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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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1

Essential Considerations and Background

Since its inception, the organization now known as the Centers for Medicare and Medicaid Services (CMS)1 has played a critical role in providing access to health care for the nation’s aged and most vulnerable citizens. This role has only increased in importance over the years in light of program expansions, the changing demographics and aging of the U.S. population, increasing health care costs, serious public health challenges, and the growing prominence of electronic health records (EHRs) and other e-health efforts—all in the face of having to operate under increasingly tight federal budgetary constraints. By providing a brief overview of the agency’s core tasks and its roles with respect to its relevant stakeholder communities, its responsibilities as a result of recent legislative mandates, and the current state of its information technology (IT) environment, this chapter attempts to capture the extent and complexity of the information enterprise that CMS is on the way to becoming. This is the context for the report’s discussion in subsequent chapters of CMS IT infrastructure and approaches the agency might take to ensure effective use of IT in accomplishing its mission.

CMS’S MISSION, ROLES, AND STAKEHOLDERS

In 1965, Congress amended the Social Security Act (P.L. 89-97) by adding Title XVIII, Health Insurance for the Aged and Disabled, which

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1 Formerly the Health Care Financing Administration.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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established Medicare, and Title XIX initiating Medicaid. Medicare, Medicaid, and related programs are currently managed by CMS within the Department of Health and Human Services.

In general, work that CMS currently performs helps to fulfill either its mission as a health care insurance provider or reflects its mandate to help improve health care quality. CMS’s core tasks include “processing billions of claims, addressing millions of inquiries and appeals, and conducting thousands of health care facility inspections and complaint investigations. CMS manages and supports its prescription drug plans, Medicare Advantage plans, employer-sponsored retiree health care coverage, and various administrative grants. The agency works with various states, regions, and providers to facilitate enrollment of millions of eligible recipients and to develop policies for cost-effective and quality health care.”2

In addition, CMS is responsible for several other key programs such as managing quality standards and training at clinical laboratories, advancing the national e-health agenda, and engaging in research and demonstration projects to improve claims reimbursement and quality of care.

The agency directly employs approximately 4,000 people, two-thirds of whom are based at its Maryland headquarters. CMS also has 10 regional offices throughout the United States,3 and CMS headquarters has 11 main functional divisions.4 In addition to its own staff, CMS currently relies on approximately 80,0005 contractors involved in claims processing and employed as front-and middle-office staff in the Medicare Administrative Contractor offices, as well as in building, managing, and maintaining its numerous IT systems.

As a result, CMS has a diverse and complex cast of stakeholders invested in its mission, and by extension in the performance of its sys

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2 CMS, 2006, “Achieving a Transformed and Modernized Health Care System for the 21st Century: CMS Action Plan 2006–2009,” document, formerly available at http://www.cms.hhs.gov/MissionVisionGoals/Downloads/CMSStrategicActionPlan06-09_061023a.pdf.

3 CMS, 2011, “CMS Programs & Information,” website, available at http://www.cms.gov/, last accessed July 31, 2011.

4The divisions are the Center for Medicare; Operations (which includes the Office of Financial Management, the Office of Information Services, and the Office of E-Health Standards and Services); Center for Medicaid, CHIP, and Survey & Certification; Center for Medicare and Medicaid Innovation; Center for Consumer Information and Insurance Oversight; Office of Clinical Standards and Quality; Center for Strategic Planning; Office of Executive Operations and Regulatory Affairs; Center for Program Integrity; Office of Legislation; and Office of the Actuary. For more information regarding CMS organizational structure, see the CMS organizational chart, last updated August 1, 2011: CMS, 2011, “Department of Health and Human Services: Centers for Medicare and Medicaid Services,” chart, available at http://www.cms.gov/CMSLeadership/Downloads/CMS_Organizational_Chart.pdf, last accessed August 1, 2011.

5Laurie Maatta, 2011, “CMS Systems Scope and Scale,” presentation to the committee, January 13, site visit.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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tems and in the effectiveness of its IT infrastructure. The most prominent among these stakeholders are those linked to CMS in its role as an insurer: CMS’s varied beneficiary subgroups rely on CMS-provided insurance to ensure their access to quality health care providers.

Major Roles—Health Insurance Provider and Promoter of Quality

Health Insurance Programs

CMS provides insurance through the Medicare (Parts A, B, C, and D), Medicaid, and CHIP programs, and each claims process is administered separately.6 “Collectively, these programs make CMS the largest purchaser of health care in the United States, [covering more than one-third of the U.S. population] and interact[ing] with thousands of health care providers across the country ranging from individual physicians to hospitals large and small, as well as with other providers such as ambulance services and rural health centers.”7 For the Medicaid and CHIP programs, CMS shares administrative responsibility with individual states. In most cases management is state administered, but CMS is tasked with ensuring mandatory state coverage for eligible participant groups (including newly eligible groups under the PPACA),8 evaluating and approving state Medicaid programs,9and processing state claims for program reimbursement for dual eligibles.10

Recent legislation, notably the Patient Protection and Affordable Care Act (PPACA), continues to expand CMS’s role in the medical insurance area, extending coverage to new groups and for new health services. CMS is also responsible for managing the Center for Consumer Information and Insurance Oversight, which will implement provisions of the PPACA related to health insurance and will oversee state-based insurance exchanges.

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6 Julie C. Boughn, 2010, “CMS Systems Briefing,” presentation to the committee, via teleconference, July 23.

7NRC, 2010, Preliminary Observations on Information Technology Needs and Priorities for the Centers for Medicare and Medicaid Services: An Interim Report, Washington, D.C.: The National Academies Press

8CMS, 2011, “Medicaid Program: Eligibility Changes Under the Affordable Care Act of 2010: Proposed Rule,” Federal Register 76(159):51148-51199.

9CMS, 2011, “Medicaid Program: Eligibility Changes Under the Affordable Care Act of 2010: Proposed Rule,” Federal Register 76(159):51148-51199

10Congressional Research Service, 2010, Medicaid and the State Children’s Health Insurance Program (CHIP) Provisions in PPACA: Summary and Timeline, R41210, Washington, D.C.: Library of Congress, available at http://www.nahu.org/legislative/resources/Medicaid%20 and%20the%20State.pdf.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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Medicare. Medicare is a federally sponsored health insurance program for people age 65 and older, or those under 65 with eligible permanent disabilities or conditions such as end-stage renal disease; it supplements Title II of the Social Security Act, which provides federal “retirement, survivors, and disability insurance benefits.”11 When the Medicare program was first implemented in 1966, 19 million people were enrolled.12 Today, the program provides medical insurance for more than 47 million people. Medicare has four parts—Parts A (Hospital Insurance), B (Medical Insurance), C (Medicare Advantage), and D (Prescription Drug Coverage)— each with different enrollment and eligibility criteria, as well as different administrative policies and procedures (see Box 1.1).

Medicaid. Medicaid, which provides health insurance for eligible lowincome individuals and families, is a state-administered program, and each state has some discretion as to how it manages the program and determines eligibility (i.e., how income is counted). Providing coverage to some eligibility groups is mandatory, meaning that all states must cover them; providing coverage to others is optional. For the coverage that is optional, each state sets and enforces its own guidelines regarding eligibility and services.13 States also are responsible for developing and maintaining their own IT infrastructures to support their programs,14 and many of the issues regarding these systems are similar to those experienced by CMS, such as the need for personnel who can support both legacy and more modern systems and the lack of a dedicated funding source.15 Legislation at both the federal and the local levels that redefines eligibility categories from time to time creates ongoing administrative and technical challenges for both CMS and state administrators in data management, claims processing, and rapidly changing business practices. The PPACA establishes a uniform state level of support starting in 2014.

