Originally published in McKnight’s

By Betsy Rust

“I’m with the government, and I’m here to help.”

Sense a little irony in that statement?

If so, you won’t be shocked that the federal government is tweaking how it rates nursing homes, but the small changes may pose big problems for some facilities.

Some background: For the past five years, the Centers for Medicare & Medicaid Services has provided a one-to-five star rating for nursing homes that participate in the government programs.

The rating system gives nursing homes a rating in three important categories: nurse staffing, annual inspection results, and  quality measures. The facilities then receive a composite rating combining those categories.

Critics of the system noted that nursing homes had been allowed to self report much of their data, and some facilities may have goosed their ratings.

So, last year, Congress passed “The Improving Medicare Post-Acute Care Transformation Act,” or IMPACT, which, among other things, requires nursing facilities to use staffing data based on “payroll and other verifiable and auditable data” for the rating system, and send the data electronically to the Department of Health and Human Services.

The changes are designed to improve transparency and reduce fraudulent reporting – laudable, consumer-oriented goals, to be sure.

Nursing homes, however, may have difficulty determining what constitutes payroll and staffing data. For example, many facilities utilize temporary staff. Reasons abound for using contract employees: For instance, some facilities may be located in areas where it is difficult to find full-time, trained personnel, and some nurses don’t want a full-time job.

The problem is that these nurses, known as “pool” labor, do not appear on nursing homes’ payroll systems as employees. Instead, the facilities pay the pool provider with a single check.

Thus, it is unclear how nursing homes will account for these employees when the facilities send in their payroll data; the IMPACT law specifies that nursing homes should include agency and contract staff in their reporting.

Another issue is the use of salaried administrative personnel in direct care nursing roles. Take the example of a director of nursing whose job doesn’t count towards the rankings. But if a nurse calls in sick one day, and the director of nursing substitutes on that shift, as often happens, there would be no way to show this through the normal payroll reporting procedure. Facilities that do not properly account for these staffing situations could experience a reduction in the overall five star ranking –  and a drop in stars can have a significant impact on the perceptions of residents, family and managed care payors.

With the new Payroll Based Journal (PBJ) requirements, the CMS did make a rating system change that should be helpful both to consumers and nursing homes: it now filters out  administrative resources at nursing homes –  as that information may distract from identifying the actual level of hands-on care at the bedside of each facility.

That’s a good start. But a lot of additional guidance and directives are necessary to ensure the end result is an accurate and consistent method of reporting.  Until then, nursing homes may want to strip a star or two from the government’s rating system.

Betsy Rust, CPA, is a consulting partner with Plante Moran‘s senior care and living practice.