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The Keckley Report

CMS Five Star Ratings for Hospitals: The American Way

By August 1, 2016March 1st, 2023No Comments

Last Wednesday, despite calls for delay from leading hospital trade groups and majorities in both Houses of Congress, CMS released its Five Star Ratings for 4589 hospitals. The new rating scheme is its latest update to Hospital Compare which has been around since 2001.

In announcing the change, CMS explained “We are updating the star ratings on the Hospital Compare website to help millions of patients and their families learn about the quality of hospitals, compare facilities in their area side-by-side, and ask important questions about care quality when visiting a hospital or other health care provider,” announced Kate Goodrich, MD, MHS, director of the CMS Center for Clinical Standards and Quality.

Methodology: The CMS Five Star rating is a composite of 64 measures across seven domains of performance: Mortality (22%), Safety of Care (22%), Readmissions (22%), Patient Experience (22%, Effectiveness of Care (4%, Timeliness of Care (4%) and Efficient Use of Medical Imaging (4%. Using a statistical model known as a latent variable model, CMS uses the weighted average of these to compare hospitals against the distribution of all hospitals in its sample for each measure and domain. Thus, a hospital’s performance on one measure or domain might place it in the exceptional category aka a Five Star but a Three Star is in the middle of the pack for another. In the end, CMS assigns a star based on performance across all seven domains, even though the data used for the average hospital addresses only 40 of the measures. Follow? Confusing to say the least.

Results: Based on these, 102 hospitals got the highest rating, 5-stars, 934 got 4-stars, 1770 3-stars, 723 2-stars and 123 the dreaded 1-star, and 937 were not rated. Per Kaiser’s analysis, 6 in 10 teaching hospitals rated below average (1 or 2 stars) and most of these operate in urban markets where poverty is prevalent. Medscape calculated that teaching hospitals had an average ranking of 2.87 compared with 3.11 for nonteaching hospitals, 2.88 for safety-net hospitals a 3.09 for non-safety-net hospitals. Thus, per CMS new ratings, only 2.2% of U.S. hospitals in the first star release can lay claim to being the best of the best.

Reaction: Criticism by leading hospital trade groups was harsh: In its official statement, AHA CEO Rick Pollack echoed a sentiment widely held across the sector: “Health care consumers making critical decisions about their care cannot be expected to rely on a rating system that raises far more questions than answers. We are especially troubled that the current ratings scheme unfairly penalizes teaching hospitals and those serving higher numbers of the poor.  Bruce Siegel, MD, president and Chief Executive Officer of Americas Essential Hospitals, the trade association of safety-net facilities, said “The ratings disadvantage hospitals that care for vulnerable patients and underserved communities and threaten to confuse, rather than inform, consumers as they make important health care decisions.… The star ratings exist partially in a black box, incorporate measures that miss clinically relevant data, and fail to adjust for patient circumstances that influence health and health care outcomes — circumstances outside a hospital’s control.”

In defense, CMS affirmed its methodology is sound but assured refinements will be made over time spiting requests to delay the Star Ratings release, but there’s a bigger story.

CMS is responding to consumer demand for simple ways to compare everything. It’s understandable. It’s the American way. Ranking and rating goods and services is firmly entrenched in our economy. It’s standard fare for cars, movies, restaurants and more. Consumer Reports and JD Power are household names. Ironically, last week, restaurant grading icon Zagat announced it was ditching its popular restaurant rating formula based on 62 measures with its own 5-star system.

Should healthcare think it is immune simply because our services are not easily comparable and our consumers are not easily grouped based on buying habits alone? No, but accuracy is a legitimate issue.

This is tricky turf for hospitals that spend millions to promote their quality and fend off efforts by insurers to keep them out of narrow networks. Comparison ratings are not new to hospitals: currently a consumer can compare “Best Hospitals” designations by US News and World Report, HealthGrades, Truven, Leapfrog Group, and many others. In fact, more than 748 hospitals appear at the top of U.S. News listing of “The Best Hospitals” and Kaiser concluded that more than 1600 hospitals can pay claim to distinction based on a rating in at least one list. So CMS’ Five Star system is one among many, but its potential impact is likely stronger than others as Medicare and other payers adjust reimbursement and alternative payment models to their star ratings.

