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4 Achieving Cultural and Organizational Transformation I n any large-scale organization, major changes in the roles, uses, and architectural assumptions of information technology (IT) systems and processes may be seen as disruptive, or onerous, or be poorly appreciated—even when the drivers for change are well understood by the organization, and even when modernizing or transforming business and information ecosystems is done in a structured, incremental, and iterative fashion, as this report recommends. If the need for moderniza- tion or outright transformation is poorly understood, especially by orga - nizational leaders as well as by the users and stakeholders who will be most affected, even the best-intended and well-designed projects can be unsuccessful. Achieving the kinds of changes in CMS’s business and informa- tion ecosystems outlined in previous chapters will require both internal CMS organizational adaptations and a cultural adaptation embracing the notion that CMS’s business functions are intrinsically tied to IT. Rather than being seen simply as a support service and mechanism for imple- menting programs, IT must be recognized as integral to CMS’s strategic directions. In the business community, which has increasingly accepted IT as fundamental to its mission, IT leaders play strategic roles in addition to their traditional operational ones. CMS, too, can benefit from evolving structurally and transforming its internal culture to effect an improved understanding of IT’s role in and contributions to realization of CMS’s mission and goals. Although the choice to modernize or transform a business or information ecosystem has to be evaluated in terms of what 77
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78 STRATEGIES AND PRIORITIES FOR INFORMATION TECHNOLOGY AT CMS type of transition is needed for that ecosystem, in the committee’s view the culture and organization of CMS have to be transformed—not merely modernized—in order to meet its current and future challenges. CMS faces special challenges in this regard, given that its agenda and priorities are often defined by external forces such as new legislation or other congressional directives, as described in Chapters 1 and 2. But much of how CMS does what it does is determined internally, based on organizational structures, planning and decision-making conventions, the availability of resources, and relationships (defined by informal culture as well as formal reporting relationships). Considering the centrality of IT as an element in, and enhancement to, a transformation in CMS’s organiza- tion and culture, the committee in this chapter summarizes CMS’s cur- rent organization and relationships and describes what an IT-enhanced enterprise within CMS might look like, offers suggestions for aligning overall strategic goals and resources to achieve the needed organizational transformation, discusses the importance of leadership and innovation, and outlines some guiding principles along with a roadmap for cultural and organizational transformation at CMS. In summary, the committee believes that in order to meet emerging and future needs, CMS should undergo an organizational and cultural transformation, actively integrating IT as a strategic partner in its business and deepening in several areas its critical internal IT core competency. BASIC ELEMENTS OF THE CULTURAL AND ORGANIZATIONAL TRANSFORMATION NEEDED AT CMS In any organizational transformation, several key elements contribute to a successful transition: a clear and well-articulated mission; an effective organizational structure; firm commitment on the part of leadership to lead change; effective communication across the board; buy-in and sup- port from key players, engaged staff, and employees; and perseverance.1 A frequently cited example of successful organizational transformation in the federal government is the IT transformation of the Internal Revenue Service. Achieving large-scale change in a complex government service operation,2 that effort has been applauded for demonstrating the key roles of leadership, vision, and cultural change. Similarly, a generation of physicians and other health professionals has seen the transformation in 1 Mark A. Abramson and Paul R. Lawrence, 2002, Transforming Organizations: IBM Endowment Series for Business of Government, Lanham, Md.: Rowman & Littlefield Publishers. 2 Amy C. Edmondson, Frances X. Frei, and Corey B. Hajim, 2002, “Transformation at the IRS,” Harvard Business School Case 603-010, available at http://cb.hbsp.harvard.edu/cb/ product/603010-PDF-ENG, last accessed July 20, 2011.
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79 ACHIEVING CULTURAL AND ORGANIZATIONAL TRANSFORMATION BOX 4.1 CMS Achievements in Information Technology CMS has achieved several noteworthy achievements in IT. Among them are the following: • Consolidated and standardized Medicare fee-for-service claims processing by eliminating numerous claims-processing systems and transitioning all Medicare contractors to three standard claims-processing systems; • Consolidated 22 independent data centers housing the processing of fee-for- service claims into two CMS-controlled enterprise data centers; • Implemented the Medicare Part D Prescription Drug Program, a more than $300 million effort over 2 years; • Implemented the Healthcare Integrated General Ledger Accounting System, providing a single integrated general ledger accounting system for all financial trans- actions and modernizing Medicare accounting; • Implemented the CMS Integrated Data Repository—a warehouse envisioned to eventually contain all CMS program data—and business intelligence tools, en- abling delivery of the CMS Dashboard (a tool to make CMS data more accessible and transparent) in just over 6 weeks; • Implemented the Health Insurance Portability and Accountability Act-com- pliant eligibility transaction system, which processes and responds to more than 300 million eligibility requests annually; • Implemented the CMS Virtual Call Center strategy in support of users of the toll-free number 1-800-Medicare; and • Developed and implemented numerous “compare” tools for the Medicare websites. the Department of Veterans Affairs’ clinical services at all its hospitals and clinics as a result of the federal program’s effective design, development, and deployment of its transformational electronic health record system known as VISTA.3 The past 10 years have also seen a number of important CMS achievements in the IT arena, several of which are listed in Box 4.1. As in other federal agencies, the context within which cultural (atti - tudes, experiences, beliefs, and values of an organization4) and organi- zational (structures and processes) transformation will occur at CMS is complex. The agency will have to address the core components of busi- ness transformation—people (including external stakeholders and Con - 3 U.S. Department of Veterans Affairs, “Veterans Health Information Systems and Technol- ogy Architecture (VISTA),” website, available at http://www.va.gov/vista_monograph/, last accessed July 20, 2011. 4 E.H. Schein, 2005, Organizational Culture and Leadership, 3rd Ed., Jossey-Bass.
