What Star Ratings cut points are
Cut points are the numeric thresholds that translate a measure's score into a 1 to 5 star rating. CMS sets them each year from the distribution of all contracts' scores for that measure, so a plan does not know the exact cut point in advance. A contract earns a given star on a measure only once its score crosses the threshold CMS draws for that star level.
Because the thresholds are derived from the whole field rather than fixed in regulation, the same raw performance can earn a different star from one year to the next. If competitors improve, the bar to hold a star rises. If the field slips, the bar can fall. That moving target is the core operational fact of Stars work.
How CMS sets cut points
For most measures, CMS uses a clustering algorithm. It takes every contract's score on a measure, plots the distribution, and groups the scores into five clusters so that scores within a cluster are close together and the gaps between clusters are wide. The boundaries between those clusters become the cut points for 1, 2, 3, 4, and 5 stars.
A simplified version makes the idea concrete. Suppose contracts on a measure score anywhere from 60 to 95. The algorithm finds the natural breaks in that spread and might draw the 4 star boundary at 82 and the 5 star boundary at 90. A contract at 81 sits one point under the line and earns 3 stars on the measure; a contract at 83 earns 4. The exact break depends entirely on where this year's field clusters, which is why the same 81 can be a 4 star one year and a 3 star the next.
The mechanics matter for planning. Cut points are set retrospectively, after the measurement year closes and every contract's score is in. The 2026 cut points reflect how the field performed on 2024 service, not a number any plan could have looked up while the work was still open. CMS publishes the final values in the Star Ratings Technical Notes alongside the release. CAHPS patient-experience measures follow a different statistical method, so the clustering, Tukey, and guardrail rules described here apply to the non-CAHPS measures that make up most of a contract's Stars work.
Tukey outlier deletion
Before clustering most non-CAHPS measures, CMS removes statistical outliers using the Tukey outer-fence method. It deletes contract scores that fall more than 3.0 times the measure-specific interquartile range below the first quartile or above the third quartile, then runs the clustering algorithm on the scores that remain. See the Tukey outlier deletion glossary entry for the full calculation.
The effect is to keep a handful of extreme scores from dragging the cluster boundaries up or down. A few very low outliers used to pull the lowest cut points down and make a 4 star easier to reach on some measures. Removing them produces cut points that sit closer to where the bulk of the field actually performs, and that move less from one year to the next.
The 5 percentage point guardrail
CMS also caps how far a cut point can move from one year to the next. For most non-CAHPS measures the guardrail limits the year-over-year shift to 5 percentage points in either direction, so a threshold cannot jump by an arbitrary amount even if the underlying distribution swings hard. The cap works together with Tukey deletion to make cut points more predictable.
For an operator, the guardrail is the planning lever. The worst the bar can get next year is the prior year's cut point plus the guardrail. A team that builds to that ceiling, rather than to last year's published number, protects the star even when the field tightens.
The Reward Factor in 2026 and what changes in 2027
For the 2026 Star Year, CMS applies the Reward Factor, an integrated bonus of up to 0.4 added to a contract's overall and summary ratings for consistently high performance with low variance across measures. It rewards plans that are both high-scoring and steady. CMS describes the calculation in the 2026 Technical Notes.
For Star Year 2027, CMS replaces the Reward Factor with the Excellent Health Outcomes for All (EHO4all) adjustment, previously named the Health Equity Index, which phases in at a smaller initial value. That is a forward-looking change with its own mechanics. We cover it in 2027 Medicare Star Ratings changes.
Why you cannot wait for final cut points
Because cut points are set retrospectively from the field and can move up to the guardrail each year, you cannot wait for the final numbers to act. By the time CMS publishes the 2026 cut points, the 2024 measurement year is closed and the gaps are locked. The only workable approach is to manage to a margin: the prior year's cut point plus the guardrail, with a buffer on top.
The margin math is straightforward once you accept the uncertainty. If last year's 4 star cut point on a measure was 80, the bar next year could move up to 85 under the guardrail. A team that targets 80 risks losing the star on any upward move in the field. A team that targets 85 plus a small buffer holds it in almost every scenario. The cost of the extra gaps closed is small next to the revenue tied to a half-star swing on a weighted measure.
That means forecasting the glide path during the year, not auditing it after. A plan needs a running estimate of where each measure will land, how far it sits from the likely 4 star and 5 star thresholds, and how many gaps it has to close in the time left to clear the margin. The teams that hold their stars are the ones working that forecast every week while the year is open, not the ones reading the published cut points after the year has closed.
How Pelica helps
Pelica is the AI-native execution layer for value-based care: one live member record and a copilot next to every team. Most platforms show you what needs to happen. Pelica actually does it. For Stars, that gap between knowing the cut point math and clearing it is the whole problem.
The Quality & Stars copilot forecasts the glide path to each measure's likely cut points and works the open gaps while time remains, closing roughly 90% of BCS and KED gaps in-year. It does not stop at a gap list. It prioritizes the members who move a measure across its threshold, makes the outreach, and follows up until the gap is resolved or escalated. At HealthCare Partners, the largest IPA in the country, teams run this on 175,000+ patients live without adding headcount.