Q & A With Tom Scully

He’s Medicare’s defender and its toughest critic. He roots for beneficiaries but works to contain costs. He wants to stop fraud. He would like to see reform for the massive government program, which now covers more than 40 million Americans, make it through Congress this year — in any version.

As administrator of Centers for Medicare & Medicaid Services, Thomas A. Scully is CEO of the largest health insurance organization in the world and the single largest purchaser of health care in the United States. CMS is responsible for the management of Medicare, Medicaid, the State Children’s Health Insurance Program and other national health care initiatives.

The organization insures 25 percent of the country’s population, processes more than a billion claims a year and contracts with one million providers. CMS is directly responsible for $1 out of every $3 spent on health care in the United States. And, quips Scully, “We generally have no clue where the hell it’s all going.”

Appointed by President Bush and sworn into the job in 2001, Scully has since earned a reputation for straight talk and tough rulings in an effort to get a handle on CMS’ spending. “When you’re in the government, you do the best you can for the taxpayers. That’s your job,” he says.

Before taking the reins at CMS, Scully was president and CEO of the Federation of American Hospitals, and previously was a partner in the Washington, D.C., law firm of Patton Boggs. As deputy assistant to the first President Bush, Scully advised the president on health care policy, Medicare and Medicaid payment reform. He also has served on the Board of Directors of Oxford Health Plans and of DaVita Corp., two of the nation’s largest health care service providers.

In this exclusive interview with HomeCare, Scully speaks frankly about his “tough guy” reputation, his opinions on current home care hot-buttons and the legacy he would like to leave at CMS.

HC: You are the CEO of the agency with the second-largest budget outlay of the federal government. What do you see as your mission in managing this massive organization?

Scully: As you know, I’m a big advocate of Medicare reform, and I think we would be better off if beneficiaries had more locally synthesized decision-making and they were getting their health care through a Blue Cross plan or through a Cigna. But since we’re in charge of running this massive government insurance program, my goal is to … have a better understanding of where we’re spending the money.

We spend billions of dollars, and we have no idea where it’s going. We make multi-billion-dollar mistakes. My goals are to run the program better, to give consumers a lot more information so they can make better decisions about what they’re doing with their federal health dollars and, basically, to make the entire system much more consumer-sensitive.

HC: What influences your decisions about how best to serve Medicare and Medicaid beneficiaries?

Scully: Always, the first thing I look at is what’s the most important thing to the beneficiaries. It’s their money. Whether they’re paying taxes for it or whether they’re paying 25 percent of Part B as a premium, I try to look at what’s best for the beneficiary, and part of that is always a cost-benefit analysis.

HC: During your tenure as CMS administrator, your resolute stances on certain issues have earned you a reputation as a controversial figure in the Bush administration. Do you think that reputation is warranted?

Scully: What? I’m a puffball — a push-over. I’m sure people get mad at me. People get mad when the government’s not giving enough money. I never take it personally. Now if somebody were to tell me that I was being unfair or not doing my job or arbitrarily picking on people, I would be concerned. But if somebody were to say, ‘We hated his decision, but he was fair and thorough and considered all the facts,’ that’s what my job is.

There are plenty of people who are tough regulators. If you’re a regulator, if you’re fair, you hear everybody’s side and you make a tough call. That’s what people should expect. People are never going to like any call where they don’t get what they want.

I want all the people that we regulate to feel exactly the same way about me that my kids do — which is tough, but fair.

HC: Where do you stand on the following home care-related topics? — Competitive bidding for durable medical equipment:

Scully: I think it’s viable. As opposed to the concept that we should pay people on a 1984 fee schedule updated for inflation — which is laughable on its face — [it’s a better alternative]. Yes, there are problems with it. I think we’ll probably have to come up with some hybrid of competitive bidding in major regions and not have competitive bidding in others. In any case, we should clearly re-base the fee schedule to current, real-world pricing. I don’t like price fixing anyway, but we shouldn’t be basing it on 1984 costs.

So, do I think competitive bidding has merit? Yes. Can it be done quickly, overnight, in lots of places? I think we could probably do it in a lot of urban areas. I would argue that outside of major urban areas, we probably need to come up with some kind of administered pricing, at least temporarily, and I would argue that it shouldn’t be based on 1984 prices unless you’re George Orwell.

