Taking Care Of The Patient

uben King-Shaw has a vision that one day, the Centers for Medicare and Medicaid Services will rank among the most respected federal agencies. In this vision, King-Shaw, CMS' deputy administrator and chief operating officer, sees an agency that is more agile, accountable and results-oriented. Eventually, he thinks, the agency can win a Malcolm Baldrige National Quality Award.

It's a vision shared by Secretary of Health and Human Services Tommy Thompson and CMS Administrator Tom Scully. Together, the three men are trying to create a culture of responsiveness. They envision an agency that delivers on its promises. This is no small task: It requires almost a wholesale change in the way CMS manages itself and its contractors.

The mere mention of this vision for CMS on Capitol Hill elicits skepticism, if not outright cynicism. In health care circles, talk of a more open and efficient CMS is seen as the stuff of dreams. While the agency now may be called CMS, many still see it as the Health Care Financing Administration, the agency everyone loved to hate.

Still, health care providers-from doctors to hospitals and home health agencies-hope Scully and King-Shaw are successful. For years, medical professionals have moaned about being over-regulated by HCFA and now CMS, their time to treat patients whittled away by the agency's paperwork demands-if they can even understand its confusing regulations and guidance. The American Medical Association, says its members must comply with 110,000 pages of Medicare rules. In a survey of members last year, one-third of 653 responding physicians reported spending one hour filling out Medicare forms for every one to four hours of patient care.

So providers are eager to see more than just a name change. One of the foot soldiers of reform is Barbara Paul, a practicing physician, who heads CMS' Quality Measurement and Health Assessment Group. Until March, Paul directed the Physicians Regulatory Issues Team (PRIT), which tries to help doctors cut through the morass of paperwork. It's not necessarily an effort to scrap rules, but a way to improve the relationship between doctors and regulators. The idea is to see where Medicare rules can be streamlined or where the agency and its contractors can do a better job of educating physicians on program requirements.

"The agency should do everything it can to be supportive of the doctor-patient relationship," says Paul, who was hired during the Clinton administration. "Because I was able to get the PRIT to focus on that, they carry this new attitude back to their program work. This wasn't the attitude of the agency that I came into. People did not apply it to daily work."

Established in 1998, PRIT is the precursor to the regulatory reforms Scully initiated shortly after being confirmed. He created a series of monthly open-door forums in 11 subject areas, including home health care, rural health care and nursing homes. While not as formalized as the PRIT, which has a detailed work plan complete with a "hit list" of problem areas, the open-door forums give providers and other stakeholders the opportunity to express frustration with CMS' policies and procedures. The agency then tries to find solutions.The goal is to "open the place up," says Scully, adding that for too long the agency has been viewed as a black box.

"In our practice, the time you have to spend with patients has been eroded, because you have to spend so much time trying to understand the regulations," says Dr. Douglas Wood, vice chairman of the Department of Medicine at the Mayo Clinic in Rochester, Minn. "Whenever you start worrying about the structure of the [patient reports] rather than what is in [the report], that has direct bearing on patient care."

A former lobbyist for the hospital industry, Scully is well aware of the problems between CMS and health care providers. "If the doctors, the hospitals, the nursing homes are angry at us, they are not going to be as good at taking care of patients," he says. "Our No. 1 goal is taking care of patients. The No. 2 goal is having a better relationship with honest, decent providers."

The true test of this new attitude is whether it will take hold at CMS' 10 regional offices. In Atlanta, the culture change is moving ahead slowly. Staff used to working on policy issues are now being asked to meet with health care providers and deal with program management. It's a whole new world, says Wilma Cooper, acting deputy regional administrator, and it requires taking baby steps. For instance, the office only recently generated a database of key contacts at various medical societies and trade associations in the region. Eventually, she says, increased outreach and communication with providers will pay off. "Providers didn't like HCFA or CMS," she adds. "I think now they'll see us as more friendly and out there to help."

