Why CMS Star Ratings Matter More Than Ever Hospitals are constantly measured on their quality of care, but few metrics carry as much weight as the Centers for Medicare & Medicaid Services (CMS) Star Ratings. These ratings influence how patients choose hospitals, how payers negotiate contracts, and how organizations position themselves in an increasingly competitive healthcare landscape. The Role of Star Ratings The CMS Star Ratings program evaluates hospitals across a wide range of quality measures. These include clinical outcomes such as readmissions and mortality, safety indicators like hospital-acquired conditions, and patient experience surveys addressing communication, responsiveness, and cleanliness. Hospitals receive an overall score that is highly visible to the public and payers. Impact on Patient Choice and Public Perception Patients want assurance that the care they receive will be safe and effective. Star Ratings serve as a shorthand for quality, guiding patient choice when selecting where to receive treatment. Hospitals with higher ratings often enjoy stronger reputations in their communities, while lower ratings can raise concerns about safety and performance. Influence on Reimbursement and Contracts Star Ratings are not just symbolic. They affect how hospitals are reimbursed, influence payer negotiations, and may unlock incentive payments for high performance. For many organizations, Star Ratings directly shape financial sustainability and the ability to reinvest in staff and technology. The Hidden Impact of Denials on Star Ratings Denials are often seen as a revenue cycle issue, but their impact goes far beyond delayed payments. When denials distort clinical data, they also undermine a hospital’s performance in CMS Star Ratings. Financial Consequences Every denied claim represents lost or delayed revenue. This directly reduces the resources available for quality initiatives, staffing, and patient experience improvements. Hospitals under financial strain may struggle to invest in areas that strengthen Star Ratings. Data Accuracy and Risk Adjustment Denials linked to documentation gaps or coding errors can lead to underreporting of patient complexity. Missed severity of illness and comorbidities affect risk adjustment, making outcomes such as mortality or readmissions appear worse than they are. Inaccurate data paints an incomplete picture of care quality. Denials influence critical Star Ratings measures, including: Mortality rates Readmission rates Complications Patient safety indicators When denials obscure true performance, hospitals risk lower ratings despite providing high-quality care. Operational Burden Staff rework and appeals consume time that could otherwise be dedicated to patient care, CDI initiatives, and proactive quality improvements. This operational distraction further hampers performance on Star Ratings measures. Organizations that do not address denial management place both their financial health and their public reputation at risk. By taking a proactive and comprehensive approach to denial prevention and management, hospitals can improve patient outcomes, protect vital revenue streams, and reinforce the trust and confidence of their communities and stakeholders. Turning Denial Prevention into Star Ratings Success Reducing denials is about more than revenue recovery. It is a strategic opportunity to strengthen documentation, improve data accuracy, and ultimately elevate CMS Star Ratings. Key Risks to Address Hospitals that do not proactively manage denials face three major risks: Missed capture of severity of illness and risk adjustment Underreported quality outcomes Reduced ability to invest in staff, technology, and patient experience Strategic Priorities for Hospitals Strengthen Documentation and Coding Accuracy: Clear, complete provider documentation ensures accurate code assignment and proper reflection of patient complexity. Proactively Manage Denials and Appeals: Early intervention prevents errors from cascading into distorted data and reduced reimbursement. Align CDI, Coding, and Revenue Cycle with Quality Measures: Collaboration across these functions ensures accurate reporting of outcomes and supports better ratings. Reinforce the Cycle of Accuracy: Accurate documentation leads to improved reimbursement, which enables reinvestment in quality initiatives, ultimately driving higher Star Ratings Connecting Quality and Finance Denial prevention directly supports quality outcomes, enhances reimbursement, and improves patient trust. By managing denials strategically, hospitals turn a traditional operational challenge into an opportunity for growth and leadership in value-based care. Resources: Centers for Medicare & Medicaid Services. (2024). Overall hospital quality star rating. CMS. https://www.cms.gov/medicare/quality/hospital-star-ratings Centers for Medicare & Medicaid Services. (2025). Transforming Episode Accountability Model (TEAM). CMS. https://www.cms.gov/priorities/innovation/innovation-models/team-model Centers for Medicare & Medicaid Services. (2024). Hospital quality star ratings methodology. CMS. https://qualitynet.cms.gov/inpatient/measures/hospital-star-ratings American Hospital Association. (2025). Denials management in hospitals. AHA. https://www.aha.org/topics/denials-management Centers for Medicare & Medicaid Services. (2024). Meaningful Measures 2.0: Moving to measure alignment. CMS. https://www.cms.gov/meaningful-measures-20 American College of Surgeons. (2025). Preparing for TEAM: Transforming Episode Accountability Model