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11Barbara S. Klees, Christian J. Wolfe, and Catherine A. Curtis, 2009, “Brief Summaries of Medicare & Medicaid Title XVIII and Title XIX of the Social Security Act,” Baltimore, Md.: CMS, available at https://www.cms.gov/MedicareProgramRatesStats/downloads/MedicareMedicaidSummaries2009.pdf, last accessed July 29, 2011.

12 CMS, 2010, “Key Milestones in CMS Programs,” website, available at http://www.cms.gov/History/Downloads/KeyMilestonesinCMSPrograms.zip, last accessed July 29, 2011.

13States may also determine the amount and duration of services offered within federal guidelines provided that the (1) limits must result in a level of services sufficient to reasonably achieve the purpose of the benefits and (2) limits on benefits may not discriminate among beneficiaries based on medical diagnosis or condition.

14Thomas Donovan, 2011, “New York State Department of Health: Health IT,” presentation to the committee, February 17-18, Irvine, Calif.; Chris Cruz and Larry Dickey, 2011, “Medi-Cal,” presentation to the committee, February 17-18, Irvine, Calif.

15Chris Cruz and Larry Dickey, 2011, “Medi-Cal,” presentation to the committee, February 17-18, Irvine, Calif.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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Children’s Health Insurance Program. The Children’s Health Insurance Program (CHIP) was created by Congress in 1997 as a means to provide insurance to children from birth to age 19 if they are uninsured and do not otherwise qualify for Medicaid.16,17 CHIP provides a capped federal grant to states18,19 funded through a tax on cigarette purchases. The legislation required states to develop a separate program for CHIP, to expand an existing Medicaid program to cover children eligible for CHIP insurance, or to do some combination thereof. CHIP charges families a monthly premium for coverage. Often, a state’s school systems or other social service organizations play an important part in enrolling eligible children and families in CHIP.20,21

Quality Initiatives

CMS not only provides insurance, but also promotes quality health care. Some of CMS’s efforts toward quality improvement include:

Funding for graduate medical education. To ensure a sufficient number of treatment providers for Medicaid-eligible patients, CMS helps to support graduate medical education programs by making “payments to hospitals that train residents in approved medical residency training programs, based on the number of residents the hospital has on staff.”22

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16CMS, 2009, “State Medicaid Director Letters, May 11, 2009,” memorandum, Baltimore, Md.: CMS, available at http://www.cms.gov/SMDL/downloads/SHO051109.pdf, last accessed July 29, 2011.

17This program is under Title XXI of the Social Security Act as amended by the Balanced Budget Act (BBA) of 1997 (P.L. 105-33).

18Congressional Research Service, 2008, “Medicaid; A Primer,” RL33202, Washington, D.C.: Library of Congress, available at http://aging.senate.gov/crs/medicaid1.pdf, last accessed July 29, 2011.

19Nancy Bearss, 2010, “Medicaid,” in Encyclopedia of Cross-Cultural School Psychology, Caroline S. Clauss-Ehlers, ed., New York, N.Y.: Springer.

20On October 30, 2009, the Department of Health and Human Services (HHS) awarded $40 million in federal funds to outreach grants to establish new public and private partnerships to increase CHIP enrollment. See HHS, 2009, “Secretary Sebelius Awards $40 Million to States to Find, Enroll Children in CHIP, Medicaid,” website, available at http://www.hhs.gov/news/press/2009pres/09/20090930a.html, last accessed July 29, 2011.

21On February 3, 2011, HHS issued a press release announcing an additional $40 million in funds available for new grants to “states, community-based organizations, school systems and others to support their outreach and enrollment activities.” See HHS, 2011, “Two Year Anniversary of Children’s Health Insurance Law Sees Millions of Newly Insured Children, Families,” website, available at http://www.hhs.gov/news/press/2011pres/02/20110203b.html, last accessed July 29, 2011.

22CMS, 2005, “Medicare Policy Clarifications on Graduate Medical Education Payments for Residents Training in Non-Hospital Settings,” document, available at https://www.cms.gov/AcuteInpatientPPS/Downloads/nonhospQA.pdf, last accessed July 31, 2011.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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BOX 1.1
Medicare Parts A, B, C, and D

Medicare Part A is hospital insurance for those over 65.1 Those who are eligible for premium-free coverage are automatically enrolled in Part A if they are already receiving Social Security retirement benefits, disability benefits, or railroad retirement checks. Otherwise, individuals must contact their local Social Security office (or enroll online at the Social Security website)2 3 months prior to their 65th birthday to sign up for Medicare.3 Services covered under Medicare Part A include hospitalization, up to 100 days of care in skilled nursing facilities, post-institutional home health care and visits, and hospice services. Payment of claims under Part A of the Medicare program is the largest component of health care spending for CMS.

Medicare Part B is a supplemental medical insurance program. Individuals become eligible at the same time they are eligible for Medicare Part A, but must enroll in the program and pay a monthly premium for the coverage. Slightly fewer than 5 percent of eligible beneficiaries will pay a higher premium based on their income, whereas low-income beneficiaries may be eligible for state assistance in meeting their premiums. Medicare Part B covers physician services and supplies, laboratory services, durable medical equipment, prosthetics and orthotics, outpatient hospital services, and limited home health care services.

Medicare Part C, called the Medicare Advantage program (formerly Medicare+Choice program), was established as part of the Balanced Budget Act of

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1Those who pay a monthly premium for coverage include individuals who did not pay enough into Medicare while working or are otherwise not entitled to Social Security, or who were disabled but returned to work, thereby losing their eligibility for free Part A.

2 Social Security Administration, 2011, “Medicare,” available at http://www.ssa.gov/pgm/medicare.htm, last accessed July 31, 2011.

3According to the Social Security Administration, “If you are not already getting retirement benefits, you should contact us about three months before your 65th birthday to sign up for Medicare. You can sign up for Medicare even if you do not plan to retire at age 65.” See Social Security Administration, 2011, “Signing Up for Medicare,” website, available at http://www.socialsecurity.gov/pubs/10043.html#part5, last accessed July 31, 2011.

Survey and certification of health care facilities. Under Section 1864 of the Social Security Act, CMS plays a critical role in setting safety and performance standards; providing oversight and quality control for a number of laboratories, health care facilities, and treatment centers; and certifying new provider facilities. One notable example is CMS's role in the Clinical Laboratory Improvement Amendments of 1988 (CLIA) program.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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1997 and modified under the Medicare Modernization Act of 20034 and under the Patient Protection and Affordable Care Act. Part C provides the option to enroll in private health plans—such as managed care—and may provide additional benefits and lower copayments than in the regular Medicare part A or B plans. Participants in Part C must also participate in both Medicare Parts A and B, elect coverage under Medicare Part C, and pay required premiums (including Part B premiums, and possibly additional Medicare Advantage premiums).5,6,7

Medicare Part D is a prescription drug program. Made effective January 1, 2006, under the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003,8 Part D provides an option for obtaining outpatient prescription drugs. Participants must enroll in the program, and eligibility is determined on the basis of their enrollment in other Medicare and Medicaid programs. All Part D beneficiaries pay a premium for service. The 2003 MMA requires that Medicare Part D plans support electronic issuance of prescriptions. Current participation is voluntary, with incentives provided to the care providers that participate.9

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4 Kaiser Family Foundation, 2010, “Medicare and Medicare Advantage Fact Sheet,” #2052-14, September, available at http://www.kff.org/medicare/upload/2052-14.pdf, last accessed July 31, 2011.