In recent years, CMS has tended to focus more on reaching out to beneficiaries than to providers. Atlanta's beneficiary outreach team has several projects under way. Among them is its sponsorship of radio traffic reports that feature a toll-free number beneficiaries can call for information about Medicare, including what services are covered and how much Medicare pays for certain services. The group also targets specialized audiences. In Dade County, Fla., the agency has a partnership with Spanish-language radio and television stations to reach out to elderly Hispanics. During a radio show, Medicare specialist Jose Jimenez helps radio listeners understand how to use the system and what to expect when they call.

The regional staff also go on road shows throughout the rural South. During an eight-day tour of four cities in the poorest parts of South Carolina last September, Medicare professionals met with more than 400 people to talk about the program. They reached another 9 million or so through various media outlets.

BILLION-DOLLAR MISSION

The sheer size of CMS creates an added hurdle for Scully and King-Shaw as they try to change the agency's culture. It is a department squeezed inside an agency. Its budget request-$397.3 billion for fiscal 2003-is larger than that of most Cabinet departments. Most of that money passes through CMS to doctors and hospitals. Just $2.5 billion of the fiscal 2003 request is slated for program administration.

CMS runs two of the federal government's largest and most important social welfare programs-Medicare and Medicaid. Combined, the programs account for one-third of U.S. health care spending. Providing health insurance for more than 40 million elderly and disabled Americans, Medicare will cost the government $255 billion in fiscal 2003. Medicaid, which is jointly funded by the federal and state governments, covers 40 million low-income Americans, mostly children and pregnant women. The federal share is expected to hit $158.7 billion this fiscal year, up 9.5 percent from fiscal 2002.

CMS manages more than 250 private health care plans participating in Medicare's managed care program. It also oversees an additional 50 contractors-known as carriers and fiscal intermediaries-who are the direct link between Medicare, health care providers and beneficiaries. These contractors process more than 900 million claims each year. CMS also monitors Medicaid activity in all states, the District of Columbia and the country's overseas territories. On top of that, it is charged with implementing major portions of the 1996 Health Insurance Portability and Accountability Act, which calls for regulations to protect the security and confidentiality of medical records.

Despite the huge mandate, CMS has carried out its core missions well. It pays Medicare claims quickly and with low administrative costs-generally less than $1 a claim. It has also worked diligently to implement complex payment systems that have helped hold down program expenditures, something that earns praise from such tough critics as the General Accounting Office. "On the minus side, however, the agency has experienced some difficulties in refining payment methods that were developed to control Medicare spending, paying claims properly, overseeing Medicare claims administration contractors, and ensuring the quality of care delivered to Medicare beneficiaries," GAO noted in a July 2001 report (GAO-01-817). "HCFA's record of performance must be considered in light of factors that may im-pede its progress in improving Medicare operations.

These include its lack of a performance-based approach to management."

If there is one glaring weakness at CMS it is exactly that-the absence of a performance-based culture. For starters, the agency is just now updating its strategic plan, last published in 1998. Several managers interviewed for this story say there has historically been little appreciation for performance and accountability. "I bet half of the people in our office don't know what is in our strategic plan or how it relates to their daily job," says one manager. Indeed, in a May 2001 survey of managers at 28 agencies and departments, GAO found that CMS ranked near the bottom in terms of creating a performance-based culture.

Part of the problem, says a manager in the Dallas office, is that some employees still don't see how their jobs directly affect the health of Medicare and Medicaid beneficiaries. The agency still is trying to figure out how and where to measure quality of care. In the 2002 annual performance plan, roughly seven of 36 measures were directly associated with beneficiary health and satisfaction. Michelle Snyder, CMS' chief financial officer, acknowledges that one ongoing struggle is figuring out how many measures to develop. An added difficulty is the fact that many quality of care goals are multi-year measures, making it difficult to tie them into a one-year performance plan.

Nonetheless, critics, GAO among them, are reluctant to let the agency off the hook. Referring to CMS' goal of improving the quality of care provided by nursing homes, for instance, GAO notes that the agency has just three goals, despite launching nearly 30 initiatives to improve the quality of nursing home care. Yet in other areas-efforts to reduce waste, fraud and abuse in Medicare, for example-the agency has clearly articulated its goals.

