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Giving CMS’ Five-Star Quality Rating System a Second Look

By Liz Liberman, Health Care Analyst, NIC

Part I: History, Developments, and an In-Depth Dive

CMS’ Five-Star Quality Rating System for nursing care properties continues to be a hot topic in skilled nursing. As hospital systems and investors increasingly use it to identify potential partnerships and investments, it’s important to understand what goes into the rating a property receives.

In this first of a two-part blog series, we’ll take a closer look at the history of the Five-Star Quality Rating System and the changes coming to it this summer.

Five-Star’s History

The history of the Five-Star Quality Rating System can be traced back to CMS’ 1998 launch of Nursing Home Compare, a nursing care property comparison tool for residents and their families. The rating system was released to provide families with a more thorough comparison of properties. It provides an overall rating for each property, as well as a rating for each of the three scored categories:

  • Health inspections, also known as surveys, which gathers three years’ of standard and complaint surveys conducted by trained inspectors.
  • Staffing, which uses self-reporting by properties on the average number of hours of care each resident receives per day.
  • Quality measures (QMs), which measures how successfully a property cares for its residents by using defined physical and clinical measures. It includes figures derived from the minimum data set (MDS), which is the health information about residents that is conveyed to the property at the time of admission and tracked throughout their stay.

In July 2013, a review of Five-Star revealed that the rating system was having an effect. The percent of one-star properties dropped from 22.7% at the system’s initial launch to 11.5% in 2013. Those with five stars rose from 11.8% to 22.3% nationally.

CMS began imposing changes on the rating system, starting in October 2014, with antipsychotics use being added to the QMs report. (Another change, which would see payroll data replace self-reporting for the staffing category, has yet to be deployed.) The majority of changes came in February 2015, with stricter staffing calculations and a raised bar for five-star status. These changes caused the ranks of many properties to change overnight; the percentage of four- and five-star properties dropped from 80% to 50% in the QM category.

Recent Developments Bring Additional Changes

In April 2016, CMS added six new QMs to those reported on the Nursing Home Compare website, with more expected to come. Five of the new QMs will go into effect in July 2016.

While the list of QMs grows, the sub-score has the same weight as the health inspections and staffing categories, which effectively dilutes the strength of any one QM to move the needle. CMS finally will begin basing the staffing sub-score on payroll data, using the payroll-based journaling (PBJ) system. About half of skilled nursing properties voluntarily registered and tested the PBJ system ahead of schedule.

Diving Deeper into the Calculation

A property’s five-star rating will be determined based on the following quality scores as of July 2016:

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In general, the scoring calculation strongly favors a skilled nursing property that receives a high base score in the health inspection category. The staffing and QM sub-scores can bring the overall score up by no more than two total points if both score five stars for the property.

To put it another way, CMS collects a lot of data on staffing and QMs, but this data does not count for much in terms of the overall score. Health inspections carry the heaviest weighting, and a property with a one-star rating for inspections cannot score above two stars overall, no matter how high the staffing and QM sub-scores are.

In Part II—Coming Soon: Five-Star has its supporters but also a fair share of detractors. Here’s where they say the rating system falls short—and what CMS might consider doing to make the rating more useful for residents and their families.

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