So what this means today for hospitals is this:

A Retail Brand Matters: The reputation of the hospital is an asset to be protected, and if tarnished by bad deeds or poor ratings, it can lead to erosion of confidence and possibly sustainability. What consumers know about a hospital, how employers and private insurers use these ratings in network design and reimbursement models, how physicians choose to align and how hospital affiliations evolve will be directly impacted by retail brands for which ratings are impactful. And years of investment in a hospital’s brand can be undone by unfavorable star ratings that are parlayed through social media or used by health insurers to limit access. It’s highly doubtful consumers will study all 64 measures for their hospitals of choice, but it’s highly likely they’ll associate their star ratings with distinctions between the best and the rest.

Methodologies matter: the methodologies used by rating agencies, and the underlying data on which ratings are based, requires vigilance by hospital leaders and investment in areas where shortcomings are apparent. The validity and reliability of the measures used by CMS in its Five Star system is not a question. The weighting scheme whereby they’re incorporated into a star rating can be challenged and the costs associated with their collection and reporting problematic. But these CMS Star Ratings fall short in three important areas: 1-addressing the widening number of clinical conditions for which ratings are provided (US News and World Report compares has17, Leapfrog 27 and. CMS’ 9); 2-the need to incorporate data from commercial and Medicaid populations to compare performance for patients under 65 years of and 3-the adjustment of measures based on the socioeconomics and severity of patient populations used in the measurement. As measures and methodologies change, hospitals must monitor and adapt. But ignoring ratings is not an option because they’re tied to payments and penalties.

Simplicity matters: Consumers want simple ways to rate cars, food, restaurants, and airlines. Per Pew, 14% have used a healthcare website to compare physicians and hospitals recently and Deloitte’s consumer surveys show its “online and onboard” segment is large and growing. Granted, most consumers are ill-equipped and arguably disinclined to study the details of infection rates, observed to expected mortality, solvency and liquidity ratios, and so on. They don’t appear to care if a hospital is owned by investors, a religious order or government agency if its performance is poor or its services suspect. They tend to think academic medical centers are better for complicated stuff, but they’re not similarly inclined when comparing routine care. They think of quality in the aggregate: the “best doctors, best facilities, and latest technology” and don’t seem to care about prices or costs (except for what they have to pay out-of-pocket). And patient experience aka patient satisfaction is their handy default for high quality hospital care, regardless of the institution’s propensity for unnecessary care or rigor in applying evidence to practice. Whether informed or not, simple ratings matter to consumers.

The CMS Five Star system is flawed but here to stay. It falls short in addressing the ‘new normal’ in hospitals that employ physicians, operate accountable care organizations and bundled payment programs, participate in multi-system alignment and derive the majority of utilization in outpatient settings. Severity adjustments, social determinants of health, payer mixes and organizational structure must be addressed by CMS if it is to be relevant and reliable, and information about underlying costs and value of care measures expanded to be relevant.

For hospitals, these ratings pose an operational challenge that’s getting more complicated. To qualify for various bonus payments, avoid penalties or participate in alternative payment programs, a hospital must capture and report on at least 400 discreet measures today, and the list is growing and changing. Therefore, each must manage organization-wide education about the salience of report cards, implement information systems that facilitate data collection and pay close attention to changes in contracting and affiliations wherein report card performance is either an asset or liability.

No doubt, hospital PR and marketing departments are scrambling this week to explain their new CMS star ratings to their physicians, boards, employees and communities. It’s necessary and costly amidst a growing list of direct to consumer considerations on their radar.

But looking beyond intrinsic flaws, we must accept that simple ratings are here to stay, and they’ll become key delineators between winners and losers for hospital care in the communities and regions we serve. It’s the American way!