5 The PPACA and the Deficit Reduction Act of 2005 (P.L. 109-171) each made a number of specific coding rules changes and adjustments to Medicare Advantage. The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 (P.L. 108-173) also revised Part C expanding coverage.

6 See http://www.medicare.gov/choices/advantage.asp.

7The PPACA, amended by the HCERA of 2010, reduces federal payments to Medicare Advantage plans over time and provides bonus payments to plans receiving high ratings for quality. See the section “Quality Initiatives” in this chapter.

8 Prior to 2006, from 2004 to 2006, help with paying for prescription drugs not otherwise covered by Part A or Part B came through prescription drug discount cards, which were provided to beneficiaries on a voluntary basis and at limited cost (except to those entitled to Medicaid drug coverage) and which, for low-income beneficiaries, provided transitional limited financial assistance for purchasing prescription drugs and added a subsidized enrollment fee for the discount cards.

9 CMS, 2011, “Electronic Prescribing (eRx) Incentive Program Overview,” website, available at http://www.cms.gov/ERxIncentive/, last accessed, July 31, 2011.

Laboratory testing. As mandated by CLIA,23 CMS shares responsibility with the Food and Drug Administration (FDA) for the oversight of clinical laboratories responsible for medical diagnostic testing. Irrespective of the size and service volume, when testing is considered either moderate or complex, CMS is required to do a| survey every 2 years to

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23CMS, 2006, “CMS Initiatives to Improve Quality of Laboratory Testing Under the CLIA Program,” document, available at https://www.cms.gov/CLIA/downloads/060630.Backgrounder.rlEG.pdf, last accessed July 31, 2011.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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ensure adherence to clinical quality standards and to provide appropriate training of personnel and fiscal management.

Quality improvement organizations. Quality improvement organizations (QIOs)24 are CMS contractors, usually not-for-profit entities, located in every state and in most U.S. territories. Staffed with health care professionals who are legally charged with improving the quality of care for beneficiaries, QIOs ensure that Medicare pays only for reasonable and necessary services provided in an appropriate setting. QIOs also address individual beneficiary complaints.

Reduction of disparities. Although CMS has addressed the issue of disparities through QIOs and other program efforts, the agency has now been charged, pursuant to the Health Information Technology for Economic and Clinical Health (HITECH) provisions of the American Recovery and Reinvestment Act of 2009 and the PPACA, to reduce health disparities as a key strategy for ensuring the delivery of quality and equitable care to Medicare and Medicaid beneficiaries. A prerequisite to achieving this aim, as mandated by Congress, is the availability of data disaggregated by race, ethnicity, primary language, and other factors. The primary source of demographic data on Medicare beneficiaries is the Social Security Administration (SSA). Other sources of data for CMS beneficiaries are state Medicaid agencies, Medicare Advantage providers, surveys, and CMS supplemental efforts to repopulate data missing from SSA records or to obtain data during Medicare enrollment via postcards and other means. In addition, disaggregated data will be collected by providers receiving EHR meaningful-use incentives administered by CMS, as one of the core eligibility requirements. CMS was required under the Medicare Improvements lor Patients and Providers Act to report to Congress in September 2011 on effective methods for ongoing data collection and for measurement and evaluation of health disparities.25

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24NRC, 2006, Medicare“s Quality Improvement Organization Program: Maximizing Potential (Series: Patfnvays to Quality Health Care), Washington, D.C.: The National Academies Press, available at http://www.nap.edu/catalog.php?record_id=11604, last accessed July 31, 2011.

25It should be noted that CMS race/ethnicity data are of uneven quality with respect to accuracy and completeness, as documented by reports produced by HHS, IOM, and other agencies, as well as testimony received by the committee. For example, although SSA modified its data collection practices in 2008 to follow the format required by the Office of Management and Budget, the new procedures apply only to new Social Security and SSI claims and to replacement number and lost card applications. These revised OMB standards do not apply to applications filed before 2008 or to applications received under SSA’s Enumeration at Birth process, which precludes the collection of race/ethnicity data because of state restrictions. See NRC, 2009, Race, Ethnicity, and Language Data: Standardization for Health Care Quality Improvement, Washington, D.C.: The National Academies Press, available at http://www.nap.edu/catalog.php?record_id=12696, last accessed September 14, 2011; SSA, 2008, “Agency Information Collection Activities: Comment Request,” Federal Register 73(56):15252-15253, available at http://edocket.access.gpo.gov/2008/pdf/E8-5716.pdf, last accessed September 14, 2011; Agency for Healthcare Research and Quality, 2010, Race, Ethnicity, and Language Data: Standardization for Health Care Quality Improvement, 10-0058-EF, Rockville, Md.: AHRQ, available at http://www.ahrq.gov/research/iomracereport/, last accessed September 14, 2011; and Institute of Medicine, 2008, Challenges and Successes in Reducing Health Disparities: Workshop Summary, Washington, D.C.: The National Academies Press.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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In addition, programs such as Hospital Compare26 make data on hospital performance available on the web for consumers and have an important impact on hospital reputation and consumer choice. One speaker noted at a committee meeting that “reporting systems, particularly those serving as a basis for public reporting, need to be up to date if they are to inform patients’ choice and accurate if they are to be used to rate provider quality.”27 Considered by some to be difficult to navigate, the current Hospital Compare website also limits comparison to just three hospitals at a time.

CMS Has Many and Varied Stakeholders

CMS’s stakeholders in addition to its insurance beneficiaries can be identified by considering CMS’s various roles. For example, Medicare Part A provides hospital insurance; hospitals, therefore, have a direct stake in CMS’s IT efforts, relying on effective IT for prompt, accurate reimbursement of claims. Health care providers have a similar stake through Medicare Part B and other programs. CMS’s role in administering Medicare Part C adds other insurance companies to the growing list of stakeholders, and Medicare Part D’s prescription drug benefits expand that list even further to include drug companies and pharmacies. Finally, through the Medicaid and CHIP programs, individual states are interested in the accuracy and reliability of CMS systems.

Looking beyond those that interact with the agency directly, researchers are another critical set of stakeholders who have expectations of CMS and its IT infrastructure. They are seeking increased access to clinical-level information (such as aggregate outcomes and events data) for diverse populations as well as more-accurate administrative and claims information to support research on comparative effectiveness and the evaluation of new care-delivery models.28

The involvement of all these stakeholders, and the need for sensitivity to their requirements and the challenges they present, have there-

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15253, available at http://edocket.access.gpo.gov/2008/pdf/E8-5716.pdf, last accessed September 14, 2011; Agency for Healthcare Research and Quality, 2010, Race, Ethnicity, and Language Data: Standardization for Health Care Quality Improuement, 10-0058-EF, Rockville, Md.: AHRQ, available at http://www.ahrq.gov/research/iomracereport/, last accessed September 14, 2011; and Institute of Medicine, 2008, Challenges and Successes in Reducing Health Disparities: Workshop Summary, Washington, D.C.: The National Academies Press.

26HHS, 2011, “Hospital Compare,” website, available at http://www.hospitalcompare.hhs.gov/, last accessed July 31, 2011.

27Vincent Mor, 2010, “Data Needs as Drivers of Transformation,” presentation at workshop, September 27, Washington, D.C.

28Vincent Mor, 2010, “Data Needs as Drivers of Transformation,” presentation at workshop, September 27, Washington, D.C.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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fore become an important part of CMS’s planning and design equation, although CMS is of course required to follow legislative directives.

