The Growing Importance of Nursing Home 5-Star Ratings
and How They are Impacted by Survey Findings
January 2017
Background
The Centers for Medicare & Medicaid Services (CMS) created the 5-Star Quality Rating System to help consumers, families
and caregivers compare nursing homes more easily and to help them decide which facilities to consider. The Nursing Home
Compare website 1 features a system that gives each nursing home a rating of between 1 and 5 stars. Nursing homes with 5 stars
are considered to have much above average quality and those with 1 star are considered to have quality much below average.
Under this system, there is one overall 5-star rating for each nursing home made up of separate ratings for: (1) Health
Inspections – The health inspection rating contains information from the last 3 years of on-site inspections, including both
standard surveys and any complaint surveys; (2) Staffing – The staffing rating has information about the number of hours
of care provided on average to each resident each day by nursing staff; and (3) Quality Measures (QMs) – The QM measure
rating has information on 16 different physical and clinical measures for nursing home residents. 2
Growing Importance of Nursing Home Ratings
Receiving a better than average 5-star rating has never been more
important to nursing homes. These ratings are increasingly used by
consumers, regulators, insurers and other payers and provider networks
to select which facilities they will consider having relationships with. The
ratings are also often a first stop for lenders and investors, who consult
them to decide whether a nursing home is a safe investment.
These ratings are increasingly used by
consumers, regulators, insurers and
other payers, and provider networks
to select which facilities they will
consider having relationships with.
• Consumers: According to CMS, the rating system gives consumers,
patients/residents and family members a broad overview of how
nursing homes are assessed for quality, and helps these individuals
to make informed decisions on which nursing homes to consider for needed services.
• Regulators: Nursing homes’ ability to obtain New York State Certificate of Need (CON) approval for facility renovations,
restructurings or sales/purchases could be affected by their star ratings. CON applicants’ 5-star ratings are now reviewed for
this purpose.
•
Providers and practitioners: When nurses and doctors discharge patients from hospitals, they often use the ratings in
referral decisions. Some Performing Provider Systems – the large provider networks operating throughout the State and New
York’s vision for delivery system reform – are also relying on the ratings to select their network partners.
In summary, nursing
homes may not even be
able to obtain sufficient
referrals or receive
Medicare and Medicaid
funding in the future if
they do not have at least
a 3-star rating.
• Insurers: Insurers consider these ratings when setting up their service networks.
Several Medicaid managed care plans, Medicare Advantage plans and Medicare
Special Needs plans will not include nursing homes with less than 3-star ratings in
their networks. Taken together, these insurers control – or will soon control – the
majority of nursing home revenues.
•
1
Nursing Home Quality Initiative: New York’s Medicaid program annually reduces
nursing home reimbursement by $50 million, which it re-distributes to nursing
homes based on measures of compliance, quality and avoidable hospital use. The
5-star Health Inspections rating and other elements of the 5-star rating system are
used to determine distributions under this program.
See: https://www.medicare.gov/nursinghomecompare/search.html.
See CMS summary of 5-star rating system, posted at: https://www.cms.gov/Medicare/Provider-Enrollment-and-
Certification/CertificationandComplianc/FSQRS.html.
2
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Adviser a publication of LeadingAge New York | Summer 2017
continued