For nearly 15 years, the Center for Medicare and Medicaid Services’ Five-Star Quality Rating System for long-term care facilities has been a single source of truth for multiple parties. 

Consumers use the ratings to judge a facility’s overall quality and safety. LTC facilities use the ratings as motivation to improve their scores and earn higher Medicare reimbursement. 

Yet there’s another party also looking carefully at your Five-Star ratings: insurers. In fact, your facility’s overall rating can impact how much you pay for professional and general liability (PL/GL) insurance. 

Because we live in a world where everyone has been conditioned to look at online reviews and various ratings and rankings for everything from children’s toys and food to insurance companies and health organizations, CMS’ ratings are simply part of the reality for care facilities. 

Let’s look at three common ways the rating system can impact PL and GL insurance premiums and what you can do to address these challenges.

Five-Star system’s impact 

1. Limited Data: Scores like the health inspection, staffing, quality measure and overall ratings score are based on specific data, which can make it limited. 

For the health inspection score, CMS takes a three-year view of a facility’s average number of citations, complaints and severity and compares them to state averages. For the staffing score, CMS looks at the number of hours provided to each patient per day by RNs, LPNs and nursing assistants. For the quality measure score, CMS looks at 18 specific measures, including pressure ulcers, falls and antipsychotic medication. Finally, the overall rating score is a rollup of inspections, staffing and quality.

Whether it’s time or quality, each measure taken is used to create an average that CMS uses to compare against others. However, averages only collect limited data, which may not reflect normal patterns or acuity. Instead, insurers want a fuller picture of your facility’s performance, such as whether a facility is improving survey compliance over time or if you manage higher-acuity patients. 

2. Trends: Objectively rating the nearly 16,000 nursing homes nationwide is almost impossible, and the Five-Star Quality Rating System does it best. From a PL/GL insurance perspective, the direction of the trends in the data is more helpful. Insurers need proof that any self-reported data is accurate. They need to consider the acuity of patients seen in a facility. And they need to see verification that a facility dedicates itself to ongoing improvement. Instead, the Five-Star Quality Rating System focuses on offering up data and averages for use when comparing facilities.

3. Linked Score and Risk: The higher your rating, the lower your GL premium will be, and vice versa. One caution to note is how just one low-rated period can impact your star rating negatively for up to three years. It could even raise your PL/GL premiums accordingly.

Let’s take quality measures as an example. Falls and pressure injury-related allegations make up a majority (65%) of all claims against LTC facilities, according to a 2022 CNA claims report. So, if you have one rating period with a two-star quality ranking, attorneys will assume your facility’s care is subpar. This makes you more likely to face lawsuits, which increases your insurance risk and, therefore, increases your PL/GL premium. And the more litigious your state is, the higher your risk.

How to address your organization’s rating

Reducing your overall risk starts with having an honest conversation with your insurer. Find an agent who understands the rating system. Then, educate your agent on your facility’s strengths and help t hem understand your weaknesses so they can get a more accurate picture.

For instance, if your facility has more patients on psychiatric drugs, share this with your insurance agent. While it may lower your quality measure score, the right agent will see that you cater to a specific sector of people and find an insurance program to best meet your needs.

LTC facilities should also ask insurers what they look at beyond the Five-Star Ratings. For example, Promont Insurance Advisors uses analytics that pull in hundreds of data points to benchmark LTC facilities based on their peers. It then takes that data and creates a score of how defensible the facility is, assigning it a letter grade from A to E. An LTC facility’s Five-Star Quality Rating System rating accounts for only 15% – 20% of that grade. Understanding what your insurer looks at can help you play up your strengths in other areas and potentially lower your risk and premiums.

The Five-Star Quality Rating System is helpful, but it’s not a be-all and end-all resource, and it’s not meant to be. By understanding how the system is meant to be used and engaging deeply with your insurance agent, LTC facilities can properly address their ratings and stay in good standing with their PL/GL insurer.

Ben Newman is the vice president of Promont Insurance Advisors, a DOXA Insurance Company. Promont is a niche program administrator with liability underwriting authority for allied health, churches and schools, and senior living facilities. Newman is an insurance and risk management executive with more than 30 years of industry experience in property and casualty lines, with a concentration in the healthcare and transportation industries.

The opinions expressed in McKnight’s Long-Term Care News guest submissions are the author’s and are not necessarily those of McKnight’s Long-Term Care News or its editors.