CMS Cracks Down on Schizophrenia Coding: What SNF Administrators Must Know

CMS has released significant updates to the State Operations Manual- Appendix PP that sharpen the focus on accurate schizophrenia diagnoses in skilled nursing facilities. These changes are in response to rising concerns that some residents are being coded with schizophrenia without meeting diagnostic criteria or having sufficient clinical documentation to support the diagnosis.

As an Administrator, your leadership in ensuring compliance directly impacts your facility’s Five-Star ratings, survey outcomes, and financial integrity.

What’s Changing — and Why It Matters to You

CMS surveyors are now actively reviewing medical records to verify that schizophrenia diagnoses are clinically supported. Facilities lacking required documentation may face penalties, including star rating downgrades and measure suppression, if selected and not passing a schizophrenia audit.

This change affects:

• MDS accuracy and coding

• Psychotropic medication justification

• Behavioral health care documentation

• PASARR compliance and updates

Additionally, on October 29th, 2025, CMS will incorporate the measure into Nursing Care Compare. This is one of several quality measures used to calculate SNF’s Five Star rating. The updated measure will replace the current measure, the percent of long-stay residents receiving an antipsychotic medication

Required Documentation: A Breakdown

For Residents Admitted with a Schizophrenia Diagnosis:

• Clear documentation of diagnosis history (prior psych records, family interviews)

• PASARR records confirming diagnosis

• Comprehensive psychiatric evaluation on admission validating DSM criteria

For Residents Newly Diagnosed After Admission:

• At least 6 months of documented behavioral symptoms per DSM

• Comprehensive medical evaluation to rule out other conditions

• Comprehensive psychiatric evaluation meeting DSM standards

• Updated PASARR reflecting the new diagnosis

What Surveyors Expect to See

• Clinical justification for psychotropic medications

• Documentation of adverse reactions monitoring

• Evidence that gradual dose reductions (GDRs) were attempted if appropriate

• Behavioral tracking tied to medication use

• PASARR screenings or mental health referrals when appropriate

Watch These Diagnosis Codes

• F20.0–F20.9 (Schizophrenia spectrum)

• F25.0–F25.9 (Schizoaffective disorders)

Audit Penalties: Know the Risks

If your facility fails a schizophrenia audit:

• Overall QM and Long-Stay QM ratings drop to 1 star for 6 months

• Short-Stay QM is suppressed for 6 months

• Long-Stay Antipsychotic QM is suppressed for 12 months → This can lower your overall Five-Star rating and reduce your competitive market standing

Administrator Action Plan

• Direct MDS and clinical teams to audit all schizophrenia-coded residents

• Ensure psychiatric and medical evaluations are properly documented

• Partner with behavioral health providers to confirm diagnoses meet DSM-5-TR standards

• Educate your IDT and QAPI teams on updated requirements and potential risks

• Monitor psychotropic medication use and ensure compliance with GDR guidelines

Bottom Line for Administrators

Inaccurate schizophrenia coding is now a high-risk area for survey penalties. As an SNF leader, it’s critical to ensure your team is aligned with the latest CMS expectations. Proactive compliance protects your facility’s ratings, reputation, and reimbursement—and positions you as a high-quality provider in a value-based care environment.