CMS Hospital Compare: Do Methods Matter?
The Hospital Quality Star Rating Program is one of CMS’s most recent, prominent, and widely criticized efforts to disclose hospital quality information. This article reviews the methodology behind the ratings, identifies the sources of the criticisms, and proposes partial remedies. Using inpatient data from Florida, we show that CMS ratings affect demand for hospitals, and we estimate the impact of different rating assignments. We use these estimates to evaluate the effect of addressing the array of flaws in CMS methodology on demand and hospital revenue. Our findings showcase the importance of proper scoring design and the challenges introduced by incomplete data collection.