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I want to quantify the financial impact STAR ratings have on hospitals.
Hello! Thanks for your question about the financial impact of star ratings on hospitals. The short version is the Centers for Medicare & Medicaid Services (CMS) has not released "the dollar amount of the penalties" to the public. However, in October 2016, the CMS announced that Medicare payments to 769 hospitals would decrease by 1% because of their high HAC rates. It is estimated that hospitals will see a total reduction of $430 million which is an 18% increase from the previous year. Star ratings do not directly affect Medicare reimbursement rates. Instead, the star ratings are used by pay-for-performance organizations like the VBP, HRRP, and HACRP, to access hospital metrics which indirectly impact insurance payments. Government officials are requesting a review of the current fee schedule due to biases in the assessment programs. Below you will find a deep dive of my findings.
FINDINGS
After searching extensively through industry news, white papers, and CMS transcripts, I learned that The Centers for Medicare & Medicaid Services (CMS) did not release "the dollar amount of the penalties" to the public. However, It is estimated that hospitals will see a total reduction of $430 million, an 18% increase from the previous year. These changes are mostly going to impact large hospitals.
According to an FAQ written by the Advisory Board in December 2016, "the overall star rating system is not a pay-for-performance program, so a hospital's overall star rating does not entail any payment adjustment." (Note: The Advisory Board offers members-only guides to Medicare Advantage Star ratings.)
The star ratings can, however, directly impact reimbursement rates and penalties when use in assessing hospitals via pay-for-performance organizations like "the Hospital Value-Based Purchasing Program (VBP), the Hospital-Acquired Conditions Reduction Program (HACRP), and the Hospital Readmissions Reductions Program (HRRP)."
Government officials have requested that the 2017 star ratings be delayed until the programs become less biased against low socioeconomic and high volume hospitals.
VBP
"Hospitals do not lose payment" from the VBP "unless their performance is subpar." The main categories considered by the VBP in allocating fees and funds are "value, improved patient outcomes, innovations, and cost efficiencies over [the] volume of services." The VBP is based on the Hospital Inpatient Quality Reporting Program (or Hospital IQR) which pays for reporting instead of performance.
HRRP
The HRRP unfairly charges hospitals that have lower socioeconomic demographics because they are not taking community factors into consideration when assessing hospitals. Access to primary care, medications, medical transportation, and healthy food can all directly (and unjustly) impact a hospital's rating. The HRRP program counts every hospital admission against the hospital, even if the presenting conditions are completely unrelated (ex. an admission for pneumonia followed by an admission for a gunshot wound).
HACRP
The HACRP has charged hospitals "nearly $1.9 billion of readmissions penalties and $737 million in HAC penalties" as of 2016. The HACRP is designed to penalize 25% of hospitals annually, and this metric is independent of improvements in performance and quality.
Becker's Hospital Review reported that the government would decrease Medicare payments to 769 hospitals in 2017 due to having the highest rate of HACs. "Affected hospitals will lose 1 percent of Medicare payments from October 2016 to September 2017."
CONCLUSION
To wrap it up, after searching extensively through industry news, white papers, and CMS transcripts, I've determined that there is no public data on how gaining, or losing, a star would impact hospitals' because the programs are in their infancy and the CMS has not released the details. However, I was able to find statistics on the relationships between of the star rating system, CMS, VBP, HRRP, HACRP and insurance reimbursement. Thanks for using Wonder! Please let us know if we can help with anything else!