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

By Liz Liberman, Health Care Analyst, NIC

Part II: The Controversy

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 second of a two-part blog series, we’ll take a closer look at where opponents of the system are finding kinks in its armor.

Identifying Shortcomings

Changes CMS began implementing in 2015 have altered how a skilled nursing property’s rating is scored. CMS places more weight on a property’s health inspections score—the “base” score—than the two sub-score categories, staffing and quality measures (QMs). This new rating system puts far less emphasis on staffing and QMs, which can receive high scores but raise the final rating only a slight amount. In other words, a property with a one-star rating for health inspections cannot score above two stars overall, no matter how high the staffing and QM sub-scores are.

The effects of the new scoring approach were immediately apparent. Some properties who previously had high scores experienced a drop to one to two stars overnight. The large decreases in ratings had more than a few crying foul.

Many in skilled nursing have questioned the Five-Star Quality Rating System’s methodologies, identifying a few critical areas that can make a rating inaccurate or unfair:

  • Health inspections are conducted at the state level. Regulations for health inspections vary from state to state, but the system does not take differences into account. This means that a Massachusetts health inspection is equated to one in Wyoming.
  • Poor timing affects the staffing score. Properties that report staffing data to CMS at an inopportune time can appear to have low staffing levels when in reality, they had a bad month for staffing. Because staffing turnover is ubiquitous across the industry, opponents of Five-Star argue that a facility’s staffing sub-score is based primarily on luck. The replacement of self-reporting with the payroll-based journaling (PBJ) system should alleviate this concern in the near future. 
  • The heavy emphasis on health inspections overlooks crucial quality measures. QMs are weighted the least heavily in the overall property score, but many in the industry see this category as the most important. For example, hospital readmissions cost a significant amount of money, but a skilled nursing property with poor readmissions performance still could receive a four- or five-star rating based primarily on its health inspections rating. Conversely, a property that provides high-quality care could receive a two-star rating based on one visit by a particularly difficult health inspector. Furthermore, although CMS places little emphasis on the QM score, it requires a lot of time-intensive data collection for the measurement, which reduces the time staff have to provide care to residents. 
  • Low Five-Star scores disqualify properties from CJR eligibility. The Comprehensive Joint Replacement (CJR) bundled payment scheme moves CJR patients from the hospital to skilled nursing property without the traditional three-day stay, providing Medicare with big cost savings. However, hospitals, which receive a bonus for transferring out patients, use the Five-Star system to identify skilled nursing partners, because only those with scores of three stars and above qualify. A low score can mean these properties miss out on lucrative partnerships with hospitals.

Five-Star and the Consumer

The Five-Star Quality Rating System was born from CMS’ desire to provide skilled nursing consumers with a tool that allowed them to compare one nursing care property to another. However, according to several studies published in the April issue of Health Affairs, many consumers do not find value in CMS’ Nursing Home Care tool or even know of it.

In Health Affairs, one study found that residents and families prefer to search for the factors that matter most to them. For example, when users personalized the scoring weights based on personal preference, the results varied significantly. Another study reported that consumers do not use the tool or can be mistrusting of the data used to arrive at the ratings. Opponents to Five-Star point to these studies and others and question why the rating system lacks solid program evaluation, as an analysis on the results of CMS’ changes to the system is needed.

Going Forward?

There are many uncertainties about the ratings coming out of the Five-Star system. Despite these uncertainties, it’s clear that a rating system designed to benefit consumers now is more closely monitored by investors, hospital systems, and others within the industry. Unless Five-Star is modified again to end owners’ and operators’ concerns, these other industry partners will need a thorough understanding of how the rating system works in order to partner successfully with skilled nursing properties.

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