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Study shows that Simplified Nursing Home Rating Systems are Informing Consumers on Making Decisions

Quality rating systems and report cards for healthcare facilities are intended to give consumers more information about choosing the best quality hospital or nursing home.  A study performed by Marcelo Perraillon, a Health economist of the Colorado School of Public Health at CU Anschutz, sought to determine whether the form in which that information is conveyed to consumers mattered.  Perraillon assessed whether a simplified rating system used by the Nursing Home Compare website encouraged consumers to choose higher rated nursing homes.

Perraillon used a statistical method called regression continuity to illustrate that consumers do respond to public reporting of nursing homes quality information and are actually using the data to make better decisions about care.  He published his findings on December 28 in the American Journal of Health Economics under the title “Consumer Response to Composite Ratings of Nursing Home Quality.”

The main finding was that nursing homes that attained an additional star, in the 1 to 5 star system, gained more admissions. However, this consumer response to this system change was not universal.  Low-rated nursing homes in poorer areas which take mostly Medicaid patients still saw high admissions.  Residents of those areas don’t have a lot of options when it comes to selecting a nursing home facility so they can’t benefit from the rating system in the same way.  Those facilities in the poorer areas do not have the same incentive to improve their rating because admissions are already high due to the lack of choice.

While these rating systems can be helpful to consumers in choosing the best care facility, this study also shows that nursing homes have incentive to earn additional stars because of the payoff.  This can be a positive when the nursing homes actually improve the care they provide but this also can lead some facilities to “game” the system to inflate their star rating.