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80 STRATEGIES AND PRIORITIES FOR INFORMATION TECHNOLOGY AT CMS gress), processes (including those that involve a complex array of external contractors at state and regional levels), and technology—all while under intense public scrutiny, and coping with federal funding idiosyncrasies and frequent transitions in leadership. In the committee’s view, five related cultural and organizational tran- sitions at CMS would have positive repercussions for nearly all of CMS’s activities, given the centrality of data, IT, information, and information management to the agency’s mission: • A cultural shift from viewing IT as simply an operational necessity to embracing IT as a critical strategic element; • A cultural shift away from viewing IT leadership as overseeing a support group, complementing but not an integral part of the leadership mainstream, and toward viewing IT leadership as playing a key role in planning, designing solutions, and advising CMS business leaders regard- ing suitable approaches to their own responsibilities; • An organizational shift from a mission centered on transaction processing to a mission centered on data, information, and information management; • An organizational shift from a focus on paying claims to a focus on driving a combination of payment with improvements in quality, safety, and equity of health care and outcomes for individuals and populations; and • An organizational shift from relying on heroics from IT staff to securing a sustained investment in and commitment to infrastructure, resources, and staff. These transitions must occur in the context of shifts in the CMS cus- tomer base, with a Patient Protection and Affordable Care Act (PPACA)- mandated emphasis on clinical care quality, equity, and safety as well as the promotion of health and increased efficiencies and cost savings. The demand for CMS-managed data to support research and other external analytic efforts continues to grow and may change in both character and volume as CMS is perceived as providing information that is more clini- cal in nature. Furthermore, the creation of accountable care organizations, the development of episode-of-care and bundled payment mechanisms, the relationship with the Office of the National Coordinator for Health IT concerning meaningful use of health IT, and growing interactions with other federal IT organizations (in HHS and beyond) highlight the growing need for cultural transformation within CMS.
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81 ACHIEVING CULTURAL AND ORGANIZATIONAL TRANSFORMATION CURRENT CMS ORGANIZATION AND RELATIONSHIPS TO INFORMATION TECHNOLOGY FUNCTIONS One of the largest agencies within the Department of Health and Human Services, CMS has more than 4,000 federal employees and approximately 80,000 external contractors organized into 6 major cen- ters, 18 operating offices and consortia, and 10 regional offices across the country (Box 4.2). The most recent enterprise-wide organizational restructuring of the agency occurred in 2001, when the agency changed its name from the Health Care Financing Administration to the current Centers for Medi- care and Medicaid Services and reorganized into three centers reflecting the agency’s major lines of business: Medicare Management, Beneficiary Choices, and Medicaid and State Operations.5 In 2003, the most signifi- cant legislative change to Medicare (the Medicare Modernization Act, or MMA)6 was signed into law, adding a new outpatient prescription drug benefit and making many other important changes to the program. Figure 4.1 shows the CMS organizational chart at the time of this writing, includ- ing the three additional centers introduced since 2001. Information Services and Information Technology in CMS Although CMS has experienced significant organizational change over the years, information services and information technology have not been fully consolidated into an enterprise-wide operation. The lead office for IT is the Office of Information Services (OIS), headed by a director who also serves as the agency’s chief information officer. The OIS is orga - nized into several units, including enterprise data, business applications management, information services design and development, an enter- prise data center, an enterprise architecture and strategy group, consumer information and insurance systems, and resource and acquisition man - agement. The Office of the Chief Information Security Officer is also part of the Office of Information Services. OIS’s main responsibility is to serve as the focal point for planning, organizing, and coordinating all aspects of the agency-wide information resource management program and to ensure the effective management of the agency’s IT, including information systems and resources. The office also serves as the lead for developing, maintaining, and enforcing the agency’s information architecture, poli - cies, standards, and practices in all areas of IT (Box 4.3). Nevertheless, the 5 CMS Press Office, 2001, “The New Centers for Medicare & Medicaid Services (CMS),” press release, June 14, available at http://archive.hhs.gov/news/press/2001pres/20010614a. html, last accessed July 20, 2011. 6 The Medicare Prescription Drug and Modernization Act of 2003 (P.L. 108-173).