For years, many Clinical Documentation Integrity (CDI) programs have focused heavily on financial metrics like DRG maximization, CC/MCC capture, and CMI shifts. While these numbers can be helpful for spotting trends, benchmarking, and understanding patient populations, they shouldn’t be the sole measure of success. When programs lean too much on these metrics, they risk stalling progress, losing physician engagement, and limiting long-term impact creating a band aid over the larger underlying issues. A stronger, more lasting approach puts clinical accuracy, provider education, and telling the complete patient story at the center, with financial results following naturally from doing the right work. The Limitations of the Traditional Model In a traditional CDI setup, much of the work happens after the fact. Queries go out once documentation is already complete, and success is judged by things like query volume, response rates, and short-term revenue gains. While this can boost the bottom-line short term the moment, it rarely fixes the real documentation gaps. For physicians, this approach often feels like an added layer of administrative work that interrupts their day and adds to compliance fatigue. Despite agreement among many CDI leaders that the focus needs to shift toward clinical understanding and root cause analysis of documentation and quality issues, the revenue-first model still dominates. Financial leaders often focus on revenue KPIs to gauge program performance, but these numbers tell only part of the story. While CDI must ultimately be financially viable, lasting success also depends on accurate reporting, quality outcomes, and better coordination of care. CDI 2.0: Building a Stronger Foundation The CDI 2.0 model focuses on clinical clarity, medical necessity, and improved communication across the care continuum. It blends clear, concise documentation into daily workflows and makes education for providers an ongoing priority formed from partnership with the CDI team. By working this way, documentation is improved at the source rather than adjusted after the fact. When CDI is positioned as a partner in improving patient care, physicians tend to see it as support rather than oversight. The result is documentation that paints a truer picture of the patient’s condition, which improves quality reporting, revenue integrity, patient safety, and collaboration across the care team. Putting Clinical Accuracy at the Core of CDI Organizations that embrace a clinically driven CDI model not only see stronger physician engagement but also achieve more lasting improvements in documentation. This connection is reflected in ACDIS’s Measuring and Valuing Quality survey, where nearly 60% of CDI professionals reported prioritizing Severity of Illness and Risk of Mortality measures ahead of purely financial outcomes. Similarly, the Optimized Comprehensive CDI Programs report found that 73% of respondents identified physician engagement and retention of education as key indicators of success, underscoring that sustainable CDI programs are built on clinical accuracy and provider partnership rather than short-term financial gains. This emphasis on clinical accuracy also extends to quality reporting. The ACDIS CDI and Quality Improvement survey showed that CDI teams track Present on Admission indicators (88%), Patient Safety Indicators (78%), and Hospital-Acquired Conditions (77%), highlighting how documentation accuracy supports organizational quality goals. Lastly, a recent exploratory analysis published in Health Services Research found that hospitals performing better on quality measures such as lower readmission rates, fewer complications, and higher patient satisfaction also tended to report stronger financial results (Carey and Burgess 2023). When CDI programs prioritize accuracy and completeness in the medical record, they not only strengthen clinical quality measures but also support long-term financial stability. Why Accuracy Leads to Better Outcomes As the healthcare landscape continues to evolve, CDI programs that focus on clinical accuracy will be best positioned to adapt and grow. When provider education, quality reporting, and financial performance are aligned around the complete patient story, CDI becomes more than a safeguard for revenue, it becomes a meaningful driver of better care. The future of CDI depends on programs that build physician trust, improve outcomes, and achieve financial stability as the natural result of accurate documentation. Need help transforming your CDI program? UASI offers staffing, assessments, quality audits, education, and more, all designed to elevate documentation accuracy, improve care quality, and uncover sustainable financial gains: https://www.uasisolutions.com/CDI References: ACDIS. Measuring and Valuing Quality. 2021, https://acdis.org/resources/measuring-and-valuing-quality . ACDIS. Optimized Comprehensive CDI Programs. 2023, https://acdis.org/resources/acdis-council-report-optimized-comprehensive-cdi-programs . ACDIS. CDI and Quality Improvement. 2023, https://acdis.org/resources/acdis-council-report-cdi-and-quality-improvement . Carey, Kathleen, and James Burgess. “An Exploratory Analysis of the Association between Hospital Quality Measures and Financial Performance.” Health Services Research, vol. 58, no. 6, 2023, pp. 1242–1252. PubMed Central, https://pmc.ncbi.nlm.nih.gov/articles/PMC10606508/ .