Accountability

Still, King-Shaw ac-knowledges that management has to do better at creating a performance-based culture. "There were measures in place. What has not been clear is that senior leadership was going to hold people accountable to accomplish those measures and there would be some repercussions if they didn't," he says, adding that the agency has implemented a more rigorous review of performance goals. "For the first time, some people who got perfect reviews didn't get them this year. . . . For some of them, we agreed to sit back down in six months and review where they are."

Further, senior leaders are mapping out performance plans for each program area. By mid-summer, King-Shaw hopes to have a series of specific goals and objectives tied to performance appraisals. Former CMS Administrator Nancy-Anne DeParle acknowledges that program administration often got short shrift, but she blames Congress and the Office of Management and Budget. Management, she says, was never viewed as a high priority, hence the tiny amount of money-just over 1 percent-devoted to administration in CMS' budget.

King-Shaw is quick to credit previous administrations for tackling a slew of congressional mandates-cracking down on fraud and successfully avoiding a year 2000 computer meltdown, for example-with a limited budget. "We can focus on things today because they focused on other things yesterday," he says.

King-Shaw has created an office of operations management. It reports directly to him and, among other things, monitors several large projects, including implementation of various congressional mandates, several information technology modernizations, and e-government initiatives. The office also performs internal audits.

MIDDLEMEN

If CMS managers are uncertain of their performance goals, the situation is even worse for Medicare contractors. For all intents and purposes, contractors are the true face of the program. Acting as middlemen, they have day-to-day contact with health care providers-not only sending out regulatory guidance, but also processing claims and responding to questions. By law, only insurance companies are eligible to act as contractors. There are 50 today. CMS' 10 regional offices oversee them. But evaluations don't always consider the quality of work performed by contractors, according to Leslie Aronovitz, director of health care program administration and integrity issues at GAO. For example, contractors are required to communicate to providers any changes in Medicare's coverage or billing policies. They do so by posting information on Web sites and sending updates directly to providers' offices. They also maintain toll-free phone lines. In a review of several Web sites and other communications, GAO found that few contained timely or accurate information. Responses to telephone inquiries were also inaccurate and sometimes inconsistent with other information being sent to providers. "We found that CMS has established few standards to guide the contractors' communication activities," GAO noted in a September 2001 report (GAO-01-1141T). "While CMS requires contractors to issue bulletins at least quarterly, they require little else in terms of content or readability. Similarly, CMS requirements for Web-based communication do little to promote the clarity or timeliness of information."

As a result, doctors are not always well informed about program changes. The Mayo Clinic's Wood says that contributes to the amount of time physicians spend dealing with paperwork rather than treating patients.

Making matters more difficult, contractors believe they get conflicting guidance from CMS, says Harvey Friedman, Medicare's contracting officer for the Blue Cross and Blue Shield Association. He says there is "no discipline" in the way CMS gives contractors information, no point person for contractors to call with questions.

The agency is taking steps to improve its oversight of contractors. Under DeParle, it shifted that task from the regions to headquarters, creating a national approach to evaluation. No longer do officials in a regional office review contractors in their area. A team from another region does. The intention is to separate day-to-day management from oversight.

"The problem is that in the past, because we had limited resources, we looked at quantitative measures because they were easier," says Elizabeth Cusick, dir-ector of contractor management at CMS. "What we are doing now is constructing a balanced scorecard so we have both [quantitative and qualitative] measures."

To truly create a performance-based culture, Cusick says the agency needs contractor reform legislation. Currently, fiscal intermediaries and carriers operate on a cost-reimbursement basis. There is no incentive to improve performance. In fact, the agency has limited authority to persuade contractors to do better. When Medicare was enacted in 1965, Congress decided to pay contractors for allowable costs, thus making sure they would not lose money for processing Medicare claims-nor make a substantial profit.