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82 STRATEGIES AND PRIORITIES FOR INFORMATION TECHNOLOGY AT CMS BOX 4.2 CMS Regions, Centers, and Offices Regions • Region I—Boston (Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island, Vermont) • Region II—New York City (New Jersey, New York, U.S. Virgin Islands, Puerto Rico) • Region III—Philadelphia (Delaware, Maryland, Pennsylvania, Virginia, West Virginia, District of Columbia) • Region IV—Atlanta (Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee) • Region V—Chicago (Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin) • Region VI—Dallas (Arkansas, Louisiana, New Mexico, Oklahoma, Texas) • Region VII—Kansas City (Iowa, Kansas, Missouri, Nebraska) • Region VIII—Denver (Colorado, Montana, North Dakota, South Dakota, Utah, Wyoming) • Region IX—San Francisco (Arizona, California, Hawaii, Nevada, U.S. Territories) • Region X—Seattle (Alaska, Idaho, Oregon, Washington) Centers • Center for Medicare • Center for Medicaid, CHIP and Survey & Certification • Center for Strategic Planning committee’s impression is that there is still significant fragmentation of resources (human, technical, financial), and cross-program coordination and collaboration are less than ideal. Apart from OIS, IT resources and systems can be found across almost all other offices and centers throughout CMS. Although the operations and indeed the missions, goals, and responsibilities of all the agency’s units (whether centers, offices, or consortia) are heavily dependent on IT services and resources, there are in most cases opportunities to integrate these key IT components more fully into each unit’s operational leader- ship and policy directions. Opportunities also exist to increase OIS’s over- sight and coordination of the IT resources distributed across the agency in order to use them more effectively and at lower cost, for example, by reducing redundancy. Some offices and centers within the agency play a more significant
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83 ACHIEVING CULTURAL AND ORGANIZATIONAL TRANSFORMATION • Center for Program Integrity • Center for Medicare and Medicaid Innovation • Center for Consumer Information and Insurance Oversight Offices • Operations (Chief Operating Officer) —Office of Acquisition and Grant Management —Office of e-Health Standards and Services —Office of Information Services —Offices of Financial Management —Office of Operations Management —Consortium for Medicaid and Children’s Health —Consortium for Financial Management and Fee for Service Operations —Consortium for Medicare Health Plan Operations —Consortium for Quality Improvement and Survey and Certification Operations • Office of the Actuary • Office of Strategic Operations and Regulatory Affairs • Office of Clinical Standards and Quality (CMS Chief Medical Officer) • Office of Legislation • Office of Communications • Office of Public Engagement • Office of Equal Opportunity and Civil Rights • Office of Federal Coordinated Health Care NOTE: Information from the CMS website, available at http://www.cms.gov/home/aboutcms.asp. role than others in shaping and defining the direction of IT at CMS. In addition to the Center for Medicare and the Center for Medicaid, CHIP and Survey & Certification, other centers and offices with a significant role in IT include:7 • Center for Strategic Planning, which provides senior leadership across the organization for strategic planning and the development of CMS strategic goals, using metrics to facilitate plans for IT integration of data resources. The center is also responsible for providing leadership in the development of performance dashboards and databases for key agency initiatives; maintaining and ensuring the quality of data resources 7 CMS, 2011, “Overview: CMS Leadership,” website, available at http://www.cms.gov/ CMSLeadership/Downloads/CMS_Organizational_Chart.pdf, last accessed August 1, 2011.
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OFFICE OF EQUAL 84 OPPORTUNITY AND CIVIL OFFICE OF THE ACTUARY RIGHTS Rick Foster, Chief Actuary Arlene E. Austin, Director Anita Pinder, Dep. Dir. Donald M.Berwick, M.D. MEDICARE ADMINISTRATOR OMBUDSMAN GROUP OFFICE OF STRATEGIC Marilyn Tavenner OPERATIONS AND PRINCIPAL DEPUTY ADMINISTRATOR REGULATORY AFFAIRS AND CHIEF OPERATING OFFICER Jacquelyn White, Director Olen Clybourn, Dep. Dir. Caya B. Lewis OFFICE OF PUBLIC CHIEF OF STAFF ENGAGEMENT Teresa Niño, Director Michelle Snyder Charlotte Newman , Dep. Dir. DEPUTY CHIEF OPERATING OFFICER Vish Sankaran SENIOR ADVISOR OFFICE OF CLINICAL STANDARDS AND QUALITY TRIBAL AFFAIRS Joseph McCannon Patrick Conway, M.D., Director GROUP SENIOR ADVISOR & CMS Chief Medical Officer Wesley Perich, Dep. Dir.* Vacant, Dep. Chief Medical OFFICE OF COMMUNICATIONS Officer Julie Bataille, Director Vacant, Dep. Dir. Mary Wallace, Dep. Dir. OPERATIONS Michelle Snyder Deputy Chief Operating Officer OFFICE OF LEGISLATION Amy Hall, Director OAGM—Daniel Kane, Director Jennifer Boulanger, Dep. Dir. OESS—Robert Tagalicod, Director OFM--Deborah Taylor, Director & Chief Financial Officer FEDERAL COORDINATED OIS--Tony Trenkle, Director & CMS Chief Information Officer HEALTH CARE OFFICE Broadside Figure 4-1 OOM—James Weber, Director Melanie Bella, Director Cheryl Powell, Deputy Director CFMFFSO--Nanette Foster Reilly, Consortium Administrator CMCHO--Jackie Garner, Consortium Administrator CMHPO--James T. Kerr, Consortium Administrator OFFICE OF MINORITY HEALTH Renard Murray, Director* CQISCO—James Randolph Farris, M.D., Consortium Admin. Vacant, Deputy Director PMAS—Sandy Kraft, Director CENTER FOR MEDICARE AND CENTER FOR MEDICARE CENTER FOR MEDICAID CENTER FOR STRATEGIC CENTER FOR PROGRAM CENTER FOR CONSUMER MEDICAID INNOVATION AND CHIP SERVICES PLANNING INTEGRITY INFORMATION AND Jonathan Blum INSURANCE OVERSIGHT Richard Gilfillan, M.D. Deputy Administrator and Director Cindy Mann Anthony Rodgers Director* Deputy Administrator and Director Deputy Administrator and Director Peter Budetti Steve Larsen Liz Richter Deputy Administrator and Director Deputy Administrator and Director Nancy Oconnor Deputy Center Director Julie Boughn Anthony Rodgers Deputy Director* Deputy Center Director Deputy Director * Mary Agnes Laureno Timothy Hill Tim Love Deputy Center Director Deputy Center & Policy Director Peter Lee Deputy Center Director Penny Thompson Thomas Reilly Deputy Director Deputy Center Director Deputy Director* Ted Doolittle Deputy Policy Director FIGURE 4.1 Centers for Medicare and Medicaid Services organizational chart. *, Acting. For more information regarding CMS’s organizational structure, see the CMS organizational chart, “Department of Health and Human Services: Centers for Medicare and Medicaid Services,” last updated October 1, 2011, available at http://www.cms.gov/CMSLeadership/Downloads/CMS_ Organizational_Chart.pdf, last accessed November 5, 2011.