Yesterday, the Centers for Medicare & Medicaid Services released several final rules and updates impacting payment and quality expectations for FY 2026. Below is a summary of each announcement and its likely effect on providers across care settings. Quarterly Listing of CMS Program Issuances (April–June 2025) This listing compiles all CMS transmittals, memoranda, manual updates, and other instructions issued in the second quarter of 2025. While not tied to a specific payment update, it sets the compliance and operational agenda that contractors and providers need to follow going into the next fiscal year. Impact: Compliance leaders and revenue cycle teams should review the quarterly listing closely to ensure internal processes reflect the latest guidance on claims processing, provider enrollment, coverage determinations, and survey protocols. Link to announcement: https://www.federalregister.gov/documents/2025/08/05/2025-14822/medicare-and-medicaid-programs-quarterly-listing-of-program-issuances-april-through-june-2025 FY 2026 Hospice Wage Index and Payment Rate Update + Hospice Quality Reporting Program (HQRP) Changes CMS finalized a payment rate increase for hospices along with routine wage index updates. Revisions to HQRP continue the move toward outcome-oriented quality measurement, including preparation for the upcoming HOPE assessment tool. Impact: Hospices should expect modest payment growth coupled with expanded quality reporting expectations that will require stronger documentation and care coordination practices. Link to announcement: https://www.federalregister.gov/documents/2025/08/05/2025-14782/medicare-program-fy-2026-hospice-wage-index-and-payment-rate-update-and-hospice-quality-reporting FY 2026 Inpatient Psychiatric Facility (IPF) PPS Final Rule This rule updates the IPF per diem base rate, wage index, and labor share for FY 2026. CMS also modifies several measures in the IPF Quality Reporting Program to put greater emphasis on behavioral health outcomes and performance improvement. Impact: Psychiatric hospitals and units will see a net payment increase, but must be ready to support enhanced quality tracking and accurate measure reporting to avoid penalties. Link to announcement: https://www.federalregister.gov/documents/2025/08/05/2025-14781/medicare-program-fy-2026-inpatient-psychiatric-facilities-prospective-payment-system-rate-update FY 2026 Inpatient Rehabilitation Facility (IRF) PPS Final Rule IRFs will receive a payment increase in FY 2026 tied to market basket and wage index changes. CMS also continues to strengthen the IRF Quality Reporting Program by refining functional outcome measures and signaling future alignment with post-acute value initiatives. Impact: IRFs should prepare for higher reimbursement alongside increased accountability for quality outcomes and performance on patient assessment data. Link to announcement: https://www.federalregister.gov/documents/2025/08/05/2025-14780/medicare-program-inpatient-rehabilitation-facility-prospective-payment-system-for-federal-fiscal Bottom Line for Providers CMS continues its trend of linking payment updates to quality, transparency, and data integrity. While most settings will enjoy FY 2026 reimbursement increases, each sector should be bracing for greater reporting rigor and operational alignment with value-based objectives. To stay ahead, providers should prioritize internal assessments of their current documentation, coding, and quality reporting workflows to identify any vulnerabilities, considering the new requirements. Investment in education, technology, and cross-functional collaboration will be essential to safeguard compliance, protect revenue, and successfully navigate the evolving value-based landscape.