EMERGING REQUIREMENTS FOR CMS

At its inception, CMS had a focus on the prompt payment of claims. Since then, however, CMS has been increasingly called on to leverage its unique position in the health care field to improve the quality of care, eliminate health disparities, promote public health, improve efficiency while reducing spending, and improve patient outcome through the adoption of health IT and the effective collection and utilization of health care data.

A brief timeline of major legislation that has materially extended the activities of CMS shows that in recent years the legislation has become more voluminous, with several major programs introduced in just the last 5 years (Box 1.2). Moreover, as the provisions of the PPACA unfold over the years ahead, CMS will have to respond to a continuing series of sometimes ambitious extensions.

Requirements in Recent Legislation

Recent legislation and policy changes at CMS reflect a growing focus on health care outcomes and quality through the use of data that can serve as indicators of health care quality and equity. Data in this context enable CMS to identify and intervene when providers are performing poorly; to detect and combat fraud and abuse; to increase access to clinical data to improve care when access to such information would help; to enable use of decision support tools by providers; to monitor health disparities and their reduction; and to enable population-wide health.29 In briefings, CMS’s goals for data-driven quality improvement were described as follows:30 increase access to safe, effective, and efficient care; ensure greater communication between health care providers and their patients; provide proper and effective stewardship of health care services and expenditures; eliminate redundancy of care; ensure that care is evidencebased and outcome-driven to manage and prevent complications from disease and improve overall outcomes; educate consumers about health

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29See D.J. Friedman and R. Gibson Parrish II, 2010, “The Population Health Record: Concepts, Definition, Design, and Implementation,” Journal of the American Medical Informatics Association 17:359-366.

30Julie C. Boughn, 2010, “CMS Systems Briefing,” presentation to the committee, July 23, via teleconference.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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BOX 1.2
Accelerating Timeline of Major CMS Legislation

The Medicare program has been substantially modernized and revamped since its enactment in 1965. The changes have come in ever shorter intervals: from 1965 to 1983 (Prospective Payment) to 1997 (Medicare + Choice) to 2003 (Modernization and Part D: prescription drugs) to 2009 and 2010 (HITECH and PPACA).

The accelerated pace of major changes reflects the centrality of health care in national policy and the expectation that the Medicare program can be used to shape the health care system in general. For example, HITECH establishes incentives for the “meaningful use” of electronic health information; the PPACA provides for the creation of “exchanges” wherein the federal government subsidizes the insurance of people whose income is below three to four multiples of the federal poverty levels; and the Improper Payments Elimination and Recovery Act of 2009 amended the 2002 act and expanded current government program auditing processes for agencies such as CMS that are high-volume claims payers.

In 2003 Congress created the Medicare Part D prescription drug program to add coverage of prescription drugs for Medicare beneficiaries. The Medicare+Choice (or Medicare Advantage) program was established under the Balanced Budget Act of 1997 to give Medicare beneficiaries the option of enrolling in a number of private plans instead of the traditional Medicare plan. The Health Insurance Portability and Accountability Act (HIPAA) of 1996 created a minimum national standard to protect personal health information and electronic medical records.

Before passage of these comparatively more broadly scoped and time-accelerated pieces of legislation, legislation affecting CMS traditionally entailed more incremental changes to the various fee schedules used to determine physician, provider, and supplier payment under Medicare. For example, the Tax Equity Fiscal Responsibility Act of 1982 (P.L. 97-248) expanded Medicare service to include coverage for hospice care for beneficiaries. In 1984, the Deficit Reduction Act of 1984 transformed Medicare payment processing through the establishment of various fee schedules such as the Medicare durable medical equipment, prosthetics/orthotics, and supplies fee schedule, and clinical laboratory fee schedule.1

This legislative trend of increasingly rapid expansion of CMS’s roles and mission has led to a growing need for agile technical infrastructure to support it. Further, the shrinking time window from the passage of legislative mandates to deadlines for deployment adds an increasing layer of risk, underscoring the pressing need for robust information systems that can enable CMS to keep pace.

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1 Office of Legislation and Policy, Health Care Financing Administration, 1984, “Deficit Reduction Act of 1984: Provisions Related to the Medicare and Medicaid Programs,” Social Security Bulletin 47(11):11-15, available at http://www.ssa.gov/policy/docs/ssb/v47n11/v47n11p11.pdf, last accessed August 2, 2011.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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care quality and efficiency and improve transparency generally; and reward providers of quality health care.

One way that CMS is moving toward these broader goals is through the Accountable Care Organization program, which was established in the PPACA.31 An accountable care organization (ACO) is a recognized legal entity under state law and is composed of a group of ACO participants (providers of services and suppliers) that have established a mechanism for shared governance and that work together to coordinate care for Medicare fee-for-service beneficiaries. ACOs enter into a 3-year agreement with CMS to be accountable for the quality, cost, and overall care of traditional fee-for-service Medicare beneficiaries who may be assigned to it. Recent legislation32 and subsequent rule making mandate that while Medicare “would continue to pay individual providers and suppliers for specific items and services as it currently does under the fee-for-service payment systems,” ACOs must nevertheless reach specified cost-reduction and quality performance goals in order to qualify for various financial incentives.33

Several recent mandates and requirements are described briefly below:

American Recovery and Reinvestment Act (ARRA) HITECH meaningful use of electronic health records plus additional oversight tasks. The HITECH provisions of ARRA, consisting of a number of subsections relating to uses of person-specific health information, create additional oversight requirements for CMS (Subtitle D). In addition, the statute promotes meaningful use of electronic records by health professionals throughout the country (described in greater detail in Box 1.3). Examples of demonstrated meaningful use include electronic exchange of health information; e-prescribing; and measures of clinical quality. Beginning in 2011, incentive programs under Medicare, Medicaid, and CHIP provide payments and IT funding to eligible health care providers as they adopt, implement, upgrade, or demonstrate meaningful use of EHR technology.

Reduce improper payments and increase efficiency. CMS contracts with

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31 The Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), §3022.

32 “Section 3022 of the PPACA requires the Centers for Medicare & Medicaid Services (CMS) to establish a shared savings program to facilitate coordination and cooperation among providers to improve the quality of care for Medicare fee-for-service beneficiaries and reduce unnecessary costs.... Eligible providers, hospitals and suppliers may participate in the Shared Savings Program by creating or joining an Accountable Care Organization, also called an ACO.” See CMS, 2011, “Shared Savings Program,” website, available at http://www.cms.gov/sharedsavingsprogram/, last accessed July 31, 2011.

33CMS, 2011, “Shared Savings Program,” website, available at http://www.cms.gov/sharedsavingsprogram/, last accessed July 31, 2011.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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payment intermediaries to process and pay claims submitted by health care providers on behalf of Medicare recipients. The Improper Payments Elimination and Recovery Act (IPERA) of 200934 amended the 2002 act and expanded current government program auditing processes to better identify programs that are susceptible to improper payments. The 2009 act further specifies that required reporting occur every 3 years and include a statement of whether the reporting agency has sufficient resources with respect to internal controls, human capital, and information systems and other infrastructure to prevent improper payments. The act also identifies risk factors to be used for assessing such payments. The PPACA and the Health Care and Education Reconciliation Act (HCERA) of 2010 add layers to the payments process and require CMS to adjust Medicare rates over time.

Reduce fraud and abuse in payments. CMS’s Center for Program Integrity has been the agency’s coordination arm for combating fraud and abuse in payments since 1996, and additional requirements were added in 2005. The PPACA has several sections (for example, §6409 and §6402) targeting abuse and fraud that will require additional CMS activities. Similarly, the HCERA has even more provisions designed to reduce fraud.