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85 ACHIEVING CULTURAL AND ORGANIZATIONAL TRANSFORMATION BOX 4.3 Functional Responsibilities of the CMS Office of Information Services CMS’s Office of Information Services has the following functional responsibilities: • Serves as the focal point for the responsibilities of the agency’s chief infor- mation officer in planning, organizing, and coordinating the activities required to maintain the agency-wide Information Resources Management program. • Ensures the effective management of the agency’s information technology and its information systems and resources (for example, implementation and administra- tion of the process of managing change). • Provides workstation, server, and local area network support for CMS-wide activities. Works with customer components to develop requirements, needs, and cost-benefit analysis in support of the local area network infrastructure, including hardware, software, and office automation services. • Serves as the lead for developing and enforcing the agency’s information architecture, policies, standards, and practices in all areas of information technology. • Develops and maintains enterprise-wide central databases, statistical files, and general access paths, ensuring the quality of information maintained in these data sources. • Directs Medicare claims payment systems activities, including common work- ing file operation, as well as systems conversion activities. • Develops application development platform standards and policies for use by internal CMS staff and contractor agents in such areas as applications development and the use of infrastructure resources. • Manages and directs the operation of CMS hardware infrastructure, includ- ing the agency’s data center, data communications networks, enterprise infrastruc- ture, voice/data switch, audio conferencing, and other data centers supporting CMS programs. • Leads the coordination, development, implementation, and maintenance of health care information standards in the health care industry. • Provides Medicare and Medicaid information to the public, within the param- eters imposed by the Privacy Act. • Performs information collection analyses as necessary to satisfy the require- ments of the Paperwork Reduction Act. • Directs CMS’s application development platform systems security program with respect to data, hardware, and software. • Directs and advises the administrator, senior staff, and components on the requirements, policies, and administration of the Privacy Act. SOURCE: CMS, 2011, “CMS Leadership, Office of Information Services,” website, available at http://www.cms.gov/CMSLeadership/16_Office_OIS.asp, last accessed August 1, 2011.
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86 STRATEGIES AND PRIORITIES FOR INFORMATION TECHNOLOGY AT CMS needed for testing and evaluating demonstrations and innovations; devel- oping enterprise business plans and process requirements for CMS post- PPACA responsibilities; operationalizing files for Medicare, Medicaid, and CHIP administrative data for use in research; and conducting and managing the Research Data Assistance Center, Research Data Distribu- tion Center, and Chronic Condition Warehouse activities. • Center for Medicare and Medicaid Innovation, which is respon- sible for identifying and developing new models for payment approaches, clinical care, integrated care, and community health, and for disseminat- ing information about these new models. This center is discussed in more detail below. • Center for Program Integrity, which serves as CMS’s focal point for all national and state-wide Medicare and Medicaid programs and CHIP integrity fraud and abuse issues. • Office of e-Health Standards and Services, which, in addition to having primary responsibility for developing regulations and guidance materials related to the administrative simplification provisions of the Health Insurance Portability and Accountability Act (HIPPA; P.L. 104- 191) is also responsible for developing and coordinating implementation of a comprehensive e-health strategy for CMS, and for coordinating and supporting internal and external technical activities related to e-health services. This office also ensures that individual initiatives tie to overall CMS and federal e-health goals and strategies, promoting and leverag - ing innovative component initiatives, and facilitating cross-component awareness of various e-health projects. • Office of Clinical Standards and Quality, which serves as the focal point for all quality, clinical, and medical science issues and policies for CMS. It also provides leadership and coordination for the development and implementation of a cohesive, agency-wide approach to measuring and promoting quality and leads the agency’s priority-setting process for clinical quality improvement. • Office of Legislation, which provides leadership and executive direction within CMS for legislative planning to address the organiza - tion’s agenda, and also tracks, evaluates, and develops provisions of annual legislative proposals for Medicare, Medicaid, the Clinical Labora - tory Improvement Act (P.L. 90-174), HIPPA, and related statutes affecting health care financing, quality, and access. It does so in concert with other CMS components, the Department of Health and Human Services, and the Office of Management and Budget, advancing the legislative policy process through analysis, review, and development of health care initia- tives and issues. • Office of Federal Coordinated Health Care, which is responsible for managing the implementation and operation of the office as mandated in
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87 ACHIEVING CULTURAL AND ORGANIZATIONAL TRANSFORMATION section 2602 of the Patient Protection and Affordable Care Act,8 to ensure more effective integration of benefits under Medicare and Medicaid for individuals eligible for both programs and to improve coordination between the federal government and the states in the delivery of benefits for such individuals. This office is also responsible for facilitating the testing of various delivery system, payment, service, and/or technology models to improve coordination of care, control costs, and improve the experience of beneficiaries eligible for both Medicare and Medicaid, and for performing policy and program analysis of federal and state statutes, policies, rules, and regulations affecting the dual-eligible population. CMS IT Internal and External Bodies and Oversight Review Groups As part of the agency’s IT operations CMS uses several internal and external bodies and oversight review groups, including the following: 9 • CIO’s Technical Advisory Board (CTAB), comprising technical rep- resentatives from the CMS business components who collectively serve as a communication and vetting body for CMS target architecture products and standards, responsible for reviewing technical impact analyses per- formed by OIS regarding requests to add, change, or delete a product or standard in the Technical Reference Architecture (TRA). The CTAB weighs the overall technical impact of the request against the CMS business need(s) and makes related recommendations to the CIO. The CTAB also recommends to the CIO any changes that are deemed necessary to evolve CMS’s enterprise architecture in response to business needs, technology innovations, or industry trends. • The Information Technology Investment Review Board (ITIRB) provides business-driven leadership to CMS’s IT operations and develop- ment to ensure that CMS’s IT resources are efficiently deployed to meet short-, medium-, and long-term business demand. The board deliberates and provides recommendations to the Office of the Administrator regard- ing expenditure of appropriated IT capital investment funds. • Executive steering committees (ESCs) serve as management authorities, providing senior management leadership for the successful and timely completion of IT projects to meet business needs. Each ESC provides management oversight and guidance to project owners/man - agers and project officers and makes final decisions on the priority, risk, 8 ThePatient Protection and Affordable Care Act of 2010 (P.L. 111-148). 9 CMS, 2011, “Oversight and Review Groups,” document, available at http://www.cms. gov/SystemLifecycleFramework/Downloads/OversightReviewGroups.pdf, last accessed August 1, 2011.
