Improving The Accuracy Of Hospital Quality Ratings By Focusing On The Association Between Volume And Outcome

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. To test the "shrinkage targets" approach, we created two parallel sets of performance measures. We 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.