HHS restructures for the DOGE era

A massive HHS restructuring announced March 27 could have an indirect impact on providers.

Secretary Robert F. Kennedy Jr. announced HHS would reduce its workforce by 10,000 FTEs, part of a 25% downsizing from 82,000 to 62,000, with previously announced early retirements and buyouts also factoring into the count.

The department’s agencies will be pared from 28 to 15, including a new Administration for a Healthy America that will combine several current agencies. CMS will remain a standalone agency and, at first glance, appears to be minimally affected compared with other HHS operations. The number of HHS regional offices will decline from 10 to five, and functions such as HR and IT will become centralized instead of being dispersed across the different agencies.

The moves are designed to implement President Donald Trump’s directive regarding the Department of Government Efficiency (DOGE) Workforce Optimization Initiative. HHS said the restructuring will save $1.8 billion per year, eliminate redundancy among the agencies and improve the department’s ability to focus on reducing the prevalence of chronic disease in the U.S.

In addition, the restructuring “will improve Americans’ experience with HHS by making the agency more responsive and efficient, while ensuring that Medicare, Medicaid and other essential health services remain intact,” per the news release.

More moves to enhance efficiency are possible, according to the announcement. By putting the changes in the context of an HHS-initiated restructuring rather than a DOGE-led reorganization, the administration hopes to avoid a basis for the types of lawsuits that have stymied mass-layoff decisions across the government over the last two months.

What’s in store

CMS’s roughly 6,700-member workforce will lose 300 jobs, with HHS saying the cuts will reduce “minor duplication across the agency.” Medicare and Medicaid services will not be affected, according to the announcement, but provider-facing functions are not necessarily included in that statement.

An Associated Press report cited a former CMS deputy director who indicated the cuts would affect positions that troubleshoot issues for Medicare and Affordable Care Act (ACA) marketplace enrollees. Customer service will be adversely affected, he said.

Any decrease in personnel could affect Medicare, Medicaid and the ACA marketplaces, Senate Democrats wrote to Kennedy in February, at which point HHS reportedly had eliminated 5,000 jobs across its agencies.

“CMS is already understaffed and leans heavily on its existing workforce to maintain current service levels,” the letter states. “The agency has not received a meaningful increase in program operations funding since at least 2014, even as healthcare and operational costs have continued to grow.”

The Democrats added, “Any cuts to the CMS workforce could have wide-ranging consequences across the healthcare system, including potential disruptions in medically necessary care, delays in payments to hospitals, nursing homes and other healthcare providers, and reductions in the frequency of safety inspections in nursing homes.”

Other areas of concern amid the cuts, they wrote, include enforcement of the No Surprises Act and hospital and insurer price transparency requirements. Trump signed an executive order on price transparency the week after the letter was sent, meaning that area is likely to remain a priority.

A possible appeals backlog

Personnel-related moves that previously have been attempted or are under consideration reflect the potential for disruption to Medicare-participating providers.

For example, 15 attorneys who had been hired in recent years to help process the backlog of cases at the HHS Departmental Appeals Board (DAB) were let go within the first two months of the new administration. The DAB’s Medicare Appeals Council is the fourth of five levels of administrative appeals regarding Medicare coverage and payment decisions.

The attorneys collectively work on an estimated 1,800 cases per year, at minimum, for the Appeals Council. Without them, a backlog that had shrunk from more than 30,000 in 2017 to 11,000 at most recent count was expected to grow.

However, the attorneys were hired back within weeks of being let go, according to a report by Law 360 (login required).

The number and focus of DAB staff nonetheless remain subject to change under new supervision. A newly created HHS role, assistant secretary for enforcement, will oversee the DAB, the Office of Medicare Hearings and Appeals (OMHA) and the Office for Civil Rights. The emphasis will be on combating waste, fraud and abuse in federal healthcare programs, according to Thursday’s announcement.

Administrative law judge (ALJ) hearings conducted through OMHA, the appeals level that precedes the Medicare Appeals Council, also may be at risk of disruption. In February, the Department of Justice sent a letter to House Speaker Mike Johnson (R-La.), stating its position that having multiple levels of removal restrictions for ALJs is unconstitutional.

If the DOJ’s position holds up in court, the administration could remove ALJs more abruptly at its discretion, potentially raising concerns about both a backlog and the possibility that judges would be vulnerable to outside influence.

Other restructuring moves

HHS’s newly created Administration for a Healthy America will subsume the Health Resources and Services Administration (HRSA) and the Substance Abuse and Mental Health Services Administration (SAMHSA), among several others. The entity will retain a focus on improving coordination of health resources for low-income Americans in areas such as primary care, maternal and child health, mental health, environmental health, HIV/AIDS and workforce development.

A key public-health agency, the Administration for Strategic Preparedness and Response (ASPR), will become part of CDC.

The office of the Assistant Secretary for Planning and Evaluation will merge with the Agency for Healthcare Research and Quality in a new Office of Strategy that will develop guidance and best practices for federal healthcare programs.

Some of the biggest staff cutbacks will take place at FDA, which is losing 3,500 positions, “with a focus on streamlining operations and centralizing administrative functions. This reduction will not affect drug, medical device or food reviewers, nor will it impact inspectors,” according to the announcement.

CDC is losing 2,400 employees, although the number drops to 1,400 when accounting for the integration of ASPR. The agency will seek to focus on “its core mission of preparing for and responding to epidemics and outbreaks.”

The National Institutes of Health (NIH) will lose 1,200 employees by “centralizing procurement, human resources and communications across its 27 institutes and centers.”

Other spending cuts

HHS this week also announced the claw-back of $11.4 billion in CDC grant funding to state and local health departments. The funding had been issued during the COVID-19 pandemic for testing, vaccination, and surveillance and other prevention activities.

HHS said the money is not needed in a post-pandemic age, according to reports. However, public health advocates note the funding also has bolstered the infrastructure to prepare for ongoing and future health risks such as measles and avian flu.

In addition, $1 billion in funding distributed through SAMHSA to support behavioral health services has been discontinued.

NIH research grants also have been affected by funding reductions that were applied in recent weeks, with HHS saying funding is being redirected to areas that meet administration priorities.

Because the funding has been appropriated by Congress, the various claw-backs could be vulnerable to legal challenges.

April 9 update: HHS has paused the funding recission in response to a lawsuit in which a federal judge issued a temporary restraining order and said the plaintiff states likely would succeed based on the merits of the case.