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Study Finds CMS Methodology Does Not Distort Hospital Star Ratings

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The Centers for Medicare and Medicaid Services (CMS) uses hierarchical modeling to stabilize its hospital quality star ratings by shrinking the performance of low-volume hospitals toward the performance of average hospitals. Responding to criticism that the methodology may distort the performance of low-volume hospitals, a CMS expert panel recommended that the agency consider using “shrinkage targets” to more accurately classify hospital quality performance. A study published in Health Affairs sought to test the “shrinkage targets” approach. To do this, researchers created two parallel sets of performance measures. They found that there was moderate-to-substantial agreement between the standard CMS approach and the approach based on shrinkage targets in hospital star ratings for all but the lowest-volume hospitals. These findings suggest that the standard CMS risk-adjustment methodology does not distort the star ratings of hospitals as long as case volumes exceed the current cutoff (twenty-five cases) used by CMS for public reporting.

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