Reduce health care disparities. The HITECH provisions of 2009 and the PPACA of 2010 include a number of provisions designed to reduce health care disparities, primarily by requiring relevant health agencies to collect and analyze data on racial and ethnic disparities in health care as specified in section 4302. The statute also gives some teeth to CMS’s role in reducing health disparities by making the capture of relevant data a requirement for federally sponsored health care providers.

Improve health care quality and patient outcomes and engagement in research. CMS has been given a number of new opportunities and corollary challenges to assist the nation in innovative ways to improve system performance. An example is the CMS Innovation Center, established under the PPACA and funded at $10 billion in appropriations over a decade to support innovations. The Innovation Center has the unique authority to transition successful innovations into widespread practice.

Engage in modernization efforts. CMS has a number of federally man-

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34 A White House memorandum, “Finding and Recapturing Improper Payments,” followed on March 10, 2010. On March 22, 2010, OMB issued government-wide guidance on the implementation of E.O. 13519; see also the Improper Payments Information Act of 2002 (IPIA), Deficit Reduction Act (DRA) of 2005, and False Claims Act of 1986.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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BOX 1.3
HITECH and CMS—Meaningful Use

The HITECH provisions of the American Reinvestment and Recovery Act were designed to create significant and measurable improvements in population health through the use of information technology (IT) while also stimulating the economy during a financial crisis. The act focuses on use of health IT to meaningfully improve local practice, foster measurement and reporting of quality and disparities, and promote the sharing of clinical data among health care providers. The program works by providing monetary incentives and penalties to health care providers based on their adoption and use of health IT. Specifically, providers are required to adopt a certified electronic health record (EHR), to use the health record meaningfully, to report quality measures, and to exchange information electronically.

Initially, a definition of “meaningful use” and its related quality measures is first proposed by the Meaningful Use Workgroup and the Quality Measures Workgroup of the Health Information Technology Policy Committee of the Office of the National Coordinator of Health Information Technology (ONC). The Policy Committee modifies and adopts the definitions, providing them to ONC. Based on these recommendations and its own work, ONC makes recommendations to CMS, which in turn generates an interim rule and, after public comment, the final rule on definitions of meaningful use and quality measures. Certification of EHRs is based specifically on the functions needed to support meaningful use. Additional workgroups provide input on issues such as privacy and security and exchange of health information.

The program is intended to focus on health outcomes that are aligned with the national health priorities. The Policy Committee and its workgroups have derived a framework from the National Priorities Partnership to organize instances of mean-

dated modernization efforts35 underway that are carrying forward from prior years. For example, as noted in its strategic plan, “CMS is replacing its legacy Medicare accounting systems, maintained by both CMS and its current Medicare fee-for-service contractors, with the new Health Care Integrated General Ledger Accounting System (HIGLAS)—a state-of-theart electronic, integrated financial accounting system … full implementation of HIGLAS [is expected] by 2011.”36 In 2007, management of the CHIPS state grants began using HIGLAS, and staged implementation for HIGLAS across Medicare and Medicaid will continue through 2012.

Implement ICD-10 and evolving national and international health data standards. The shift from ICD-9 (the International Statistical Classification

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35 NRC, 2010, Preliminary Observations on Information Technology Needs and Priorities for the Centers for Medicare and Medicaid Services: An Interim Report, Washington, D.C.: The National Academies Press, available at http://www.nap.edu/catalog.php?record_id=13061, last accessed July 31, 2011. For more about HITECH, see Box 1.3.

36CMS, 2011, CMS 18-Month Plan for Enterprise & Shared Services, July 7.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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ingful use. It includes five areas: improve quality, safety, and efficiency, and reduce health disparities; engage patients and families; improve care coordination; improve population and public health; and ensure adequate privacy and security protections for protected health information. The program is organized as a collection of objectives within each area along with measures to determine if the objective has been met. Meaningful use is divided into sequential stages in which objectives evolve from data capture, decision support, and quality measurement, to continuous quality improvement and structured data exchange, to actual quality, safety, and efficiency improvements and patient self-management.

The program has several IT implications for CMS. To create a forward-looking yet feasible final meaningful-use rule requires that CMS understand EHRs and other health information technology, including understanding the technologies’ current functions, current status, and evidence base of what outcomes can actually be achieved, and near-term research of what may be possible in the future. In the committee’s view, CMS has developed a coherent and bold yet feasible rule.

The actual implementation of the program is a significant logistical undertaking. Many thousands of providers will register for the program, and they will attest to some measures and submit concrete numbers for others. CMS must verify the submissions, audit as appropriate, and pay incentives or assess penalties. This multiyear program requires keeping track of previous years’ progress and payouts for each provider. Furthermore, several aspects of this program overlap other programs, including the Accountable Care Act’s quality measurement provisions. The programs must therefore be coordinated, using common standards and submission methods and reducing duplication of reporting effort, leading to efficiencies such as the proposed shared services organization. CMS must also monitor progress in the HITECH program, and so it will need robust data-warehousing capabilities.

of Diseases and Related Health Problems, 9th Revision) to ICD-10 has many implications for CMS (as discussed further in Box 1.4).

Increasing Demands Related to Data

In association with its expanding scope, CMS must now collect an increasingly diverse and complex set of data. These data are intended to improve CMS’s ability to assess the quality, safety, and efficiency of care; address issues of variations in care; determine the appropriateness of care; support research; and combat fraud. This growth in the diversity and scale of data to be collected is accompanied by the requirement that CMS extend its core competence of providing transaction-oriented IT capabilities needed to support its day-to-day insurance operations, such as claims payment, to include significant data analytic capabilities.

In addition to collecting data during the claims payment process, CMS conducts beneficiary surveys, collects supplemental clinical information on patients in settings such as nursing homes and home health

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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BOX 1.4
ICD-10 Implementation at CMS

In the next 3 years, the transition from the International Classification of Diseases (ICD) 9th edition code set (and U.S. clinical modifications) to the ICD 10th edition code set will be one of the largest business, operational, and technical transformations in health care, in general, and for CMS in particular. The code set, which is used to describe patient-level diagnoses for all settings and procedures for inpatient encounters and is fundamental to decisions regarding payment of or denial of claims, is deeply embedded in most systems and business operations within the agency, from program eligibility and billing systems to operations related to quality, patient safety, clinical analysis, research and even fraud and abuse prevention and detection. Full transition and compliance with the new code set (and phase-out of the old code set) are required under HIPAA regulations by October 1, 2013.

CMS plays a dual role when it comes to implementing ICD-10. As a HIPAAcovered entity, CMS is subject to implementing ICD-10 to conduct business with providers, other payers, vendors, and other trading partners. CMS is also the oversight regulator and enforcer of the ICD-10 regulations, and in that capacity it has created a number of avenues to communicate with the industry and has provided resources and tools to assist the industry in achieving compliance.

