President Obama has signed into law a bill that provides $11M in funding to improve the electronic collection of data for the Medicare star rating system. The Improving Medicare Post-Acute Care Transformation Act (IMPACT Act) will not impact the ratings families use to compare facilities but also affect the pricing provided by medical malpractice insurance underwriters.
After the hard market of the early 2000s sent premiums up double and triple digits, many insurers looked for ways to better underwrite nursing home and elder care facilities. Millions were invested in analytics that continue to be used and tweaked today. Nursing homes are priced with a rate multiplied by the number of licensed beds, with a credit put on for any deductibles. How that rate is established is the art of underwriting – claims history, location and underwriter opinion of the quality of care are all taken into account.
The advent of the Medicare star system was a data bonanza for insurers. For the first time that had massive troves of collected quality data to analyze, however much of it was incomplete or not subject to independent verification. The IMPACT Act will collect more data and give Medicare the tools to verify it. This will likely push insurers to rely even more heavily on it.
Many insurers have found their own pricing bands closely matched the ones implied by the federal star ratings, many other insurance companies took the cheaper route and have used star ratings instead of investing in their own analytics. One thing is for sure – if the newer star ratings cause a drop for your facility it will correlate with an increase in liability insurance premiums.
Working with an expert insurance broker will ensure your facility is presented to the most competitive underwriters and your risk is put in the best light. The market continues to evolve and partnering with an expert can ensure cost containment in a difficult operating environment.