"One of the problems with the way contracts are structured right now is we don't have a lot of intermediate-level incentives or sanctions," says Cusick. "The contracts are actually very short and haven't really been renegotiated since 1988." While the agency has the authority to fire poor- performing contractors, more likely both sides will agree not to renew a contract.

CORALLING CONTRACTORS

To gain more leverage over contractors, the Bush administration is pushing a reform bill that would let CMS competitively bid contracts. Nearly every administration during the past 20 years has pushed for contractor reform legislation. The House passed a measure last year, but it's not clear yet how high a priority the issue is in the Senate. On a smaller scale, the agency hopes to launch a demonstration project next year with three contractors to test performance-based measures. CMS has some experience with performance-based contracting. Under the 1996 Health Insurance Portability and Ac-countability Act, the agency was given authority to contract with entities besides fiscal intermediaries to protect Medicare from waste, fraud and abuse. The 12 program safeguard contractors (PSCs) perform a range of functions, including investigating areas vulnerable to fraud, such as community mental health centers. In some instances, PSCs have taken over all program safeguard activities from carriers and fiscal intermediaries.

"One of the things we've been able to do on the PSC side that we can't do on the contractor side is say, 'I have $1 million, tell me what you can give me,'" says Timothy Hill, director of program integrity at CMS.

Hill acknowledges that the agency is still struggling to come up with the best outcome measures. One thing that will help is a more sophisticated method for assessing waste, fraud and abuse. Right now, the Health and Human Services Office of Inspector General is the main source for such information.

Each year, the IG issues a report highlighting improper payments in the program. These errors range from paying fraudulent claims to cutting checks for incorrect bills. Medicare made improper payments totaling about $12 billion last year, according to the IG. That's down from $23.3 billion in 1996, the first year the IG estimated overpayments. To a large degree, the agency was able to drive down the number through increased outreach to providers, says DeParle. Throughout her tenure as administrator, DeParle kept up a steady drumbeat of anti-fraud rhetoric. The attention, says one hospital lobbyist, scared providers into hiring consultants and creating compliance programs. There still is room for significant improvement, says Hill. While national in scope, the IG report looks at only about 6,000 claims. CMS is developing a system to review 2,000 claims per contractor every year. This will allow the agency to track trends by contractor, state and type of claim. "It provides both the performance management aspect of the error rate as well as the management information we need on a day-to-day basis," says Hill. "The other thing it gives us is a releasable file. I'll be able to call the AMA and have them look at the database, and we can look at it together to figure out where the problems are." CMS will have the error rate measuring system up in a limited capacity next January. By 2004, CMS will produce its own report, and the HHS IG will bow out of the picture.

EVERYTHING IS A PRIORITY

Improving performance at CMS doesn't stop with creating a more results-oriented culture. One of the most difficult challenges-and one that touches every corner of the agency-is modernizing an antiquated information technology system. CMS relies on nearly 100 mission-critical computer systems. They contain information on beneficiary enrollment, the use of medical services, provider payments, program expenditures and more. Nearly all of CMS' computer systems are in desperate need of overhaul. For example, its national claims history, which contains about 12 years of data on Medicare claims, is still stored on old magnetic tapes.

"Say you have a policy question about the effect on the Medicare trust fund of changing [payment for a medical service]," says Gary Christoph, who was chief information officer at CMS from 1997 to March 2002. He was interviewed for this story before leaving to take on a similar role at the National Institutes of Health. "In order to collect data for the last five years, we would have to write a special program that could take three to five months to write and test. So here is a policy-maker trying to answer a question, and it takes us four months to get the answer," says Christoph.

CMS has had a modernization plan for several years, but it has made little progress in achieving significant results. Part of the problem is that while the agency is trying to upgrade systems, it also has to maintain current systems and implement program changes passed by Congress.

Additionally, CMS put modernization on the back burner in the late 1990s to work exclusively on the Y2K bug. The agency passed the crucial date without a hitch. With Y2K over, CMS can get back to its modernization plan, right? Not quite. There are still hundreds of policy changes mandated by the 1997 Balanced Budget Act, as well as another series of payment reforms passed by Congress in 1999 and 2000. Each requires reprogramming the agency's computer systems.

