Nursing Homes' Response to Composite Quality Ratings

One of the main goals of public reporting of providers’ quality information is to ultimately improve the quality of health care. Report cards are intended to reduce asymmetric information and motivate consumers to choose providers of better quality. In turn, report cards may motivate providers to improve their quality of care. In 2008, Nursing Home Compare (NHC), a web-portal that publishes report cards for nursing homes, made significant changes to its reporting system. Besides continuing publishing a series of clinical outcome measures, staffing measures, and deficiency citations, NHC added a composite rating in which nursing homes receive one to five stars. While there is some evidence that consumers responded to the new ratings by choosing better-rated nursing homes, little is known about how nursing homes responded to the new composite ratings. The objective of this paper is to evaluate whether reporting composite ratings motivated nursing homes to make quality improvements.

The new star ratings are determined by cut-offs from continuous scores that summarize the information from three quality domains: yearly nursing home inspections, a subset of ten clinical outcome measures, and staffing levels. While all domains affect the overall number of stars, the new ratings assign a larger weight to the inspection domain. We exploit these features of the new ratings and use a regression discontinuity design to estimate changes in the summary scores for each quality domain after the ratings are released.

Data for this study come from three sources. The first contains the unpublished underlying scores and thresholds that were used by the Centers for Medicare and Medicaid to determine the number of stars. The second source is the Online Survey Certification and Reporting, which contains information on baseline facility characteristics. Finally, we also use Minimum Data Set, which contains detailed clinical assessment information collected at regular intervals for every resident in a certified nursing home.

Our results show that observed characteristics of nursing homes and residents are comparable close to cut-off points, even though there are large differences in these characteristics by star level. Our main results indicate that nursing homes that obtained an additional star significantly improved their first subsequent health inspection score following the initial release of the five-star ratings. However, we found no changes in scores based on staffing and clinical quality measures. Since the new ratings shifted the importance of health inspections over that of clinical outcome measures and staffing levels, our results suggest that the new ratings caused nursing homes to allocate more resources into improving their performance in health inspections, which are based on unannounced visits by a team of inspectors. Ensuring that health inspections address aspects that truly impact the quality of care in nursing homes should be a priority for policymakers.