Scully leaves CMS for a private-sector job

The Medicare chief changed the agency's name and tried to improve its responsiveness.

By Markian Hawryluk, amednews staff. Dec. 22/29, 2003.

Washington -- The Centers for Medicare & Medicaid Services has lost its best administrator ever. Tom Scully's "best ever" label became a standard joke in introducing the outspoken official at Capitol Hill appearances after he renamed the agency, thus becoming the first, and so far only, CMS administrator.

After helping shepherd through Congress the most sweeping reform of Medicare since its inception, however, Scully announced earlier this month that he would leave the agency effective Dec. 15. He has been wooed by a number of law firms and private equity firms to advise clients on the new legislation. At press time, Scully had not revealed his new employer.

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Topic: Medicare payment

"It has been a great run," Scully said in announcing his resignation. "I have loved every minute of this job and am grateful to the president for the opportunity to serve."

In 2001 Scully became the ninth administrator of the agency, then known as the Health Care Financing Administration, and immediately began working to improve its responsiveness and accessibility. He implemented open-door forums allowing physicians and other health practitioners to address Medicare or Medicaid concerns with high-level CMS officials on a monthly basis.

"Tom Scully is leaving a different agency from the one he took over in 2001, an agency that has been re-energized by his leadership," said his boss, Dept. of Health and Human Services Secretary Tommy Thompson.

Thompson has indicated he, too, will not remain in his post. After the 2004 elections, he plans to start his own business.

Scully's straightforward, shoot-from-the-hip manner at times gave critics ample ammunition. It spurred multiple calls for his ouster and repeated rumors of his resignation. Last year, he angered House Small Business Committee Chair Donald Manzullo (R, Ill.) by declining to be part of a panel with small business owners at a hearing.

Earlier this year, the Gallup Organization sued him. The group alleged that he engaged in collusion and intimidation in the development of a patient-satisfaction survey. The dispute prompted Scully to send a terse e-mail, in which he used the terms "jerk" and "weasel," that made its way into press reports. And just this fall, Scully was lambasted for spending $600,000 for a blimp to promote the 1-800-Medicare number at sporting events.

Even his impending departure became controversial as some questioned whether Scully should have been pursuing a position with firms whose clients had stakes in the Medicare legislation while he helped craft the bill. Senate Finance Committee Chair Charles Grassley (R, Iowa) said he made an inquiry to HHS about the matter.

"I'm interested in ensuring that all government officials, especially high-level officials, adhere to the highest ethical standards," Grassley said. Reports have surfaced that congressional staff who worked on the Medicare bill also are exploring private-sector employment options.

Scully said he complied with the law governing such matters. He had asked to leave his post in May but agreed to remain until after the Medicare reform bill was passed.

The exiting CMS administrator made numerous regulatory changes to help reduce red tape for physicians serving Medicare beneficiaries. Those include consolidating the publication of regulations, clarifying physician responsibilities in taking call in the emergency department, and halting work on the evaluation and management documentation guidelines so physicians could re-evaluate the codes themselves.

But Scully's image among doctors suffered somewhat as a result of the payment update formula. In each year of his term, the formula resulted in proposed cuts in Medicare payments to physicians. Congress prevented reductions in 2003 and 2004, but not a 5.4% cut in 2002.

CMS made some changes to the payment formula to minimize the potential for reductions, but Scully rejected arguments by the American Medical Association that the agency could make more substantial adjustments to alleviate the cuts.

Although Scully said the agency did not have the authority to fix the update on its own, he maintained that the reductions were the result of formula problems and pushed Congress to step in. Many experts believe that without his help, the physician update fix for 2003 may never have passed.

"The AMA remains grateful to Mr. Scully for his help in halting Medicare physician pay cuts in 2003," said AMA President Donald J. Palmisano, MD. "Mr. Scully played a pivotal role in creation and passage of this year's historic Medicare bill. The AMA wishes him well in his new endeavors."

The Bush administration is expected to name an interim administrator this year before deciding on a permanent replacement. Rumored candidates include CMS Acting Deputy Administrator Leslie Norwalk, HHS Deputy General Counsel Peter Urbanowicz and Assistant Secretary of Defense for Health Affairs William Winkenwerder, MD.

First and foremost on the agenda of the new CMS administrator, along with the new HHS secretary, will be implementation of the Medicare legislation. The measure left a number of unresolved issues and demonstration projects to agency officials.

Those include calculating how much to increase practice expense payments for physicians affected by drug pricing reforms, determining criteria for limiting physician referrals to specialty hospitals, and establishing a new enrollment and appeals process for physicians and others.