On top of that, HHS has directed all of its agencies to implement three new enterprise resource planning systems, stretching scarce resources further. In the face of these competing priorities, the agency has had trouble staying focused on a coherent modernization plan. In fact, even the agency's harshest critic is sympathetic. In a September 2001 report (GAO-01-824), GAO took the unprecedented step of suggesting that Congress boost the agency's IT funding. GAO's Aronovitz is quick to point out that CMS still needs a more detailed modernization plan and implementation strategy.

Nonetheless, the agency is moving forward with two critical modernization efforts:

• Scrapping a 30-year old financial management system. CMS relies on 53 different systems used by its fiscal intermediaries and carriers. To reconcile accounts payable with accounts receivable, CMS employees spend a fair amount of time re-entering data into spreadsheets. Despite its arcane system, the agency has secured clean audits for the past two fiscal years.
• Replacing the Medicare claims history file. Though it costs less to store data on magnetic tapes than on disks, tapes are inefficient. They do not allow direct access to records. Moving the data to disks will allow CMS to respond faster to policy-makers thinking about changing payment formulas.

LABOR PAINS

Another key hurdle in creating a more agile and responsive CMS is its ongoing labor problem. A contract with the American Federation of Government Employees, which represents nearly half the agency's 4,480 employees, expired last year. A deal struck in 1998 remains until a new contract can be negotiated. That appears unlikely.

Both sides have dug in. John Gage, president of AFGE Local 1923, which represents CMS employees, accuses the Bush administration of union busting. Agency leaders say the contract prevents them from managing and hinders program performance.

The union is willing to negotiate select portions of the pact, but the administration wants to reopen the whole contract. Two areas of concern for CMS leaders are the agency's awards program and rules about when employees can be detailed to different jobs. Under the awards program, employees nominate their colleagues. Sometimes, co-workers simply nominate their friends. "The process is not an incentive anymore. People are getting awards because they did something with their buddy," says Michael Odachowski, director of internal customer support at CMS.

More problematic for managers is the ability to detail employees from one program office to another. The contract requires that jobs be posted and made available to all qualified workers. This means that if a division has a short assignment and knows exactly the right person for the job, the manager is unable to simply pluck that person from their current position. Rather, the job has to be open to competition. "We cannot manage human resources in an agile way," King-Shaw says. "I do not believe Congress is prepared to tell the American people, 'I'm sorry, we cannot improve Medicare any better than we can today because the union contract is outdated.' "

Gage says agency brass are exaggerating. If a situation arises in which one employee is a perfect fit, he says the union is willing to make accommodations. In fact, it has done so in the past, he says.

For the moment, the dispute over contract negotiations seems to involve only top-level managers and union leaders. Line employees and lower-level managers are more concerned with workforce planning problems-hiring and retaining quality staff as well as getting adequate training. One pressing need is succession planning.

To address the issue, CMS is creating a Senior Executive Service candidate development program. But the agency is limited to 40 SES positions, making it difficult to balance the agency's needs and the expectations of its employees, says Odachowski. Managers don't know what kind of skills gaps exist in their divisions. The agency's 2001 employee assessment was a voluntary checklist and did not provide a thorough analysis. CMS is developing an automated system that will help managers make better resource and training decisions.

There's also a concern that the agency does not have adequate skills to address a rapidly changing health care environment. Most CMS employees are well versed in Medicare's traditional fee-for-service program. But there is a push-from the administration, members of Congress and state lawmakers-to increase Medicare and Medicaid's managed care options. As that happens, the agency will need more people with experience in private health insurance. Recruiting them is difficult, given that CMS is competing against private insurers who are able to offer better salaries and benefits.

King-Shaw is certain that CMS will improve its management practices. It has no choice, he says. Its constituency is growing-especially as baby boomers get older.

"If we do all of these things, our policies will be clearer," he says. "My job here is to deliver on our products and promises."