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96 STRATEGIES AND PRIORITIES FOR INFORMATION TECHNOLOGY AT CMS fusely broad demands or expectations, the inclusion of some elements of the suggestions offered here may be important to specify early on, before the Innovation Center’s culture, personnel, and budget are focused solely on innovative payment models. STRATEGY, GUIDING PRINCIPLES, AND ROADMAP FOR CULTURAL AND ORGANIZATIONAL TRANSFORMATION AT CMS CMS is in the information business; its changing roles and mission make this ever more true. The successful transformation of CMS toward an IT-enhanced enterprise requires that the CMS leadership manage the following organizational and cultural elements in such a way that they are aligned and carefully optimized to work together. Comparatively frequent changes in leadership make it difficult to build and execute a strategic IT plan. This is particularly challenging when there is no strong backbone of enterprise strategic planning that tightly integrates IT stra - tegic planning with business needs. For IT to be deployed strategically, particularly given the frequent changes at the top level, CMS business- led IT governance is needed whereby the OIS guides the agenda but the CMS business leaders are also responsible for the actions and outcomes. Ensuring that CMS business leaders are directly involved in sorting out IT priorities for CMS contributes to their understanding of what business and IT alignment means to them as well as the consequences of action or inaction and funding constraints. • Active engagement of leadership. CMS IT transformation is not solely a technical issue but is also a critical business issue and thus must be owned by CMS top management. Emphasized above in this chapter are the roles of CMS leadership in the modernization and transformation of CMS business and information ecosystems. • Business-driven IT governance. IT governance should include not only the current focus of technical review but also IT investment priori- tization and funding and should aim to take advantage of the benefits of shared services and enterprise architecture. Business-driven IT gover- nance for CMS is discussed in more detail below. • Strategic technology plan. CMS’s organization and culture must be aligned to support the execution and evolution of the strategic technology plan in an incremental manner as recommended in Chapters 2 and 3. • Skill sets. Some of the in-house skill sets that need to be strength- ened or newly acquired for the successful modernization and transforma - tion are discussed below. • Management of change. The meta-methodology described in
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97 ACHIEVING CULTURAL AND ORGANIZATIONAL TRANSFORMATION Chapter 3 implies changes not only in the way CMS manages IT but also in the way CMS interacts with its stakeholders. Suggestions for effective management of change are discussed below. Information Technology Governance Given the strategic and operational importance of IT modernization and CMS transformation, the highest levels of the organization must be involved in the governance of the transition, actively guiding and man - aging it using a meta-methodology as described in Chapter 3. Gover- nance refers to the principles, processes, and organization that direct and manage IT resources.21 At its core, governance involves determining the distribution of the responsibility for making decisions, the scope of the decisions that can be made by different organizational functions, and the processes to be used for making decisions. Internal and external stake- holders should be engaged in defining governance structures. CMS can strengthen its IT governance efforts by addressing (and regularly reconsidering) the following general IT-governance related questions:22 • Who sets priorities for IT and how are those priorities set? • Who is responsible for implementing information systems plans, and what principles will guide the implementation process? • What organizational structures are needed to support the linkage between IT and the rest of the organization? [In particular, how is man- agement authority assigned regarding data, projects, budgets, strategies, and so on?] • How are IT responsibilities distributed between IT and the rest of the organization and between central and “local” IT groups? • How is the IT budget developed? • What principles will govern [data, applications, and core technologies]? High-level governance should ensure that the efforts toward business and information ecosystems modernization and transformation achieve CMS’s goals. In addition governance should provide direction with respect to major changes to core processes, resolve policy issues raised by the implementation, address problems encountered during the transition, and approve, if necessary, the commitment of additional resources. IT governance must be developed to oversee the full set of CMS IT strategies, policies, and operations. The governing body that serves this function 21 Erica Drazen and D. Staisor, 1995, “Information Support in an Integrated Care Delivery System,” Healthcare Information and Management Systems Society Proceedings 2:191-199. 22 John P. Glaser, 2002, The Strategic Application of Information Technology in Health Care Or - ganizations, 2nd Ed., San Francisco, Calif.: Jossey-Bass.