Transitional Steps Taken by CMS

CMS work on the ICD-10 transition started in 2007 with an initial analysis of the business processes, systems, and operations in the agency that could be affected by the ICD-10 transition. A more comprehensive impact analysis for planning and implementation of ICD-10 was completed in mid-2009 and used as the basis for the overall agency strategy to transition to the new code set.1 The impact analysis found 17 functional areas (defined as a set of specific CMS policies, activities, and systems, such as Medicare as a Secondary Payer (MSP) or Provider Cost Reporting) organized into 7 major business areas (defined as a broad collection of functional areas that combine to achieve a key business objective for the agency, such as Medicare feefor-service claims processing) to be directly affected by the transition to ICD-10. The 7 business areas identified in the report, and their assessed impact, were as follows:

• Medicare fee-for-service claims (including claims processing, payment policy, coordination of benefits, and other functions)—very high impact;

Risk adjustment—very high impact;

• Quality (including quality assessment tools, quality measurement and payment initiatives and quality improvement activities)—high impact;

• Medicare integrity—high impact;

• Research, evaluation, and demonstrations—moderate impact;

• Medicaid (including Medicaid operations, integrity, and policy)—moderate impact (Note: does not include state Medicaid programs and their operations); and

• Medicare call center—low impact.

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1 CMS, 2009, “ICD-10 Impact Analysis for Planning and Implementation,” Version 3.0, July, available at https://www.cms.gov/ICD10/downloads/CMS_ICD-10_ImpactAnalysis.zip.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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Since the completion of the impact assessment, CMS has been progressively implementing a comprehensive ICD-10 project management plan under the direction of the Office of E-Standards and Services (OESS).

One of the key transitional steps toward ICD-10 will take place January 1, 2012, when the entire health care industry will be required to move to the new version of the standard for electronic health care administrative transactions (i.e., claims submission, claims payment, eligibility, etc.)—namely, version 5010. This transition is necessary to support ICD-10, because the current version (4010) does not have the capability to carry ICD-10 codes. CMS is leading the industry and is on target with the implementation of 5010.

Challenges and Opportunities Ahead

Achieving compliance with ICD-10 by October 1, 2013, represents a formidable challenge to CMS, given the extent to which the code set is built into many business and operating processes and systems, the size of CSM operations, and the complexity of its systems. However, ICD-10 is much more a business and operating challenge than a technical and information systems issue. Some of the organizational challenges identified in the impact assessment phase include:

Distributed ownership and collaborative governance. CMS will have to coordinate an enterprise-wide effort of this size across multiple independent divisions, units, projects, and systems in a timely and coordinated manner;

Program and system interdependencies. CMS must coordinate the interdependencies between discrete projects affected by ICD-10 and cross-cutting themes related to ICD-10 affecting multiple programs and units—for example, having an enterprise-wide crosswalk approach between ICD-9 and ICD-10; and

Competing initiatives. In addition to ICD-10—CMS and OESS specifically—is challenged with having to implement several other agency-wide initiatives and oversee national health care reform efforts that may detract from the ICD-10 transition.

One of the opportunities that the ICD-10 transition offers CMS is to consider phasing out legacy systems for certain functions, when the costs and benefits to remediate and upgrade those systems and applications to meet the ICD-10 requirements will be offset by the value and benefits offered by a new system.

CMS can also leverage the greater granularity and specificity of the new ICD-10 code set to establish more effective processes and perform and execute more refined controls in areas such as quality, patient safety, population health management, and fraud and abuse. This will be particularly valuable under the new Accountable Care Organizations program.

Another opportunity for CMS is to leverage the ICD-10 code set to explore more effective outcomes-based payment and reimbursement policies, including the new health care reimbursement approaches envisioned in the Patient Protection and Affordable Care Act.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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care, receives reports on serious hospital errors, and collects quality-related information of various types from hospitals and providers. All of this information is used within CMS and elsewhere in the government to feed analyses of the present and future condition of the Medicare program. Most, although not all, of these data are eventually made available to outside researchers either with personally identifiable information removed or under agreements that strictly protect patient privacy. Table 1.1 lists some of the various sources of data now held by CMS. These sources and uses of data are described in greater detail in Chapter 5 and Appendix D.

Within the government, CMS information is the source for the trustees’ annual report on the health of the Medicare program, the Medicare Payment Advisory Commission’s “data book” on the current state of the

Table 1.1 Sources and Content of Some of the Data Held by CMS

Source of Data Data Description
Claims for Medicare Parts A, B, C, and D All claims contain basic diagnostic information as well as information on date, the type of service provided, and the identity of the prescribing physician. Managed care plans serving Medicare beneficiaries are required to submit extensive “benefit utilization” reports that include encounter data. This information is merged into the fee-for-service data sets to generate a comprehensive view of facts such as hospital discharges. Part D providers are required to submit detailed reports of the drugs prescribed as well as to identify the prescriber and the pharmacy that filled the prescription(s).
Supplemental clinical data sets This information is intended for use in both monitoring quality and assigning patients to payment groups. Information is collected on nursing home patients, home health care patients, patients in rehabilitation facilities, and those in psychiatric facilities.
Quality surveys Data from quality surveys done by the joint commission and by state agencies and entered into the Online Survey and Certification and Reporting database.
Opinion surveys The Medicare Current Beneficiary Survey is a rolling survey of beneficiaries that includes questions on out-of-pocket costs, services used, and the experience of care. The Health Outcomes Survey measures outcomes for individuals enrolled in Medicare managed care. A survey specific to patients' experience of hospital care is also conducted.
Financial reports All institutional providers paid under Part A must submit annual financial reports.
Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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Demographics Information on providers and institutions participating in the Medicare program, including information on the ethnicity of providers, is collected at the time of request for a Medicare number. Since CMS receives most of its data on Medicare beneficiaries from the Social Security Administration, accurate and complete demographic information is often lacking, posing a challenge in terms of identifying and reducing racial disparities in health status, outcomes, and treatment. Data on Medicaid and other CMS beneficiaries is similarly incomplete.
Quality reporting Hospitals, nursing homes, and others are required to report on some quality indicators. Physicians have an incentive to participate in voluntary quality reporting. In addition, beginning in 2015, physicians who fail to report quality data will be penalized by a 1.5 percent payment reduction and a 2.0 percent payment reduction for each subsequent year.a Data available includes experience reports and lists of those who successfully participated in previous years (the most recent data are for 2009).b
Quality analyses For the purpose of QIOs. These data are, by law, not available for general use.

a CMS, 2011, “Physician Quality Reporting System: Statute Regulations Program Instructions,” website, available at https://www.cms.gov/PQRS/05_St3tuteRegulationsProgramInstructions.asp.

b CMS, “Physician Quality Reporting System formerly known as the Physician Quality Reporting Initiative—Overview,” available at https://www.cms.gov/pqrs/, last accessed August 3, 2011.

Medicare program, and other analyses of the trends in Medicare carried out by agencies such as the Government Accountability Office. Outside researchers also make use of these data sets in materials such as the series of atlases in practice variation produced by Dartmouth.37 CMS currently manages the escalating external demand for its available data files by using an external contractor, the Research Data Assistance Center, which provides support to researchers applying for use of data files. Congress requires that researchers pay the costs of preparing and releasing data sets; as a result the information is often beyond the reach of younger or less well funded researchers. The other concern expressed by the outside

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37 The Dartmouth Institute for Health Policy and Clinical Practice, 2011, “Dartmouth Atlas of Health Care,” website, available at http://www.dartmouthatlas.org/, last accessed August 8, 2011.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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research community is the long delay—approximately 2 years—before data sets are available.

