When it comes to general liability insurance for long term care facilities, ratings are often based on the CMS 5 STAR rating system.* This is data that consumers view as the holy grail of quality metrics for skilled nursing facilities. It essentially says a facility rated 5 STAR is well above average and a facility rated 1 STAR is much below average with others falling in between. This provides a good overview for nursing home quality but there are flaws inherent to this system whether it is inaccurately reported data, variation in quality standards between states and survey districts, or facilities that specialize in higher acuity and have sicker patients in-house. The overall STAR rating is made up of the STAR ratings from the following sub categories. Here are some of the variables to note that I have noticed over the years not only as an insurance underwriter but also as a licensed nursing home administrator for more than 20 years.

1. Health Inspections STARS – This is a 3-year average of annual surveys and complaints surveys and is calculated based on the number of citations and their severity compared to the state averages. The average is not as important as knowing the facility is improving with survey compliance or getting worse.

2. Staffing STARS – This is based not only on the number of hours of care provided to each patient per day by nurses and nursing assistants but is also heavily weighted in the in the number of RN hours. What you need to know is that the staffing data used is only for a 2 week period of time that is self-reported by the facility during their annual survey. This is a limited snapshot and may not be indicative of normal staffing patterns or could be inaccurately reported.

3. Quality Measures STARS – This is based on 18 quality measures (QMs) for short-stay and long- stay residents. Some of the more scrutinized are for the prevalence of pressure ulcers, falls and antipsychotic medication. What you need to know is, if the facility has a focus in caring for these types of high-acuity patients, their star ratings may be lower in comparison with state averages and this is not necessarily an indication that the facility is deficient.

4. Overall Rating STARS – A rating of 1 to 5 stars is based on health inspections, staffing and quality measures ratings combined into one. The more stars the better. What you need to know about this is that the facility is being compared in relationship to other facilities in their geographic area. Why this is relevant is, if all the facilities around you are excellent operators a low star rating may not be a good indication of that facilities overall operation.

5. Pay attention to trends – A facility that is improving or declining cannot be detected with just an overall 5 STAR score. The CMS 5 STAR system has many good points and provides a consistent rating for all 16,000 nursing home in the US but should not be used without interpretation for insurance purposes. We need to first validate that the self-reported data used for each facility is accurate and also consider the types of residents the facility has chosen to admit and care for. Higher-acuity residents will have an effect on the three categories that drive the overall rating and could make the facility appear as an underperformer. And lastly, both the quality performance and performance improvement of a facility are becoming a heightened area of focus for centers. Effective quality improvement programs play a role in assessing risk that is easily overlooked.

*In December 2008, The Centers for Medicare & Medicaid Services (CMS) enhanced its Nursing Home Compare public reporting site to include a set of quality ratings for each nursing home that participates in Medicare or Medicaid. The ratings take the form of several “star” ratings for each nursing home. The primary goal of this rating system is to provide residents and their families with an easy way to understand assessment of nursing home quality, making meaningful distinctions between high and low performing nursing homes. Here’s a link the CMS website: CMS 5 STAR Ratings