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98 STRATEGIES AND PRIORITIES FOR INFORMATION TECHNOLOGY AT CMS should be led by senior business leadership at the agency, and members of the body should be drawn from the senior leadership team. 23 CMS currently has several IT governance bodies such as the Executive Steering Committee, Information Technology Investment Review Board, and Configuration Control Board. These bodies are important. However, they focus largely on technical, tactical, and operational issues. Because modernization and transformation efforts are critically important to the agency, IT governance bodies should be structured so that senior leader- ship, including the CMS administrator, are well aware of the needs and efforts underway, are willing and able to integrate the planning into their business thinking, and are well-informed so as to take advantages of the opportunities that such planning provides.24 In addition, subordinate governance bodies (reporting to the overall governance body) should be established to strategically direct and man - age critical components of the IT strategy. On the basis of the discussion in Chapters 2 and 3 and related recommendations, component-specific bodies should be established for the following: • Shared services, • An enterprise architecture framework, and • A health information model. Shared service governance determines which services should be shared among whom to achieve which benefits, defines the services, and ensures that services evolve appropriately. Enterprise architecture and health information model governance defines the architecture and model, monitors conformance, and evolves the architecture and model as appropriate. The enterprise architecture governance defines the enter- prise architecture framework, including all relevant standards, monitors conformance to standards, and evolves the framework. Each of these component bodies will need means and authority (including budgets, authority in personnel actions, and exercise of man- agement decision-making authority) to enforce governance decisions. Effective IT governance requires a tight linkage with the overall orga - nizational strategy. The agency’s Center for Strategic Planning and its Office of Research Development and Information will play important roles. The implementation of a major IT application invariably occurs as 23 PeterWeill and Jeanne W. Ross, 2004, IT Governance, Harvard Business School Press, available at http://hbswk.hbs.edu/archive/4241.html. 24 For more on characteristics and behaviors of senior leaders who are actively engaged and successful in the strategic use of IT, see M. Earl and D. Freeney, 2000, “How to Be a CEO for the Information Age,” MIT Sloan Management Review 41(2):11-23.
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99 ACHIEVING CULTURAL AND ORGANIZATIONAL TRANSFORMATION a component of a larger process in the management of change. Hence IT governance is inextricably linked to the strategies and operations of the organization, and governance should be responsible for making such IT- centric decisions as the following:25 • How do we link our IT strategy to our overall strategy? • How much should we spend on IT? • Which business processes should receive our IT dollars? • Which IT capabilities need to be organization-wide? • How good do our IT services really need to be? • What security and privacy risks will we accept? • Who do we hold accountable for the success of an IT project? The specific relationships between IT and the business side have to be worked out through this governance process. In general, CMS’s business side would lead process transformation and establish what it needs from IT (including service-level agreements), and indeed this is what the pro- cess outlined in Chapter 3 affords. From time to time IT might be asked to lead a specific initiative within the overall agenda for transformation. A key component of establishing governance is determining which indi - viduals and functions will make which decisions and the mechanics of the governance process. The governance function for each of these efforts could be structured as a CMS IT governance committee or could become a responsibility of an existing CMS senior leadership forum. Regardless, given the importance of the transformation, the CMS business leadership should be an integral part of the IT governance function. Organizations cannot accomplish the large-scale modernization or transformation of core business and information ecosystems without the effective utilization of outside expertise. This expertise takes several forms: • Expertise in the management of change that can assist the organi- zation in preparing its members for changes in roles, processes, working relationships, and goals; • Process redesign experience that can help the organization think through how to design its new processes and how to determine what data it needs; • Project management experience with projects of comparable, scope, size, and complexity; 25 Jeanne W. Ross and Peter Weill, 2002, “Six IT Decisions Your IT People Shouldn’t Make,” Harvard Business Review 80(11):84-91.
