How to employ strategic opportunities for marketplace differentiation

Editorial note: The following post is an excerpt from HCPro’s popular title, The Five-Star Quality Rating System Technical User’s Guide written by Maureen McCarthy, BS, RN RAC-MT, QCP-MT and Reginald M. Hislop III, PhD.

The challenge for skilled nursing facility (SNF) providers today is less about census and more about payer mix. Providers must develop a strong and replicable quality mix—one that, with the application of good marketing strategy and business development techniques, sources desired referrals consistently and dependably.

SNFs must focus strategically on the dynamics of how quality ratings play into various policy programs, including value-based purchasing, bundled payments, and survey and certification. Ratings or stars may serve as consumer report cards, but that is no longer all they do.

The data within the 5-star reports is the cornerstone of business positioning and strategy. At the simplest level, consumers viewing star ratings are less moved to referral or provider choice individually as they are moved structurally within a complex environment of networked referrals and provider agreements. In other words, industry dynamics use the ratings to accommodate and create referral patterns.

Following this pattern, SNFs should consider how their market environment adjudicates referrals and their position in terms of referral preference. For example, as CMS moves toward additional bundled payments, hospitals and physicians will evolve in their understanding of postacute quality and downstream referral-related risk. A SNF that has lower quality ratings (stars) and whose QMs show more readmissions and/or ER transitions may wind up lower in the referral queue, even if the SNF has an overall three- or four-star rating. Hospitals will make clear delineations between providers in a bundled payment environment with incentive payments and penalties.

The CMS star rating system can present strategic opportunities for differentiation in a marketplace where nearly all providers compete for the same payer mix. Essentially, all providers are competing for a limited number of “paying” patients (read: patients with payment sources equal to or better than Medicare), and those with higher star ratings have the advantage. With providers moving toward at-risk scenarios for payment incentive or reduction across an episode of care (minimally 90 days), they are less willing to accept downstream provider risk via poor care. SNFs must be prepared to demonstrate their outcome excellence, and the star report is the main vehicle.

The goal for a SNF should not be to build a star-rating strategy, but to build an enterprise environment that drives performance in a tangible fashion that translates to maximum star ratings. Focusing on ratings vs. focusing on operations may seem like a narrow distinction; the difference is that an operational focus concerns itself with what the stars measure and ultimately (not immediately) report. From a business development perspective, the strategy and thus the results are organic—naturally occurring as a result of operational standards and care outcomes.

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