THE CURRENT STATE OF INFORMATION TECHNOLOGY AT CMS

The process of implementing, managing, and maintaining key information technologies is challenging, and the federal government is no exception. Although there have been a number of noteworthy initiatives, including the establishment of IT priorities within the office of the federal CIO,38 a new focus on shared services,39 and the 25-point IT reform plan issued in December 2010,40 federal government IT still faces a number of challenges in reaching these goals, especially at a time of significant budgetary constraints. Not only is federal IT management—and IT management, in general—notoriously difficult, but federal budget constraints also place additional pressure on agencies to maintain, and even increase, productivity in spite of limited financial resources. CMS, like other federal agencies, is typically not allocated sufficient funds to modernize or upgrade existing systems in an enterprise-wide integrated fashion, and as a consequence must cope with the dual challenge of (1) program-byprogram stove piping that makes it difficult to properly integrate programs or achieve the efficiencies (programmatic and operational) that would result and (2) inconsistent year-by-year funding that makes it difficult to do long-term planning of the sort possible with capital budgets.

It is likely a political reality that the bulk of CMS funding for IT will continue to be allocated on a program basis. A challenge for CMS is to implement enterprise-wide planning in this context. Indeed, program-byprogram funding and implementation are likely to reduce the efficiency and efficacy of the resulting IT capabilities.

A promising strategy for accommodating common needs while living within individual program budgets is to allocate costs for shared services as service fees charged to individual programs. CMS and HHS are cur-

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38 White House Office of the Chief Information Officer, 2011, “Closing the Technology Gap,” website, available at http://www.cio.gov/module.cfm/node/priorities, last accessed July 31, 2011.

39 Both within the government broadly and within the Department of Health and Human Services. See, for example, Vivek Kundra and Richard Spires, 2010, “Update on Federal Data Center Consolidation Initiatives,” memorandum, October 1, Washington, D.C.: White House Office of the Chief Information Officer, available at http://www.cio.gov/Documents/Update-Federal-Data-Center-Consolidation-Initiative.pdf, last accessed July 31, 2011. See also CMS, 2011, CMS 18-Month Plan for Enterprise & Shared Services, July 7.

40 Vivek Kundra, 2010, 25 Point Implementation Plan to Reform Federal Information Technology Management, December 9, Washington, D.C.: White House Office of the Chief Information Officer, available at http://www.cio.gov/documents/25-Point-Implementation-Plan-to-Reform-Federal%20IT.pdf, last accessed July 28, 2011.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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rently exploring how such a fee-based system could be implemented. Such a system will take effort to put in place but would result in more flexibility to meet broader infrastructure development needs within existing resources, and the committee encourages the continuation of this work.

To fulfill its core function of paying providers for services to beneficiaries, CMS processes more than 3 million eligibility inquiries and makes more than $1 billion in fee-for-service payments daily.41 So that it can provide these services, CMS has established a number of information systems families both internal and external to the organization. Each system family consists of a number of existing CMS application systems integrated by means of automated and human processes to meet the requirements of a specific CMS business role or function. Some of these systems families include:

• Medical Beneficiary Membership Systems,

• Medicare Claims and Utilization Data Systems,

• Medicare Pricing Systems,

• Medicare Fee-for-Service Claims Processing Systems,

• Provider Management Systems,

• Medicaid and Children's Health Insurance Program Systems,

• Business Intelligence and Data Access Systems,

• Healthcare Quality Systems, and

• Medicare Financial Management and Payment Systems.

The committee’s impression is that each CMS systems family was developed rather independently using infrastructure technologies current at the time of development, and each has been enhanced over time to address ongoing and changing requirements. There was not a welldefined enterprise architecture framework in place to guide their development. Because of the age and nature of the infrastructure (some CMS systems families were created more than 40 years ago, some when CMS was not yet an agency and the programs were organized under other systems and divisions), many systems families are less flexible than those built on more modern infrastructures. It is the committee’s understanding that there was typically little design for or anticipation of data sharing; thus interoperation, integration, enhancement, and sharing of data across systems families is often costly, risky, and time-consuming.

Over the years, the President and Congress have expanded CMS’s core functions and increased the complexity and sophistication of its

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41 Julie C. Boughn, 2010, “CMS Systems Briefing,” presentation to the committee, July 23, via teleconference.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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activities. CMS has done an exceptional job of creating the IT infrastructure necessary to support these extensions, often within extremely short time frames and in response to rapidly evolving requirements—such as the implementation of Medicare Part D, which was accomplished well within the statutory deadlines with full required functionality. The systems implementation required setting up connections not only among several federal agencies but also with health insurance plans and pharmacies—all of which was done quickly and successfully. The Part D implementation also included the deployment of websites that allowed the customers to easily access information about their options, make comparisons among plans, and, after making a selection, proceed to enroll.

Nevertheless, as CMS’s roles have expanded, integration among and within systems families has become increasingly necessary to meet functional (for example, automated end-to-end fee-for-service claims payment) and non-functional (such as increased interoperational efficiency) needs. The heterogeneity of the underlying technologies and solutions for integrating them have resulted in interoperation between information systems that is both lower in quality and more expensive than it might otherwise have been. Even in spite of the increased integration, CMS itself has documented 700 business processes and identified the potential for approximately 100 shared functions or services.42 Hence, as “silos” or “stovepipes” some CMS information systems have poor interoperability and insufficient flexibility.

CMS reported to the committee that legacy application and data systems are frequently re-purposed for emerging needs, and that an unprecedented volume of change and complex interactions demand disciplined processes and extensive testing. Core business operations are conducted through intricate file transfers and batch processing, and there is an escalating growth in claims volume. Newer business processes have been added using more modern technologies. There are separate claims flow and data requirements, for instance, for institutional providers versus individual practitioners due in part to how the systems have evolved over time. CMS reported that many interactions, combined with large and often aging systems, render the CMS systems world brittle and resistant to nimble change.

In terms of the architectural and integration challenges, in the committee’s view, CMS, as a large, ongoing enterprise, has the usual mix of near-obsolete hardware and software as well as modern technologies and systems (the committee saw references to, for instance, CICS and COBOL, as well as Oracle and other modern database technologies). Chapter 2

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42 Vish Sankaran, 2011, “Healthcare in the US & the Role of CMS,” presentation to the committee, CMS site visit, January 13-14, Baltimore, Md.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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and 3 offer the committee’s assessment of and recommendations for modernizing CMS’s business and information systems.

The acceleration in the diversity and complexity of activities expected of CMS is likely to continue for the foreseeable future. As the country heightens its efforts to improve health care quality and reduce the costs of care, it will rely increasingly on CMS to be at the forefront. Indeed these expectations have been described in recent legislation (see Box 1.2 and the section “Recent Legislation” above). The committee is aware that the CMS Office of Legislation plays an important stakeholder management and engagement role in striving to ensure that congressional mandates are not misaligned with current CMS IT capabilities. See Box 1.5.

Absent changes, it is likely that current CMS IT solutions will hinder CMS’s ability to meet its requirements efficiently. There is thus a risk that CMS IT applications and infrastructure will become a barrier to national efforts to improve care. In addition, the time and costs of fulfilling accelerating congressional requirements will become a material barrier to progress in meeting congressional mandates. With regard to data, CMS IT leadership notes, “But in order to [improve quality], the IT infrastructure that you need from a data perspective and a mining perspective and an analysis perspective, is probably a little bit of an order of magnitude over and above what we have today, especially when you think about quality data, claims data, [and] master data of beneficiaries and providers.”43 CMS is aware of these challenges and is making strides toward addressing them.