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100 STRATEGIES AND PRIORITIES FOR INFORMATION TECHNOLOGY AT CMS • Technical assistance to enable the organization’s information tech- nology staff to master the new technology being introduced; and • Staff augmentation management to provide the person-power nec- essary to do a sizeable portion of the work that accompanies the imple - mentation of a large system; existing organizational staff rarely have large amounts of “free time” to devote to such an initiative. In particular, CMS would benefit from the counsel of leaders from organizations in the public and private sectors that have effected sig- nificant IT-enabled organizational transformations. CMS will encoun- ter issues and challenges for which the advice of others would be very important. An advisory panel of these leaders or similar entity should be developed and structured so that they can develop a deep understanding of CMS and its challenges as well as its broader stakeholder communities. Building in the ability to foster informed and frank exchanges of ideas should be emphasized. CMS should not underestimate the difficulty of the transformation and the value of learning from the experiences of others. Critical Skill Sets The implementation of the recommendations stemming from the dis- cussion in Chapters 2 and 3 will require introducing new skills into CMS and strengthening existing skills. In addition to reflecting the importance of informatics skills and the value of the CMS Innovation Center, the IT organization should be augmented and changed in some key areas. CMS’s existing IT staff are talented and skilled, and they have dem - onstrated an impressive ability to implement complex systems under sig - nificant time pressures. Moreover they continue to manage well a massive IT operation. To enable an effective response to the near and intermediate demands of payment reform and other responsibilities placed on CMS, these competencies must be strengthened. Central to the CMS agenda is the application of IT and data to help improve the delivery of care. Enhancing staff expertise in data management practices and the applica - tion of those practices to health care, as well as in health services research and the performance of that research in an electronic health record envi- ronment, will be important. Recognizing the critical role played by having a well-conceived, well- executed, and well-supported global information ecosystem and design is a critical competency of CMS. The roles of the technology strategy function and chief information officer should be strengthened, and they should be responsible for guiding and managing the enterprise techni - cal architecture and contributing to the strategic and tactical decisions
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101 ACHIEVING CULTURAL AND ORGANIZATIONAL TRANSFORMATION basic to the approach outlined in Chapter 3, including shared services and process and information model strategies and plans. These efforts should be aligned with the agency’s strategic planning office as part of the strengthened interactions between business and operation needs and IT. Architectural, engineering, project management, security, and support staff will all have critical roles to play. Information technology continues to undergo extraordinary innova - tion. This innovation occurs not only in the technology but also in the uses of the technologies and surrounding business models that enable rapid technology adoption. CMS would benefit from having a stronger technol- ogy scanning and surveillance function to regularly assess the potential applicability of new information technologies to CMS requirements. In the committee’s view CMS IT currently excels at managing its huge portfolio of subcontracts, which provide the bulk of CMS’s IT ser- vices. The recruitment, retention, and training of IT professionals within CMS must reflect not only technical skill requirements but also organiza- tional, management, and planning capabilities. In addition to its internal staff, CMS has a large contracting contingent that performs the bulk of the day-to-day work in systems development, operations, maintenance, claims processing, and so on. Of course the cultural shifts the committee is urging here will have to occur in the contracting community as well. Appropriate leadership and strategic guidance from within the agency are critical to ensuring that the needed cultural changes propagate through CMS’s contractor community as well. The ability to manage subcontractors is critical, but so is the ability to manage and respond to internal CMS organizational and cultural issues. Although soliciting and receiving advice from contractors about technol - ogy can be useful, the ultimate decisions about which technologies should be explored, evaluated, and deployed must reside with CMS and should be based on the judgments of people whose principal obligations are to CMS and the success of its missions and who can draw on deep insights and expertise in IT. Key decisions need to be made by the agency itself. Contractors may have their own institutional agendas, which may or may not always align with CMS’s agenda, or they may simply have an understandably narrower view than in-house staff. In order for CMS to make decisions that are as sound as possible, the decisions must be rooted in a strong grasp of CMS issues and considerations, and also in a strong grasp of technology. A number of positive factors should be preserved during the trans- formation. IT personnel’s current commitment to the CMS mission and the welfare of the public is notable. In the committee’s view, the group has a commitment to getting the job done, having succeeded on a number of difficult projects like Medicare Part D. The group has shown unusual
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102 STRATEGIES AND PRIORITIES FOR INFORMATION TECHNOLOGY AT CMS resourcefulness and inventiveness in executing such projects, overcoming the challenges of outdated software and enormous complexity and largely recognizing the need for positive organizational and cultural changes such as those outlined in this report. IT skills and knowledge will also be needed by non-technical man - agers in an IT-enhanced enterprise. IT is at the heart of virtually every CMS business interaction, process, and decision. Managers can thus no longer afford the luxury of relinquishing participation in IT decisions. CMS managers must become knowledgeable participants in IT decisions, understanding the interdependency between its business strategy, orga - nizational strategy, and IT strategy. In addition, managers have to under- stand the basics of how IT is managed in CMS, in particular, enterprise architecture, IT governance, IT funding and value management, and the moral and ethical implications of using information and information systems. Management of Change Effective management of change requires attention not only to the formal design of the organization (business processes, roles, and incen - tives) but also to the political (power bases) and cultural (shared val- ues and beliefs and traditions) aspects of the organization. These three areas—formal design, political considerations, and culture—need to change in concert for significant organizational change to be effective. Organizational change need not be precipitated by the implementation of an information ecosystem, but invariably new information ecosystems are required to enable the change.26 Managing significant change has several necessary aspects: 27 • Leadership. Change must be led. Leadership, often in the form of a group of leaders, will be necessary to: —Define the nature of the change; —Communicate the rationale for and approach to the change; —Identify, procure, and deploy necessary resources; —Resolve issues and alter direction as needed; —Monitor the progress of the change initiative; and —Lead by example. Given the magnitude of the changes proposed for CMS, the process 26 S.L. Woerner and J.W. Ross, 2007, “Tackling the Organizational Change Issues in IT Projects,” research briefing, Volume VII, Number 3D, Center for Information Systems Research, Massachusetts Institute of Technology, December. 27 Peter G.W. Keen, 1997, The Process Edge, Boston: Harvard University Press.
