December 15, 2025
The 2026 CMS Five Star Rating Rule: How the CMS Five Star Rating Can Create Long-Term Risk for Hospitals
Beginning in 2026, updates to the CMS Five Star Rating methodology introduce a far more punitive and long-term consequence for hospitals with lower safety performance. Any hospital that falls into the bottom quartile for safety will be blocked from achieving a 5-Star rating and may be automatically downgraded to 1-Star in future cycles—even if clinical quality improves later.
This shift transforms what once felt like an annual performance challenge into a multi-year financial and reputational constraint.
Several components of the CMS Five Star Rating are influenced by safety-related measures, including patient safety indicators, which play a role in how hospitals are evaluated across reporting periods.
How the CMS Five Star Rating Methodology Changes Under the 2026 Rule
Under the revised CMS Five Star Rating model, safety performance becomes a gating mechanism for a hospital’s overall rating. Falling into the bottom quartile no longer affects only the current reporting year. Instead, the designation limits upward movement in subsequent cycles, making it more difficult for hospitals to recover once they fall behind.
Even with strong clinical care, the star rating may not immediately reflect improvements due to historical weighting and lookback periods used in CMS calculations. This lag increases the risk that lower ratings will persist long after care delivery has improved.
How Documentation Issues Affect CMS Medicare Star Ratings
Safety quartile placement under the CMS Five Star Rating program is influenced not only by clinical outcomes but also by how accurate events are captured in documentation. Inconsistencies in cataloging clinical data, present-on-admission (POA) designations, or coding detail can inadvertently elevate safety event counts.
Even small inaccuracies may create a misleading representation of patient safety performance—pushing hospitals into the bottom quartile and triggering the long-term downgrade risk outlined in the 2026 rule. Proactive alignment between documentation and clinical activity is now one of the most controllable ways to avoid unintended rating impact for your Stars rating.
The Long-Term Implications of Low Hospital Star
Ratings CMS Reports
A 1-Star designation affects far more than year-end quality reporting. Because the revised CMS Five Star Rating model limits upward mobility over multiple cycles, the consequences can compound year after year.
Hospitals may experience:
- Contracting & Revenue Limitations: Reduced leverage in payer negotiations and limited inclusion in preferred networks.
- Volume & Market Share Declines: Employers, consumers, and digital navigation tools increasingly direct patients toward higher-rated hospitals.
- Margin Pressure: A weaker payer mix, higher underpayments, and diminished leverage in billing disputes.
- Growth & Valuation Challenges: Lower ratings influence partnerships, employer agreements, affiliations, and investment confidence.
- Workforce Strain: Physicians and APPs often avoid joining hospitals with persistent 1-Star ratings, increasing recruitment and retention costs.
Financial impact may occur immediately, but recovery within CMS reporting is gradual—resulting in long-term consequences even after performance improves.
How the Star Rating Program Creates Long-Term Performance Challenges
Once a hospital falls into the bottom safety quartile, the pathway back to a higher standing within the star rating program becomes slow and difficult. Because CMS blends historical data with current performance, real-time improvements rarely translate into immediate rating changes. This lag can extend reputational and financial challenges for years beyond the initial downgrade—long after underlying issues have been resolved.
To prepare for the 2026 rule, hospitals should complete a focused assessment to understand where safety event inflation or documentation inconsistencies may be influencing their performance within the star rating program. An effective readiness assessment should:
- Quantify potential downgrade exposure in financial terms
- Pinpoint documentation patterns that may be affecting safety event reporting
- Identify opportunities to reduce downstream financial risk
- Establish a roadmap aligned to the 2026 CMS rating methodology
Taking these steps now can help hospitals strengthen their safety profile and prevent prolonged rating challenges under the evolving star rating program framework.
The Bottom Line
The 2026 CMS Five Star Rating rule fundamentally changes how long hospitals may feel the effects of a single year of poor performance. Even hospitals with high clinical quality may be at risk if documentation doesn’t accurately reflect patient care.
Now is the time to reinforce documentation accuracy, verify how safety events are captured, and address any preventable factors that could affect safety quartile placement—before a downgrade shapes financial and operational outcomes for years to come.
Linda Wiseman, BSN, RN, CCDS
Director, CDI Services at UASI
References & Additional CMS Resources
Centers for Medicare & Medicaid Services. (2024). Overall hospital quality star ratings methodology. Available at: https://www.cms.gov/medicare/quality-initiatives-patient-assessment-instruments/hospital-quality-initiatives/overall-hospital-quality-star-rating
Centers for Medicare & Medicaid Services. (2024). Technical notes for the overall hospital quality star rating. Available at:
https://www.cms.gov/files/document/overall-star-rating-methodology.pdf
Centers for Medicare & Medicaid Services. (2024). Medicare program; hospital inpatient prospective payment systems for acute care hospitals and the long-term care hospital prospective payment system and policy changes. Federal Register. Available at:
https://www.federalregister.gov
for Medicare & Medicaid Services. (2024). Present on admission (POA) indicator reporting. Available at:
https://www.cms.gov/medicare/medicare-fee-service-payment/hospitalacqcond/poa
