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Poor Five-Star Rating? Investors Are Watching

The Centers for Medicare and Medicaid Services' (CMS) Nursing Home Compare site is a trusted resource for individuals researching long-term care facilities for themselves or their loved ones. For facilities with strong Five-Star Rating, the site provides third-party validation to attract new residents. The site also holds nursing home management accountable for maintaining quality standards. With high turnover and mandatory reporting, that's often easier said than done.

This leads to a somewhat love-hate relationship with LTC facilities and the CMS site, as its database can quickly point out flaws in their systems. While a good rating can draw in prospective residents, a poor rating can lead to a vicious cycle of lower occupancy and yet lower ratings. Though no administrators want to see a reduction in occupancy, few know that there is even more at stake. Consumers are not the only ones looking at your Five-Star Rating — financial institutions are as well.

Creditors and investors pay close attention to the Five-Star Rating system when considering facilities for financing. CMS provides them with an instant, side-by-side comparison that can be the deciding factor as to which facilities they work with in the future. As such, maintaining a high Five-Star Rating is essential to being considered viable and valuable to those interested in investing in your facility.

Through the Five-Star Rating system, potential investors gain objective insights into skilled nursing facilities, ranging from health and safety to staffing, all just a few clicks away. These measures grant lenders a wealth of information from which they can recognize performance issues and advantages and, with more consumers using the nursing home compare tool, financial institutions are leaning further on Five-Star Ratings to determine credit eligibility. The lower a facility's rating, the harder it becomes to get financing, and the higher interest rates on such financing may be.

With all three measures (health inspections, staffing, and quality measures) providing indications of a facility's viability, there is no room for slack on any of them.
While each measure of the rating system can indicate different issues in a facility to investors, the best way to prioritize these issues is to think about them through the mindset of potential residents — what questions would you have? Would you feel safe in a facility with a three-star health inspection rating? If a facility's staffing rating is low, could you be sure that you'd be cared for properly? It is these types of questions that both residents and financing institutions raise; residents and loved ones want to know their best options for long-term care, and financing institutions want to know if your facility is that best option.

From here, you can dig deeper to explore how to improve. For example, a low staffing rating might result in a lower health inspection and quality score, as staff are either poorly scheduled or in short supply and negatively impacting other aspects of your facility.

However, if your staffing rating is high but the others are low, it is important to explore why. Are the right staff scheduled at the right time? Are you using the best tools and technology to engage your staff? Do your staff have a say in scheduling? Are they unmotivated due to being under- or over-scheduled or working excessive overtime? Of course, just like the staffing score itself, many factors can impact quality and health inspections, and often the causes can differ widely from facility to facility.

Taking an interconnected view of your ratings can lead to new considerations and strategies on how to improve your overall score to attract financing institutions. Still, the road to improvement can often be an arduous one without the right tools and technology to help.

It's not all doom and gloom for struggling facilities searching for financing. While lower scores are best to be avoided, improvements in a rating can act as a signal of a strengthening facility to financers. No matter how high or low your rating may be, by taking a hard look at your Five-Star Rating, you can begin taking steps to make your facility more marketable to residents and financers, and open the road to further improvement.

About the Author

As Compliance Expert at SmartLinx, Tom Jegou oversees SmartLinx innovations in our payroll and compliance systems. Tom is focused on transforming client needs into leading-edge products. Tom leads cross-functional teams from a product's conception through to its launch. Tom led the design of the 1095-C and Payroll-Based Journal reporting features in the WorkLinxTM suite. Since 1996, Tom has worked with every aspect of Human Capital Management Systems. He has defined, supported, implemented and managed Payroll, Time and Labor and HR systems. Tom is a Certified Payroll Professional through American Payroll Association.

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