A new skilled nursing facility validation program could be the “tip of the iceberg” in verifying provider quality measurements and could lead to reduced incentives, reimbursement experts warned this week.

The Centers for Medicare & Medicaid Services this month quietly posted new details about the program, which was established and then refined in 2024 and 2025 skilled nursing payment rules. Essentially, it is an audit of MDS-based measures that feed the skilled nursing Quality Reporting and Value-Based Purchasing programs.

CMS said data collection will begin this fall to “ensure accurate quality data” for the fiscal year 2025 performance period — affecting 10% of nursing homes per year.

“This ‘validation’ is an audit verifying MDS coding and the supportive documentation used to code the item,” said Maureen McCarthy, CEO of Celtic Consulting. “I see this as a precursory way for CMS to account for incentive payments, and whether they were appropriate. … This is the tip of the iceberg and may result in reduced SNF VBP incentive multipliers.”

CMS said it will initially withhold a 2% reduction of a nursing home’s annual payment update for the FY2027 SNF QRP for those deemed non-compliant for failing to submit.

Eugene Gonsiorek, vice president of clinical regulatory standards for PointClickCare, last week predicted the new audits could lead to much more onerous data-validation requirements at CMS.

“Like TPE [Targeted Probe and Educate audits], it involves selecting a sample of records from randomly chosen providers, which does suggest a targeted review process,” Gonsiorek told McKnight’s Monday. “While this current initiative focuses broadly on validating MDS-based measures tied to the QRP and VBP programs, CMS has a track record of expanding audits when patterns or outliers emerge — as we saw with the schizophrenia diagnosis reviews related to antipsychotic usage.”

Stephanie Fitzgerald, manager at compliance firm Blue & Co., said broad evaluation through the validation program “could absolutely lead to more targeted audits or enforcement actions if patterns of noncompliance or inaccuracies are identified.”

If CMS identifies recurring issues such as systematic MDS coding errors, inconsistencies between documentation and reported data, or high error rates in specific regions or facilities, the agency “may flag these for further scrutiny” and escalate its audit approach.

Fitzgerald said CMS also could possibly move beyond the initial 2% withholding and order SNFs to recode claims based on documentation discrepancies, request refunds for overpayments; and even impose penalties or reduce a facility’s quality scores to impact reimbursement.

For now, randomly selected nursing homes will be required to submit requested medical chart documentation to validate 10 MDS assessment records. 

The current measures to be validated include percent of residents with falls resulting in major injury, pressure ulcer/injury rates, drug regimen review with follow-up, discharge function scores, discharge to community and transfer of health information.

“If CMS identifies significant discrepancies or trends, particularly in areas that impact

patient outcomes or Medicare spending, there’s a strong possibility of more focused

reviews in the future,” Gonsiorek said.

Any selected SNF that fails to submit requested medical chart documentation within 45 calendar days of the audit notification will be considered noncompliant, CMS said in a new Frequently Asked Questions document. 

Providers need to start looking at their quality measures now, McCarthy said. QAPI teams can determine areas to target based on quarterly reports and develop a plan for compliance and accuracy for any outliers, she added.

The audits announced now are for the MDS quality measures, but McCarthy warned that the agency is believed to be considering a similar validation process for claims-based measures, too. It could also expand to include managed care patients, rather than just Medicare beneficiaries.

And McCarthy warned that managing audits for additional value-based purchasing measures could quickly become “a bear.” Until now, providers have been potentially penalized or rewarded only based on their rehospitalization rates; staffing measures; and infections are being added to the program in fiscal 2026.

It’s important to note that CMS is not just validating MDS entries, Gonsiorek added, but

evaluating whether facilities can demonstrate a clear, defensible link between care

provided, documentation and MDS coding. He said robust electronic health records can support compliance by surfacing documentation gaps, aligning MDS data with clinical workflows and providing measure-level analytics.