SNFs analyze VBP performance, audit MDS and Payroll-Based Journal data, prepare for MDS data validation, design response procedures, and implement quality improvement strategies. If you want to protect your SNF VBP payment adjustment, please get in touch with us. We will be happy to help you with this topic.

References

• U.S. Social Security Administration. Social Security Act, Section 1888, Prospective Payment for Skilled Nursing Facilities. https://www.ssa.gov/OP_Home/ssact/title18/1888.htm

• Electronic Code of Federal Regulations. 42 CFR 413.338, Skilled Nursing Facility Value-Based Purchasing Program. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-413/subpart-J/section-413.338

• Centers for Medicare & Medicaid Services. Skilled Nursing Facility Value-Based Purchasing Program. https://www.cms.gov/medicare/quality/nursing-home-improvement/value-based-purchasing

• Centers for Medicare & Medicaid Services. SNF VBP Program Measures. https://www.cms.gov/medicare/quality/nursing-home-improvement/value-based-purchasing/measures

• Centers for Medicare & Medicaid Services. SNF VBP Spotlights and Announcements. https://www.cms.gov/medicare/quality/value-based-programs/value-based-purchasing-snf-vbp-program/spotlights-announcements

• Centers for Medicare & Medicaid Services. Skilled Nursing Facility Data Validation Process. https://www.cms.gov/medicare/quality/value-based-programs/skilled-nursing-facility-snf-validation-program

• Centers for Medicare & Medicaid Services. Data Validation Process Frequently Asked Questions (August 11, 2026). https://www.cms.gov/files/document/data-validation-process-frequently-asked-questions-08-11-2026-pdf.pdf

• Centers for Medicare & Medicaid Services. SNF VBP FY 2027 Program Year Timeline. https://www.cms.gov/files/document/snf-vbp-fy2027-timeline-pdf.pdf

• Federal Register. Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities; Updates to the Quality Reporting Program and Value-Based Purchasing Program for Federal Fiscal Year 2027 (July 31, 2026). https://www.federalregister.gov/documents/2026/07/31/2026-15562/medicare-program-prospective-payment-system-and-consolidated-billing-for-skilled-nursing-facilities

• Federal Register. SNF PPS Final Rule for Federal Fiscal Year 2026 (CMS-1827-F). https://www.federalregister.gov/d/2025-14679

• Centers for Medicare & Medicaid Services. FY 2026 Skilled Nursing Facility Prospective Payment System Final Rule (CMS-1827-F) Fact Sheet. https://www.cms.gov/newsroom/fact-sheets/fy-2026-skilled-nursing-facility-snf-prospective-payment-system-final-rule-cms-1827-f

• Centers for Medicare & Medicaid Services. Minimum Data Set 3.0 Resident Assessment Instrument Manual. https://www.cms.gov/medicare/quality/nursing-home-improvement/resident-assessment-instrument-manual