The MDS Documentation Errors CMS Is Targeting in 2026

The MDS assessment sits at the centre of every Medicare Part A billing decision a skilled nursing facility makes. Under PDPM, it determines the daily reimbursement rate. Under Medicare’s compliance framework, it is the clinical record that auditors use to evaluate whether the care provided, and the billing submitted are aligned. An MDS that is coded accurately is simultaneously a correct billing document and a defensible compliance record. An MDS with coding errors is both a revenue risk and an audit risk.

CMS audit activity through the Targeted Probe and Educate program, Recovery Audit Contractors, and OIG review work has consistently identified specific categories of MDS documentation error that appear repeatedly in skilled nursing facility claims. These are not obscure technical failures. They are predictable coding errors that occur when the clinical-billing connection in the MDS process is not actively managed. This post covers the specific errors that are generating audit findings and what they look like in practice.

Error Category 1: Section GG Functional Scoring That Does Not Reflect Observed Function

Section GG of the MDS captures functional ability in specific self-care and mobility activities using a seven-point rating scale ranging from complete independence (rated 6) to total dependence (rated 1). The functional score derived from Section GG affects PDPM payment rates across the PT, OT, and SLP components higher impairment generates higher functional component payment. It is also a clinical record that auditors review for consistency with the therapy evaluations, nursing notes, and other documentation describing the resident’s functional status.

The error that CMS audit reviews consistently identify is Section GG scoring that reflects the resident’s best performance or their estimated potential rather than their actual functional performance during the assessment reference period. When a resident can perform a task with maximum assistance on some days and total dependence on others, the Section GG score should reflect what occurred during the assessment period not an average, not an optimistic estimate, and not what the resident is expected to achieve with therapy.

The compliance problem is a documentation inconsistency: when a therapy evaluation documents that the resident requires maximum assistance for bed mobility and the Section GG score reflects substantial assistance, an auditor reading both documents identifies a discrepancy that suggests the Section GG was not completed based on direct observation during the assessment period. That discrepancy invites scrutiny of the broader MDS and the PDPM payment it generated.

The revenue problem is the inverse: when the resident’s actual functional impairment is greater than the Section GG score reflects when optimistic scoring understates impairment the functional score tier is lower than the resident’s condition warrants, and the PDPM component rates that depend on that tier are lower than they should be. The facility is simultaneously creating audit risk from inconsistent documentation and losing revenue from underestimated impairment.

What this means for your facility: Section GG should be completed from direct observation during the assessment reference period, with the score reflecting the level of assistance the resident required for the specific activities assessed. A brief clinical note documenting the basis for the scoring who observed the activity, when, and what they observed provides the audit trail that supports the score if the assessment is ever reviewed.

Error Category 2: Active Diagnosis Coding That Is Not Supported by the Clinical Record

Section I of the MDS captures the active diagnoses that are present, documented, and being actively addressed in the resident’s care plan. Under PDPM, specific Section I diagnoses drive both the primary diagnosis clinical category and individual Nursing and NTA component classifications. The Medicare requirement is that Section I diagnoses reflect conditions that are active currently diagnosed, documented by the treating clinician, and being managed in the facility.

The MDS documentation error that audit reviews identify in this area takes two forms that represent opposite billing risks. Over coding – coding diagnoses that are historical, resolved, or present in the medical history but not actively being treated creates audit exposure for PDPM payment driven by conditions that the clinical record does not support as active. Under coding missing active diagnoses that carry PDPM payment weight because the MDS coordinator did not identify them in the clinical record creates revenue loss from Nursing and NTA components that are lower than the resident’s actual condition warrants.

Both errors are preventable with a systematic approach to Section I coding. The active diagnosis review should cross-reference the MDS with the current physician orders, the nursing care plan, the medication administration record, and the most recent physician and specialist notes not with the hospital discharge summary or the admission history, which may include conditions that are no longer active in the facility setting.

CMS’s particular focus in audit activity is on high-value active diagnoses those that generate significant PDPM payment coded without corresponding clinical documentation. An active septicaemia diagnosis coded in Section I that is not supported by physician documentation of active treatment in the facility, or an active pressure ulcer stage coded at a level not consistent with the wound care documentation, are the categories of Section I error that generate the largest individual claim recoupment amounts in audit reviews.

What this means for your facility: Section I active diagnosis coding should be a clinical review, not a transfer of codes from the hospital discharge summary. Every diagnosis coded in Section I should be traceable to a current physician order, a current treatment in the care plan, or a current medication and that traceability should be verifiable without explanation if an auditor reviews the assessment.

Error Category 3: NTA Component Coding Without Documentation Support

The Non-Therapy Ancillary component is calculated from an NTA comorbidity point score specific conditions and medications each carry assigned point values that sum to determine the NTA classification tier. The NTA component is the PDPM element that has generated the most sustained audit interest, because it is the component where the connection between clinical documentation and billing payment is most specific and most verifiable.