WHAT THIS REPORT DOES AND DOES NOT DO

The committee was tasked with reviewing the current state of CMS’s technical infrastructure and systems architecture and the current plans for its evolution, and with making recommendations to CMS on modernizing its business processes, practices, and information systems to meet today’s and tomorrow’s demands—including how to build in the flexibility to cope with changing requirements. The rest of this report offers the committee’s analysis and recommendations on how CMS can move forward most productively. In discussions and deliberations throughout the study, briefers, CMS staff, and committee members spoke frequently of the need to modernize systems. The committee believes that transformation will be necessary as well. The report also considers the dynamic legislative and budgetary environment in which CMS operates and attempts to speak to perennial challenges rather than short-term responses to specific items of

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43 Julie C. Boughn, 2010, “CMS Systems Briefing,” presentation to the committee, July 23, via teleconference.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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BOX 1.5
CMS’s Office of Legislation and Congressional Mandates Affecting CMS IT

The Office of Legislation serves as a liaison between Congress and CMS. Historically, Congress has been very interested and involved in the Medicare and Medicaid programs. The Office of Legislation addresses congressional inquires regarding CMS and its programs and serves as a resource to authorizing committee staff when they are drafting legislation that affects CMS. The office works with CMS internally to ensure that the agency itself understands what various statutes require, and also works with Congress to keep it informed about how statutes are being implemented. Information is provided in the form of briefings, hearings, or other communications to Congress. The office interacts most frequently with such authorizing committees as the House Ways and Means Committee, the House Energy and Commerce Committee, and the Senate Finance Committee.

Advising on preparation of legislation is a key function of the office. Because the Medicare and Medicaid programs are very budget driven and very complicated, even small changes in the program can affect how large sums of money are spent, and legislative changes can have significant implications for the programs. Therefore, when Congress is considering new legislation relevant to CMS, the Office of Legislation provides help in clarifying the underlying goal that Congress is trying to achieve, whether the goal can be accomplished in the way that Congress is considering implementing it, or whether the goal is more reasonably accomplished in some other manner that CMS can implement. Such implementations might result in new regulations or in changes to CMS’s information technology systems. Jennifer Boulanger, deputy director of the Office of Legislation, noted, “If we can’t program [the proposed legislation], we can’t do it,” emphasizing the point that the capability of existing systems to handle the new or additional demands imposed by legislation is a critical factor in the successful implementation of a new congressional mandate.1 When congressional proposals reach the point of being legislative language, the Office of Legislation will usually begin to engage staff from relevant components within CMS. This engagement includes communicating to relevant CMS staff what Congress is intending to accomplish. At the same time, the Office of Legislation tries to gather input from CMS program owners and the Office of Information Services

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1 Jennifer Boulanger and Maria Martino, 2011, “Office of Legislation Perspective,” presentation to the committee, April 18.

legislation or budgetary mandates. The committee does not offer specific estimates of cost or personnel—such estimates would be unreliable given the rapid rate at which requirements are changing and choices for solutions that might stem from a long-range technical plan.

Reflecting the complexity of the challenges and expectations faced by CMS that are described in this chapter, the committee in its analy-

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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as to what would be involved in enacting the legislation from a program and IT systems perspective.

Because of its role in helping Congress to craft implementable legislation, the Office of Legislation also interacts a great deal with CMS’s own IT personnel to stay informed regarding CMS IT systems capability. This includes keeping apprised of what it takes to change the systems and how often they can be changed. Typically, three primary outcomes for systems changes are required by congressional mandate:

• The required change is relatively simple or of a type that CMS staff is familiar with and that can be implemented as a part of routine CMS maintenance and updates. The quarterly releases, for instance, are a narrow window in which CMS systems are regularly updated and can be used to incorporate additional minor changes. Updates to the different Medicare fee-for-service payment systems typically only require making sure that the time frames for implementing the change coincide with the scheduled quarterly update windows.

• The required change is complex or especially challenging and will involve more extensive disruption to create the necessary system functionality. For example, major Medicare legislative changes can strain the time window for implementing the quarterly update.

• There are cases when, for a variety of reasons, CMS cannot easily make the changes necessary to implement legislation passed by Congress, and Congress has new legislative changes in the pipeline. The Office of Legislation can then step in to communicate the situation to congressional staff. For instance, it may be that at a particular time CMS is at capacity and cannot take on additional programming unless Congress is willing to delay enactment of particularly difficult-to-implement provisions. This type of communication was seen in several of the systems mandates imposed in light of the Y2K phenomenon most recently in the agency’s push to implement the various provisions of the PPACA.

Constant communication is required between CMS and congressional staff about what can be done when. The question of what changes to CMS systems must be made in response to a legislative request requires a technical assessment. The Office of Legislation forms working groups as needed to consider how to implement given legislation. For novel or complex congressional changes, working groups will need to have broader discussions, and such changes will involve significant internal discussion between relevant program staff and IT staff.

ses, findings, and recommendations seeks to provide guidance to CMS for building on the agency’s considerable achievements while rising to unprecedented challenges. The committee understands the need for CMS to continue to respond to current and emerging demands, which are not infrequently accompanied by extraordinarily demanding timelines and insufficient IT resources. While recognizing these realities, the commit-

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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tee also seeks to offer guidance to an agency that is poised to take center stage in transforming the nation’s health care system. At the same time, it must be recognized that CMS’s expanding roles will focus unprecedented attention on its ability to handle new responsibilities effectively.

Chapter 2 urges the development of a comprehensive strategic technology plan at CMS and presents conceptual underpinnings that emphasize the importance of a strategic technology plan that fully recognizes and addresses the centrality of IT as CMS plans to meet its challenges and opportunities. Chapter 3 provides a framework for re-envisioning CMS business and information ecosystems and a meta-methodology for conducting incremental, phased transitions of needed components. Chapter 4 describes the cultural, organizational, technical, and management prerequisites for CMS’s transition to an even more capable, nimble, and adaptable agency that uses IT effectively in support of its mission. Chapter 5 discusses the centrality of data to nearly all of CMS’s current and future work and describes several ways in which the data and information collected by CMS are used extensively within the agency for a variety of analytic purposes.

Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
×
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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Suggested Citation:"1 Essential Considerations and Background." National Research Council. 2012. Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services. Washington, DC: The National Academies Press. doi: 10.17226/13281.
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The Centers for Medicare and Medicaid Services (CMS) is the agency in the Department of Health and Human Services responsible for providing health coverage for seniors and people with disabilities, for limited-income individuals and families, and for children--totaling almost 100 million beneficiaries. The agency's core mission was established more than four decades ago with a mandate to focus on the prompt payment of claims, which now total more than 1.2 billion annually. With CMS's mission expanding from its original focus on prompt claims payment come new requirements for the agency's information technology (IT) systems.

Strategies and Priorities for Information Technology at the Centers for Medicare and Medicaid Services reviews CMS plans for its IT capabilities in light of these challenges and to make recommendations to CMS on how its business processes, practices, and information systems can best be developed to meet today's and tomorrow's demands. The report's recommendations and conclusions offered cluster around the following themes: (1) the need for a comprehensive strategic technology plan; (2) the application of an appropriate metamethodology to guide an iterative, incremental, and phased transition of business and information systems; (3) the criticality of IT to high-level strategic planning and its implications for CMS's internal organization and culture; and (4) the increasing importance of data and analytical efforts to stakeholders inside and outside CMS. Given the complexity of CMS's IT systems, there will be no simple solution.

Although external contractors and advisory organizations will play important roles, CMS needs to assert well-informed technical and strategic leadership. The report argues that the only way for CMS to succeed in these efforts is for the agency, with its stakeholders and Congress, to recognize resolutely that action must be taken, to begin the needed cultural and organizational transformations, and to develop the appropriate internal expertise to lead the initiative with a comprehensive, incremental, iterative, and integrated approach that effectively and strategically integrates business requirements and IT capabilities.

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