The ABCs of CMS

Now, more than ever, major changes in the way healthcare is provided, measured, and paid for seem to be coming from a single source: the Centers for Medicare and Medicaid Services (CMS). From the Physician Quality Reporting Initiative (PQRI) to last summer’s Medicare Physician Fee Schedule, CMS has an ever-growing influence on U.S. healthcare.

Although it has published numerous articles about CMS and its policies, The Hospitalist has never offered an explanatory overview of one of the largest healthcare agencies in the world. In order to help hospitalists understand the policies, payments, and trends that affect them every day, we have prepared this CMS fact sheet.

Agency Background

CMS falls under the jurisdiction of the U.S. Department of Health and Human Services, and is tasked primarily with administering the Medicare program and working in partnership with state governments to administer Medicaid and the State Children’s Health Insurance Program (SCHIP). CMS’ current mission is “to ensure effective, up-to-date healthcare coverage and to promote quality care for beneficiaries,” which is a more modern focus than when the Medicare and Medicaid programs were first signed into law in 1965. Those programs were created solely to provide healthcare coverage to Americans over the age of 65, as well as low-income children and people with certain disabilities.

CMS has grown in size and scope since its inception. “First and foremost, CMS is the largest single payor for healthcare in the United States,” says Patrick J. Torcson, MD, MMM, FACP, director of hospital medicine at St. Tammany Parish Hospital in Covington, La., and chair of SHM’s Performance and Standards Committee. Insurance companies model their coverage and fee schedules after CMS. “That makes it very important for reimbursement.”

Approximately 45 million Americans are Medicare beneficiaries, and CMS pays reimbursements for more than 90 million people through the Medicare, Medicaid, and SCHIP programs. Hospitalists treat so many of these beneficiaries that Dr. Torcson estimates CMS represents “at least a third” of the payor mix for most adult hospitalists. For hospitals, the percentage is larger: “For acute-care public hospitals, I’d estimate that Medicare is probably 50% of the payor mix,” Dr. Torcson says.

Policy Points


A CMS trail of coordinated care programs has shown that these programs—specifically created to keep Medicare patients out of the hospital and reduce costs—generally did not work, according to a study published in the Feb. 19 Journal of the American Medical Association.

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