An NTA comorbidity coded in the MDS that does not have corresponding clinical documentation in the medical record is an improper payment under PDPM. Auditors do not need to assess clinical judgment to identify this error they simply compare the NTA-qualifying conditions coded in the MDS against the physician orders, nursing notes, and lab results that would be expected to support each condition. When a high-value NTA condition such as IV medication administration is coded and the medication administration record does not reflect the administration of IV medications during the assessment period, the discrepancy is straightforward to identify and document as an overpayment.

The inverse error NTA qualifying conditions present in the clinical record that are not coded in the MDS costs the facility NTA payment that it is entitled to receive. IV antibiotics documented in the MAR, parenteral nutrition orders from the attending physician, or specialty medication administration that is occurring and documented but absent from Section N and Section I of the MDS all represent NTA payment that the facility is not capturing.

Preventing both errors requires a systematic NTA coding review as part of every five-day assessment specifically cross-referencing the MDS point table against the current MAR, the active physician orders, and the clinical documentation for the assessment

reference period. This review takes time. The alternative is either an audit finding or uncaptured revenue both of which cost more than the review.

What this means for your facility: Every NTA-qualifying condition coded in the MDS should have a corresponding entry in the clinical record that is dated within the assessment reference period. The review question is not whether the condition exists it is whether the clinical record, read by someone who does not know the resident, clearly supports the condition as active and being managed during the assessment period.

Error Category 4: Five-Day Assessment Reference Date Errors

The five-day PPS assessment must be completed with a reference date called the Assessment Reference Date (ARD) that falls on days one through eight of the Medicare Part A stay. The ARD determines the observation period that the assessment reflects. An ARD outside the required window produces a timing compliance finding, and a claim submitted using a five-day assessment with an invalid ARD is subject to denial.

The ARD error that appears most frequently in audit findings is not a deliberate or obscure mistake. It is a miscalculation of day one of the Medicare Part A stay. When the SNF admission date is assumed to be day one without verifying the qualifying hospital stay dates, or when the benefit period start date is miscalculated because the hospital discharge date and SNF admission date are the same day and counted incorrectly, the resulting ARD may fall outside the required window by one or two days.

A one-day ARD error is a compliance finding that does not change the clinical data captured in the assessment the resident’s condition is the same but creates a documentation deficiency that an auditor can use to question the validity of the associated PDPM payment period. For facilities with a high Medicare Part A admission volume, a systematic ARD calculation error becomes a pattern finding rather than an isolated event.

The fix is a documented ARD calculation process a standard method for determining day one of the Medicare Part A stay for every new admission, applied consistently by whoever schedules the five-day assessment. The calculation should be verified against the qualifying hospital stay documentation, not assumed from the admission date in the billing system.

What this means for your facility: ARD calculation should be a verified step in the admissions workflow not a calculation performed from memory by whoever happens to be scheduling the assessment. A documented calculation with the source data (hospital inpatient admission date, hospital discharge date, SNF admission date) recorded alongside the ARD confirms the accuracy and provides the documentation trail if the timing is ever questioned.

Error Category 5: MDS Coding for Conditions Not Present During the Assessment Period

The MDS is designed to capture the resident’s condition during a specific observation window the seven days preceding the ARD for most items, with specific lookback periods for others. MDS items coded from documentation outside the assessment observation window the hospital discharge summary, prior admission assessments, or care plan goals produce coding that may not reflect the resident’s actual condition during the assessment period.

This error is particularly common for Section I active diagnoses and Section GG functional scores, because both sections require information that is often more readily available in historical documents than in current clinical observation records. An MDS coordinator under time pressure who codes Section I from the hospital discharge summary rather than from a current physician review, or who scores Section GG from the therapy initial evaluation rather than from current nursing observation, may produce a technically complete MDS that does not accurately reflect the resident’s condition during the assessment period.

CMS audit reviews identify this error when the MDS coding is inconsistent with clinical documentation from the assessment period when the Section GG score reflects a functional level inconsistent with nursing notes from the assessment week, or when Section I diagnoses include conditions the physician notes do not describe as active in the facility. The inconsistency is the finding. The cause is the documentation source historical records coded as status.

What this means for your facility: Every Section I and Section GG item should be traceable to clinical documentation from the current assessment period, not from historical records. A brief annotation on the assessment or in the coding notes identifying the documentation source for high-value items provides the audit trail and confirms the assessment reflects status.

How MCA Medical Billing Solutions L.L.C. Supports MDS Accuracy?

MCA Medical Billing Solutions, L.L.C. validates MDS coding as part of our PDPM billing management reviewing Section GG scores, active diagnosis coding, NTA component accuracy, and ARD calculations before each assessment is locked. Our review focuses specifically on the coding areas that generate the most audit risk and the most revenue impact. Contact MCA for a free billing and MDS accuracy assessment.