The Centers for Medicare and Medicaid Services (CMS) star ratings have become a critical measure of quality and patient experience for U.S. hospitals. The overall ratings summarize 57 quality measures reflecting treatment for common conditions such as heart attacks or pneumonia.1 Higher ratings go to hospitals that demonstrate greater performance than the national average.2

The ratings, most recently updated in December 2017, cover quality measures reported by more than 4,000 hospitals nationwide.3 Based on technical experts’ recommendations and public feedback, the latest ratings have been streamlined to exclude measures deemed redundant or for which less than 100 hospitals have reported. As a result, CMS currently rates reporting hospitals as follows (figures rounded):

  • Five stars — 9 percent
  • Four stars — 31 percent
  • Three stars — 32 percent
  • Two stars — 20 percent
  • One star — 7 percent4

Ratings Reaction

While the overall rating program’s stated goal is to help consumers make informed choices when selecting a care facility, it is not a pay-for-performance program and does not entail adjustments to hospitals’ Medicare reimbursement. Nonetheless, many of the measures that determine overall star ratings are also used in separate initiatives that do have direct reimbursement impacts: the Hospital Value-Based Purchasing Program, the Hospital-Acquired Conditions Reduction Program, and the Hospital Readmissions Reductions Program.5

Higher-rated facilities have an advantage in promoting their services to consumers, potentially boosting revenue. For instance, a spokesperson for New York’s Hospital for Special Surgery, among only two percent of hospitals to achieve a five-star rating in 2016, told CNBC, “We are very proud of our results and feel that it is a reflection of our high quality of care.” On the other hand, hospitals who received lower ratings have felt pressure to defend their quality performance, claiming that the ratings system is “significantly biased” against large hospitals that treat more patients with complex conditions and higher proportions of individuals facing socioeconomic challenges.6

Looking Beyond the Ratings

Considering what’s at stake—and that star ratings change over time—business consultancy Deloitte recommends that hospitals adopt a broad quality improvement strategy, rather than focus too narrowly on ratings results. That translates to “optimizing patient outcomes and experiences, quality areas that CMS consistently weighs more heavily and that show the highest variation among hospitals,” Deloitte advises.7

Over the long run, hospitals that generate more profits and take on additional debt financing generally improve in delivering quality care. “With the profits they earned and the capital they borrowed, hospitals can train their workforce, employ more highly skilled nurses, improve quality and safety control, reduce patient waiting time and upgrade medical equipment,” according to a 2015 study published in BMC Health Services Research.8

As CMS contemplates further updates to overall star ratings,10 hospitals should seek out such product innovations that help prevent patient harm—and, ultimately, protect the bottom line.

1. Centers for Medicare and Medicaid Services. Hospital Compare overall rating. https://www.medicare.gov/hospitalcompare/About/Hospital-overall-ratings.html Accessed December 17, 2017.

2. Healthcare Financial Management Association. 18 key points about the new overall hospital star ratings https://www.hfma.org/Content.aspx?id=49503 Accessed December 18, 2017.

3. Centers for Medicare and Medicaid Services. CMS updates website to compare hospital quality. https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2017-Press-releases-items/2017-12-21-2.html Accessed January 8, 2018.

4. Becker’s Clinical Leadership & Infection Control. CMS updates overall hospital star ratings: 5 things to know. https://www.beckershospitalreview.com/quality/cms-updates-overall-hospital-star-ratings-5-things-to-know.html Accessed January 8, 2018.

5. The Advisory Board. Overall Hospital Quality Start Ratings: Answers to your frequently asked questions. https://www.advisory.com/research/financial-leadership-council/at-the-margins/2016/12/demystifying-overall-hospital-quality-star-ratings Accessed December 17, 2017.

6. CNBC. New quality ratings roil hospitals, give consumers help. https://www.cnbc.com/2016/07/27/new-quality-ratings-roil-hospitals-give-consumers-help.html Accessed December 18, 2017.

7. Deloitte. Understanding Medicare’s 5-star rating hospital program. https://www2.deloitte.com/us/en/pages/life-sciences-and-health-care/articles/cms-star-ratings-for-hospitals.html Accessed December 18, 2017.

8. BMC Health Services Research. Performing well in financial management and quality of care: evidence from hospital process measures for treatment of cardiovascular disease. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4345031/ Accessed December 18, 2017.

9. PharmacoEconomics. Early assessment of the likely cost effectiveness of single-use flexible video bronchoscopes. https://link.springer.com/article/10.1007/s41669-017-0012-9 Accessed January 8, 2-18.

10. Healthcare Finance News. Expert calls CMS hospital star ratings delay a major mistake. https://www.ambu.com/about/corporate-info/investors/news/news?year=2017#/ambu-news-item=525/ Accessed December 18, 2017.