decades-old systems to be considered for modernization. This modernization could involve re-architecting or re-implementing the existing information system and might involve migrating information system components—for example, databases, business rules, and other contents that must be incorporated in the modernized information system.

Reforming infrastructure in the face not only of demanding new requirements, but also of potentially significant changes to those requirements in the short term and medium term, will be difficult, and the process will be further complicated by the ever-changing policy environment in which CMS must operate. Moreover, cultural change to address new demands and requirements means a change in the way that the agency and its stakeholders operate and do business day to day. Such change will require an array of new skills and new ways of managing the development of needed functionality. In particular, architecting a sophisticated, complex, and constantly evolving system is a challenge when individual components of it are implemented and maintained by different entities (whether internal or on a contractual basis). A coordinated and direct management approach to ensure appropriate integration and adherence to well-articulated architectural requirements will likely be needed.

But CMS’s efforts are further complicated by federal budgeting—which does not easily allow for sustained long-term agency budgets or flexibility in resource allocation—the oversight context within which CMS must operate, and the complexity of the overall U.S. health care system. Resource constraints pose a significant challenge to successful transformation. The year-by-year, project-by-project approach to federal IT demanded by the budgeting process makes it difficult for CMS to prepare, plan, or implement a long-term, multiyear, multiprogram IT project. Moreover, past experience has been that funds for the development of new or refined systems are often obtained only by the removal of funds from other equally critical areas. However, the transformations and reengineering suggested above will likely require a substantial net investment made over an extended period of time. As noted previously, CMS has accommodated significant adjustments to its mission (and consequently its systems) over time, most recently the implementation of the Medicare Part D program for subsidizing the costs of prescription drugs. However, the scope and scale of upcoming changes associated with the recent legislative mandates described earlier seem, in the committee’s view, to present even greater challenges than any that CMS has thus far encountered.

Part of grappling with the kind of transformation described in this report involves developing ways to ascertain the needed skill sets and key gaps in those skill sets as well as devising and implementing a plan to address those gaps. High-level strategy setters, not the IT managers, should drive the development of business processes and definitions. However, the IT leadership at the agency must “sit at the executive table” as the high-level strategic directions of CMS, including the evolving business model, processes, and requirements, are addressed. Such participation by the IT leadership ensures that decisions made are cognizant of IT best practices in such areas as systems integration and standardization of processes and data, among others. In addition, in large-scale transformations, it is typically the program managers, architects, and transformation managers at the middle levels of the organization who have the most difficult job—that of transforming the technical results of the practitioners into the business results demanded by the executives and external stakeholders. Thus, building

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