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103 ACHIEVING CULTURAL AND ORGANIZATIONAL TRANSFORMATION of change should be led by senior business leadership at the agency, and all members of the CMS leadership and management structure should be engaged as leaders of change. • Language and vision. The staff who are experiencing a change must understand the nature of the change. They must know what the world will look like (to the degree that this is clear) when the change has been completed, how their roles and work life will be different, and why making this change is important. A failure to communicate the importance of a chosen vision elevates the risk that staff will resist the change needed to realize that vision and through subtle and not-so-subtle means cause the change to grind to a halt, or worse, negatively affect current operations. For example, CMS can establish a vision of being at the forefront of the country’s efforts to transform health care delivery. • Connection and trust. Achieving connection means that leadership takes every opportunity to present the guiding vision throughout the organization. Leaders may use department head meetings, all-staff meetings, one-on-one conversations in the hallway, internal publications, and e-mail to communicate and to keep communicating the vision. These communications need to invite feedback, criticism, and challenges. The members of the organization need to trust the integrity, intelligence, compassion, and skill of the leadership. Trust is earned or lost by everything that leaders do or do not do. The members must also trust that leaders have thoughtfully come to the conclusion that a difficult change has excellent reasons behind it and represents the best option for the organization. An organization’s members are willing to rise to a challenge, often to heroic levels, if they trust their leadership. Trust requires that leaders act in the best interests of the staff and the organization and that leaders listen and respond to the organization’s concerns. • Motivating factors. An organization’s members must be motivated to support significant change. At times, excitement about the vision will be a sufficient incentive. Alternatively, fear of what will happen if the organization fails to move toward the vision may serve as an incentive. Although important, neither fear nor enthusiasm is necessarily sufficient. If an organization’s members will lose their jobs or have their roles changed significantly, education that prepares them for new roles and or new jobs must be offered. • Planning, implementing, and iterating. Change should be planned. Plans describe the tasks and task sequences necessary to effect a change. Tasks, which can range from redesigning forms to managing the staged implementation of information ecosystems to retraining staff, must be allotted resources, and staff accountable for the performance of the tasks must be designated. Because few organizational changes of any magnitude are fully understood beforehand, problems will be encountered during
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104 STRATEGIES AND PRIORITIES FOR INFORMATION TECHNOLOGY AT CMS implementation in addition to the problems that occur, for example, when task timetables slip and task sequences are interrupted or tasks themselves disrupted. Iteration and adjustment will be necessary as an organization handles problems and learns about glitches in new processes and workflows. These basic steps in managing large-scale change will require the focused attention of the CMS leadership and the involvement of all CMS staff and its contractors. Factors That Contribute to Successful Organizational Transformations Transformation of the role and contribution of IT at CMS requires that the leadership skillfully manage the necessary changes in processes, cul - ture, and technology. In addition to this overall effort CMS should estab - lish management practices that will enable it to more effectively guide the changes and manage the new organization throughout its transformation. Moving an organization from the systems that currently support core operations to a new system is a difficult, expensive, and risky undertak - ing. The organization must make this transition in a way that does not jeopardize its ability to function from day to day. Several factors come into play and are discussed below along with spe- cific management practices that contribute to successful transformations. Leadership Conviction and Sustained Commitment The leadership of the organization must be convinced that a transi - tion is necessary. This conviction can result from the creation of a new strategy that clearly highlights the need for new organizational activi - ties, processes, and data needs—needs that can be addressed only by an extensive replacement or modernization of an information ecosystem. Such a conviction can also result from a fear by leadership that the cur- rent systems will be unable to support the future demands made of the organization, raising the specter that the organization will be unable to fulfill its mission because of its information systems’ inability to keep up. Conviction on the part of leaders is necessary because these transi- tions invariably take years to accomplish, involve a significant invest - ment, subject the organization to extensive change, and place the orga - nization at risk that the transition will not go well. These transitions inevitably involve some disruption to the organization and the transition will encounter problems, some of them serious problems, several times during the transition; leadership conviction will be needed to ensure that the organization stays the course during rough periods. Frequent leader-
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105 ACHIEVING CULTURAL AND ORGANIZATIONAL TRANSFORMATION ship changes over the course of a transformation, such as those experi - enced by CMS, are an impediment to success. Resources Sufficient for the Task The transition of major application systems and infrastructure has costs that include the new system infrastructure, external implementa - tion assistance, and the time and management attention of organization members who have been assigned the tasks of guiding and designing the new system. The investment will be non-trivial. But if some of the funds are obtained by taxing current initiatives, demand for new funds may be modest. In addition, in CMS’s case, the committee’s suggested incremental approach means that the funds would not all be required up front. Experience and the literature show that the initial estimates of resources needed are almost always low because organizations usually fail to accurately estimate the magnitude of the necessary resources and do not anticipate the problems that will be encountered. Even if internal taxes on programmatic initiatives can be used to help fund larger transition efforts, resources for the transition should be man- aged separately from routine operating and capital budgets lest line man - agers be faced with the temptation to borrow funds from the transition effort to address shortfalls in operations budgets. Funding for any piece of these efforts should cover not only the initial capital and operating costs of the implementation but also ongoing operations and maintenance of the new IT applications and infrastructure. Too often in the past the allot- ted funding has failed to take into account the life-cycle costs of a system once implementation has been completed. Successful transitions can lead to reduced expenses in ongoing operations, but such expenses still need to be accounted for. Obtaining and protecting resources in an ongoing manner for transi- tion as the incremental work is done is challenging for any large organiza- tion, but particularly so for a government agency. If the commitment of resources is anemic, too myopic, unnecessarily stove-piped, or unpredict- able, the transformation will not succeed. Management of Risk Large-scale transitions are fraught with risk. Invariably, mistakes will be made in the design of new processes. The information systems may not scale or may demonstrate unexpected instability. Project budget and time estimates may be grossly understated. Changes in the organization’s external environment may challenge the value or importance of some of the changes particular to a transition.
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106 STRATEGIES AND PRIORITIES FOR INFORMATION TECHNOLOGY AT CMS An analysis of the risks associated with an initiative should be con - ducted and frequently updated. Such an analysis would identify the more significant risks, develop plans to mitigate risk should it occur, and devise means to track whether a risk is materializing.