Star ratings for hospitals are public indicators of clinical quality, patient satisfaction, and financial performance. With the push for value-based care models, hospitals must find smarter ways to improve outcomes and protect revenue.
In this article, we explain how star ratings are calculated, why they impact patient care and revenue, and how technologies like remote monitoring help hospitals secure better outcomes and financial strength.
What are Star Ratings for Hospitals?
Star ratings for hospitals are a method for the Centers for Medicare & Medicaid Services (CMS) to evaluate and publicly display the quality and performance of hospitals. These ratings are based on a 1 to 5-star scale, in the following areas.
- mortality
- safety of care
- readmission
- patient experience
- timely and effective care
A hospital’s overall star rating measures how well it performs across the categories compared to others nationwide. The more stars a hospital earns, the better it performed across the quality measures. However, smaller or newer hospitals may not qualify for ratings if they don’t have enough data available across all measures.
How are They Calculated?
CMS’s overall star ratings for hospitals distills hospital quality over 46 measures into one simple score. Each of the categories evaluated carries a set weight toward the final score. Mortality, safety, readmission, and patient experience each contribute 22%.
Timely and Effective Care is weighted at 12% of the total hospital score. If a hospital lacks data in one group, weights are redistributed proportionally across the remaining categories. Risk adjustment is applied to be sure hospitals are compared fairly, considering patient complexity and uncontrollable conditions.
Interestingly, 40% of the risk adjustment diagnoses used have no effect on Medicare payment rates. This is why documentation is important. Hospitals are grouped with peers based on the number of reported measures. They are compared accordingly to assign star ratings, which are paired with a clustering method that organizes hospitals into groups based on their overall performance score.
CMS publishes data on hospital performance. The following breakdown shows the percentage of hospitals at each rating level. These figures are an example of how 4,658 hospitals compared nationwide in July 2024.
- 5.9% or 277 hospitals earned 1 star
- 12.8% or 595 hospitals earned 2 stars
- 17.8% or 828 hospitals earned 3 stars
- 16.4% or 766 hospitals earned 4 stars
- 8.2% or 381 hospitals earned 5 stars
- 38.9% or 1811 hospitals did not receive a rating
How Do Star Ratings Work?
Star ratings provide incentives for plans to improve their performance. CMS and the Agency for Healthcare Research and Quality (AHRQ) developed the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey of 29 questions to include 10 patient care experience measures. A summary star rating combines all 10 HCAHPS star ratings into one overall metric.
To qualify for HCAHPS star ratings, hospitals must complete at least 100 HCAHPS surveys over a rolling four-quarter period. They also must meet the criteria for public reporting of HCAHPS results. If a hospital collects fewer than 100 surveys, it won’t receive a star rating, but its individual HCAHPS scores are publicly available.
Patients can review star ratings, penalty data, and benchmark ratings for local and nationwide hospitals with websites like the American Hospital Directory. However, patients should be sure to consult their physicians for hospital guidance about their care plans.
Patients will want to consider other factors in hospital quality, as well. These include infection and complication rates. The Leapfrog Group reports publish data on safety and quality to help the healthcare industry improve on safety, quality, and affordability.
Why Hospitals Care About Star Ratings
Hospitals take quality ratings seriously because low performance can trigger financial penalties under several Medicare programs. A hospital’s star rating can affect its public reputation, patient trust, and even millions of dollars in Medicare revenue.
Star ratings keep hospitals accountable. Accurate clinical documentation helps capture the conditions that directly impact hospital scores through risk adjustment. To improve ratings, hospitals should regularly monitor performance, study measure specifications, and educate clinical teams.
Although improving ratings takes time, better documentation, smarter engagement, and a coordinated quality strategy are all steps toward improving hospital star ratings. Medical technology can also help improve star ratings for hospitals. Star ratings often align closely with broader healthcare quality initiatives, including performance benchmarks tied to HEDIS measures, which further influence hospital rankings, value-based contracts, and financial incentives.
Star Ratings and Financial Gains
In 2012, CMS launched the quality bonus program for payers. This program provides a 5% bonus payment to health plans that receive at least 4 stars. Plans with less than 3 stars may be terminated if poor performance persists. Increased rebates offer plans the ability to reinvest funds into benefits.
Although, hospitals are not offered bonuses, they can still financially benefit indirectly in the following ways.
- Plans with higher bonuses may pay providers better, expand networks, or fund new quality programs.
- Hospitals that perform well under value-based contracts may help their partnered plans reach high ratings, and are often rewarded through value-based payment agreements or shared savings contracts.
- Some hospitals participate in Medicare Advantage networks or own affiliated Medicare Advantage plans. In these cases, they benefit directly because they act as both the provider and the payer.
- Star ratings often align closely with broader healthcare quality initiatives, including performance benchmarks tied to HEDIS measures, which further influence hospital rankings, value-based contracts, and financial incentives
Research points to remote patient monitoring (RPM) as an opportunity to help improve star ratings and increase revenue in the categories of mortality, safety of care, readmission, patient experience, and timely and effective care. The following section offers research and insights into how RPM can aid in improved star ratings for hospitals.
How Can Remote Monitoring Help?
Remote patient monitoring and remote therapeutic monitoring (RTM) are healthcare technologies that supports both value-based care success and star rating gains. RPM can improve star ratings for hospitals by improving chronic condition management, reducing hospitalizations, and increasing medication adherence and patient satisfaction.
RPM and RTM also help meet value-based goals by preventing costly complications, improving population health, and reducing total care costs.This is why many hospitals view investments in RPM and other digital health tools as business strategies, and most important improved patient care.
A study conducted by the Mayo Clinic examined the impact of a remote patient monitoring (RPM) program on healthcare costs during the COVID-19 pandemic. The study found that patients who engaged with the RPM program experienced significantly lower costs of care compared to those who did not participate. Specifically, there was an average cost savings of $1,259 per patient during the 30-day follow-up period. This reduction in costs was primarily attributed to lower rates of hospitalization and shorter lengths of hospital stays among the RPM participants.
Remote monitoring tools focus on preventive care rather than reactive care. It is an opportunity for hospitals to reach long-term care savings and earn financial incentives. Hospitals that adapt now with solutions like RPM are positioned to earn more, grow faster, and outperform competitors.
Understanding Star Ratings for Hospitals
Hospital star ratings directly impact patient trust, financial performance, and hospital growth. Hospitals that focus on better documentation, quality improvement, and digital tools like remote monitoring are best positioned for sustainable growth, stronger patient loyalty, and long-term financial success.