• A seven-year Consumer Price Index freeze for DME: Scully: That takes the 1984 price fix and extends it to 2010. There are a lot of official ways of saving and, as I’ve said repeatedly, I don’t like fixing prices. My preference is that we do the best we can to mimic what happens in the market, but we’re so big that almost anything we do drives the market, which is unfortunate. Competitive bidding in itself will be a strange process, because [CMS] will be the 70 percent buyer of DME in most markets. It’s hard to be a market purchaser when you are the market. That’s a problem, because fixing prices is not pretty. My own version would be: Figure out what Congress wants to save, and then come up with, from the existing baseline — which we all know is fairly out of whack, product by product — real market-based pricing.
• Delaying the HIPAA transactions and code sets deadline: Scully: Well, we’ve been delaying it for 10 years … We’ve delayed and delayed and delayed. At some point you just have to close your eyes and flip the switch … but we are going to give people some flexibility if they’ve done their homework. I think the best thing we can do for clarity before October 16 is to take all the HIPAA consultants in the country and lock them in Turner Field. A lot of this stuff is driven by consultants who want fees. They’ve got people all stoked up into a tizzy … and this thing is not as bad as it looks. Editor’s Note: On Sept. 23, CMS announced it will put a transactions acceptance and processing contingency plan in place while its trading partners continue to work out compliance issues with the TCS rule, which is scheduled to take effect on Oct. 16. Check HomeCare Monday for updates.
• Fraud and abuse in the DME industry — the exception or the rule?

Scully: It depends on where you are. It seems to be the rule if you’re in Houston right now.

I really believe most health care providers are good, honest, decent people, and most DME manufacturers are good, honest, decent people … but in some places, you get just flat-out fraud, where people are actually filing fraudulent claims.

There’s a lot of bad stuff going on in DME in certain areas. There are clearly people in the DME field — especially in the wheelchair field — who are ordering wheelchairs for seniors who in some cases don’t need them and in some cases never get them, but they’re clearly billing Medicare.

Editor’s Note: For information on CMS’ 10-point plan aimed at curbing fraud and abuse of the Medicare program, see the “Headline News” section in this issue.

HC: Do you prefer the House or the Senate Medicare-reform model?

Scully: We’re not picking sides. If you look at the House and Senate bills, virtually every single thing the President asked for in his framework is in both bills. The stuff that we really care about — which is the future structure of Medicare — is in both bills. We could live with either one of them.

We support the House bill, we support the Senate bill, and our job is to help work out the differences in-between. We’d take either one.

HC: How do you imagine the home care landscape will look five years from now? Will small providers play a role?

Scully: One thing I’ve tried to express to people in the DME field and the home health field [is that] if you’re a good person, running a good business, trying to take care of seniors, I have no problem with your making a profit — and a healthy, happy profit.

My goal is to have good, honest, decent people who are long-term, reliable partners with the federal government who can make a decent living [in home health]. That’s what you should expect from a government contract. But we shouldn’t expect for people to go around billing the government inappropriately. So, when we see huge spikes up in spending, like we have in some areas in wheelchairs, we’re going to do something about it, and people shouldn’t be surprised.

On the other hand, I don’t want good, honest DME suppliers — who are doing a good job taking care of patients, making sure they have walkers and bed pans and wheelchairs and everything else — to be discouraged.

If you’re an honest provider, you should not be afraid of the federal government. You should come in and give us guidance about how you can make a living providing supplies to seniors, and make sure we hammer the guys that are bad for the business and take care of the people who are good for the business. I think it’s greatly in the interest [of people in the DME business] to come work with us and get rid of the bad apples … and I think it’s greatly in my interest — and the taxpayers’ interest — to scare the good guys just bad enough that they rat on the bad guys.

HC: Leaders in the home care industry say they want to show Washington decision-makers that home care is part of the solution to the country’s current health care woes; that, rather than cutting home care reimbursements, the federal government should be investing in home care as a viable, cost-saving, patient-preferred alternative to hospital and institutional care. Do you think they are doing a good job of communicating this message?

Scully: It is [part of the solution]. We totally agree with that. I don’t know of a single senior or disabled person who wants to be in an institution … most people would rather be at home.

So, our goal is to make home health care the best we can. We want to make home health care predictable and high-quality for seniors. And, we’ll make it a good, solid, predictable business for companies. If you’re a government contractor, the government’s reimbursement should be predictable, solid and boring so you can go about providing home health care, not worrying about what the next CMS regulation or congressional change will be.

HC: What legacy would you like to leave at CMS?

Scully: I had three goals coming into the job. One was to shake up HCFA (Health Care Financing Administration, the name for CMS prior to June 2001) for the better and make it much more transparent and more consumer-responsive.

Secondly, I want to make the program more understandable and responsive to seniors. I think the whole health care system is much more responsive when beneficiaries know what they’re getting and they have information about quality.

Third, I really want to get Medicare reform done, and I’d also like to do something about the uninsured.