Guest Columns

Who else is using Five-Star? (Who isn't?)

Steven Littlehale
Steven Littlehale

At the beginning of March, I presented a session titled “What Investors Should Know about the Five-Star Quality Rating System” to a group of real estate investment trusts (REITs), lenders and operators/owners at NIC's Spring Investment Forum.

Now, several weeks later, I continue to be struck by how deep Five-Star has worked its way into the countless nooks and crannies of our industry. It's far beyond what the Centers for Medicare & Medicaid Services intended since the rating system's inception in 2008. I'm also caught by the clear correlations between profitability and Five-Star, despite how short-lived the correlation truly is.

In advance of the session, we conducted a study investigating the relationship between Five-Star and profitability. We used higher occupancy, higher Medicare, managed care and private-pay ratios as proxies of profitability, along with low Medicaid.

Additionally, we chose to study the industry as two separate cohorts: 1- and 2-star facilities and 3- , 4- and 5-star facilities. We used the “overall domain” although the relationship more or less held true when examining all other domains. Why this demarcation? The industry has been led to make patient referral, lending, and investment decisions based upon overall Five-Star performance. CMS policy requires skilled nursing facilities to achieve 3 stars in order to access desirable benefits and relationships with accountable care organizations and bundles.

The private sector has quickly mimicked this, and some might say they've “upped the ante” by using 4-star “status” as the determining factor for membership into a preferred network. Consequently, facilities that achieve and sustain a 3-star rating are more likely to find themselves in preferred networks and other preferred relationships that lend themselves to profitability. For those who fall below, they tend to have lower occupancy, lower Medicare (FFS/Commercial) and lower private pay but a greater volume of Medicaid residents.

One might ask: What is motivating CMS to align Five-Star with entrance tickets to Affordable Care Act initiatives? Surely it must be somehow aligned with ACA's triple aim, right? After studying Five-Star — overall and each domain separately — we've yet to make a clear connection back to ACA's triple aim.

As part of this attempt, we examined rehospitalization rates and noted that any difference between the 1- and 2-star facilities versus 3- , 4- and 5-star facilities is diminished when you case mix adjust. In other words, if financial stakeholders use Five-Star to make network decisions, they will see a very low return on investment.

Eventually, stakeholders (and I'm using this term very broadly) will turn away from Five-Star to make these decisions, and they should for the aforementioned reasons. Five-Star will not be a strong predictor of profitability in the future; there are better ways to make placement, investment, lending and network decisions.

Will the addition of five new Quality Measures to the Five-Star system in July alter these predictions by increasing Five-Star's correlation with rehospitalization? It's reasonable to assume they will since one of the QMs is, in fact, rehospitalization. However, my guess is that other QMs will dilute this outcome measure, and ultimately the Quality Domain holds the least weight when calculating the overall Five-Star domain.

Steven Littlehale is a gerontological clinical nurse specialist, and executive vice president and chief clinical officer at PointRight Inc.


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Guest columns are written by long-term care industry experts, ranging from academics and thought leaders to administrators and CEOs.

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