Why HCFA Reorganized

hen Congress created Medicare in 1966, the health care industry worried the government wouldn't promptly pay its bills. So Congress created a reimbursement system that paid health care providers quickly. Medicare managers focused on paying the bills, both at the Social Security Administration until 1977 and at the Health Care Financing Administration beginning in 1977, when Medicare and Medicaid were brought under one agency roof. A financing focus was emblazoned right in HCFA's name.

Over the last decade, consumerism, pressures to cut costs and technological advances have forced the health care industry to rethink how it delivers and finances services. In the early 1990s, forward-thinking analysts saw HCFA falling behind the times. The agency simply spewed checks, expecting policy changes to come from Congress or the White House. Meanwhile, private insurers were moving to balance costs with quality of care, developing performance measures for their plans, and surveying customers to learn what services they expected.

Industry's more comprehensive approach created the need for employees with a broader set of skills than those who had built entire careers specializing in the minutiae of the Medicare program.

"There's a tendency throughout the bureaucracy to get so highly specialized that workers stay in a professional rut for years and years," says Bruce Vladeck, who headed HCFA from 1993 to 1997.

When much of the aging HCFA staff began to retire in the mid-1990s, Vladeck saw an opportunity to bring in people with more general backgrounds and skills. "That turnover was wonderful. We recruited a lot of outstanding people," Vladeck says.

But putting new people in the old finance-centric structure held little value. So Vladeck set up internal review teams to study reorganization options. HCFA settled on a plan to move from being process-driven to being customer-driven. The Medicaid bureau, survey and certification offices, insurance and, clinical laboratory regulators and the intergovernmental affairs staff went to the Center for State Operations. Disparate offices dealing directly with the health care industry were rolled into the Center for Health Plans and Providers. HCFA created a new Center for Beneficiary Services to provide information to beneficiaries, assess their needs and ask for their feedback on Medicare services.

The reorganization officially kicked off in July 1997. This summer, HCFA finished moving employees, but they'll need additional and ongoing training to prepare for current and future health care trends, analysts say.