We are in a brave new world when it comes to paying for skilled nursing care. There are Senior HMO’s, post-acute provider networks and a wide variety of ACO’s.

I have written before about the faulty nature of the Medicare Nursing Home 5 Star Rating System. This New York Times Article is further evidence that it is a failed system when it comes to identifying good and bad skilled nursing facilities. There are at least 3 major flaws:

  1. A facility can unfairly have less than a 5 star rating because they are taking more medically and behaviorally complex residents.  This provides a disincentive for great skilled nursing facilities to take these difficult patients.
  2. A facility can lose or miss a 5 star rating over something stupid and inconsequential.  It can then take several years to get their 5 star rating back.
  3. Worst of all, there are some skilled nursing facilities that have a 5 star rating and yet . . . they have serious, real problems.

Scamming the System

I want to start by saying that, even though the skilled nursing facility targeted in the New York Times article is near where I live, I have no personal knowledge about the quality of care.  It could be that they have real problems or this could be a Pro Publica style hatchet job.  Regardless, the fundamental point about the 5 star system being gameable is a serious issue.

 According to the article, scamming the system to get a 5 star rating looks like this:

“The Times analysis shows that even nursing homes with a history of poor care rate highly in the areas that rely on self-reported data. Of more than 50 nursing homes on a federal watch list for quality, nearly two-thirds hold four- or five-star ratings for their staff levels and quality statistics.”
  1. Two of the three components that make up the the 5 Star rating are staffing levels and quality indicators, both of which are self-reported.  This means that fudging or even outright lying is a huge temptation. Too often skilled nursing facilities just plain “forget” or fail to report information that would reflect badly on the facility.
  2. Because the inspections are all conducted by state surveyors, there is tremendous variability from state to state as to how the rules are applied. So the first way to game the system is to be in the right state.

The Other Big Hole

The 5 star system does not factor in fines and other enforcement actions against facilities.  It also doesn’t look at the number of complaints a facility has received. While to a large degree it is fair that unsubstantiated and uninvestigated complaints should be viewed with great skepticism, a large number of complaints could suggest problems. Perhaps substatiated complaints should be a factor.

Why It Matters

We are in a brave new world when it comes to paying for skilled nursing care.  There are Senior HMO’s, post-acute provider networks and a wide variety of ACO’s.  Before it all shakes out we will see even more new payment schemes in an effort to improve care and reduce costs.   Today the 5 Star rating is one of the biggest things these payor organizations look at. It may not be fair, but it makes sense that they look at the 5 star rating. First, what else do they have as a benchmark? Second, if a patient gets sent to a four star or three star facility and something goes wrong, the liability both from a financial standpoint and a publicity standpoint is huge.  The easy way out is to only use 5 star facilities.


There seem to be three solutions to the problem:

  1. For the industry (primarily trade associations) to put pressure on the government and elected officials to make the system better.  This seems obvious, but in fact it is problematic because in order for the industry to do this they need to start by acknowledging that some of their members are part of the problem.
  2. For those buildings that are doing a great job but don’t have a 5 star rating it becomes critical that they develop personal relationships with the organizations that control the flow of patients and dollars.  With those relationships in hand, it then become possible, perhaps even relatively easy, to tell the complete story.
  3. This challenge creates a very real opportunity for accreditation organizations to step into the gap.

What Do You Think? Steve Moran

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