Choosing a Nursing Home: How Useful Are CMS Star Ratings?

Quality ratings are useful when they capture important and durable aspects of overall performance. They are less useful (and can be misleading) when they are excessively volatile, particularly if volatility is not the result of facility‐specific performance. We provide a detailed, primarily descriptive study of the nursing home star ratings published monthly by the Centers for Medicare & Medicaid Services (CMS) over 2009–2024. We present both nationwide and state‐specific results. Ratings are quite volatile, even over short time periods. Over longer periods, under 3% of nursing homes consistently maintain the same star rating. We find evidence of both “general” volatility (i.e., volatility in average ratings, unrelated to individual nursing home performance) and “facility‐specific” volatility (i.e., volatility associated with actual nursing home performance). General volatility, reflects opaque, time‐varying internal details of the star rating system. Although the CMS website states that a 3‐star nursing home is “average,” we find that the mean star rating varies widely—both by state and over time. There is a strong negative correlation between the Overall rating and citations and financial penalties imposed after an inspection, and a strong positive correlation between the Overall star ratings and staffing levels. However, we find no evidence that federal and state minimum staffing rules matter much; most nursing homes have staffing ratios well above statutory minimums. Surprisingly, higher‐rated nursing homes exit the market at a higher rate than lower‐rated nursing homes, sometimes by converting to other types of facilities. We offer suggestions on reducing general volatility and improving disclosure of whether a particular nursing home is above‐average, average, or below‐average at any given point in time.