Yesterday was the last day of work for outgoing North Carolina Secretary of Health and Human Services, Lanier Cansler. The 58 year-old Cansler has been involved in state government for most of the past two decades, first as a legislator from Asheville, then as Deputy Secretary of Health and Human Services, lobbyist and as the leader of DHHS since 2009.

Reporter Rose Hoban sat down with him to talk about politics, changing the culture inside DHHS, the future of healthcare and the Medicaid computerized billing system that’s been making headlines.

NCHN: Why are you leaving now?

Secretary Cansler: I had my first conversations about leaving back in November. I did not want to announce that I was leaving until she (Governor Perdue) decided about who would step in so that there would not be a void.

I wanted to give her (Gov. Perdue) enough time so that if she wanted to go out and find someone else she could offer them at least a year. And it just seemed like going into an election year with the transition, knowing if she was going to run that it was going to be a constant battle with the legislature…

NCHN: Not that it hasn’t been a constant battle already…

Secretary Cansler: Not that it hasn’t been a constant battle with the legislature but in an election year it’s expected to be more.

NCHN: A number of people said last fall that you looked tired and it was obvious that the job was wearing on you. You seem more relaxed now.

Secretary Cansler: laughsI’m feeling much more relaxed as my days wind down here.

I told the legislature this past week that until you sit in this chair you don’t know what it’s like. When you think about a $17 billion operation, 17–18,000 employees, 14 facilities, the largest insurance program in the state… and you have responsibility for all that and things are always happening, in all of those pieces, it does wear you down. It is a tough job.

You have to find people that will take this job who want to do the job, you certainly don’t do it for the money because the same kind of responsibility equates to running a Fortune 500 company, but it’s a lot different.

There’s a lot of positive things that we’ve been able to do and that’s the fun part. But there’s all these little things that keep blowing up that you can’t control, that you have to fix. And then you mix up politics in it… imagine running a Fortune 500 company with 170 members on your board of directors that run for re-election every 2 years.

I’m glad that I’ve been here, I’ve enjoyed it, I’m dedicated to what this department does, but it’s time for someone else to take the reins.

NCHN: You’ve just described how large DHHS is. Some people have said DHHS is just too big and should be broken up into two or three smaller agencies.

Secretary Cansler: I disagree with that. If you look across the spectrum of things that DHHS does: the 14 programmatic divisions and offices, 260-some services and things that we oversee and do – they are all interconnected.

If you divide this department into 2 or 3 smaller departments you lose any potential that you have to making that happen. Now, we can look across the 260 services and align them with the intensity that someone needs. And instead of just saying, “Gee that person’s really in trouble, let’s just make sure they get the services,” we are trying to change to the attitude of, “they are in real trouble, how do we use our services to move them back down the scale, to move them to where they need less services.” That way they don’t become dependent on us, but they use the services in a way to try to reduce their dependency, improve their health and well-being.

It’s not the size of the organization that matters. If you are trying to achieve goals you focus on the right expertise, the right knowledge and leadership to help achieve those goals. I think would be a big mistake to divide the agency, because size is not the issue.

NCHN: One of the biggest issues hanging over your departure is the status of the Medicaid Management Information System (MMIS) project that’s now several years late, and costing more than expected. Is it the largest single contract in state government now?

Secretary Cansler: No doubt. It generally is for any state that’s doing in an MMIS and our system is probably the most complex any state has attempted. We’re including multiple payors and paying state employee claims, as well as Medicaid.

I will agree with the state auditor (pdf) that documentation of how the decisions were made was not as good as perhaps it should be. I think it was not because they didn’t intend to document, I think it was because in the process of making decisions, they weren’t thinking about when the state auditor comes in, what we need to have in the file.

NCHN: Documentation was a concern that predated even awarding the contract to CSC (Computer Sciences Corporation). In 2008, there were complaints about how little documentation there was on how decisions were made even in granting the contract.

Secretary Cansler: There was documentation that should have been done. The project managers have documented the final decisions. They didn’t always document the discussion of how they got there and why they made the decision that they made.

That’s something that a plan of correction is being developed to make sure that if the auditor comes in again in a year or two they won’t have the same issues.

I will say that whenever you are trying to manage and make management decisions, it’s different than an auditor coming in and trying to figure out why you did something.

If you’re coming in to do a financial audit, that’s one thing. But if you are coming in to do a performance audit and you are asking questions about the management and the performance and the operation… if you have never tried to manage an operation like that it’s very hard to critique. You can second guess, you can armchair quarterback…

The thing that worries me most about it is that the public has gotten the idea that the increasing cost was all an overrun. That we’re getting what we originally asked for but we are paying twice as much for it… and it’s taking 18 months longer to build it. And that’s simply not true.

It’s a great political line, it’s a great way for the Legislature to criticize the governor or the administration, but it’s not true.

NCHN: But the project is late. And it’s costing more, correct?

Secretary Cansler: In July ’07 there was still year and a half left in the Bush administration. And that’s when the request for proposals went out went onto the street, so it was designed, around what we knew in the middle of 2007.

It was awarded in December 2008 before the previous administration left. And while we knew some things were changing we still didn’t have any idea of healthcare reform and how that would change things.

The vendor said they could use 75 percent of the code they had in used creating the New York system. But by the time they actually came in and started evaluating all the things, they said it’s going to be 35 percent of the previous code.

We charged them $10 million for the 4 month delay. And we are not paying them for the extra code that they have to write because that’s their problem.

When you look at the extra $200 million, it’s not an overrun. More than $80 million of it relates to all the changes in the federal government. More than 700 changes are being made to the old system that we’re still operating to keep up with federal and state changes. Those will have to be made to the new system as well.

And then $76 million is related to a 2-year option on managing the system once it’s up and running. The contractor is building the system and when they negotiated the contract, they negotiated two additional, optional, years at a fixed price to protect us from increasing cost.

So you can’t say it’s a $200 million overrun when $76 million relates to options that we don’t even have to do. That, by the way, is about half the price we are currently paying per year to run the current system.

NCHN: The language you used in the response to the audit, some of it was pretty strong. It felt… unseemly in places, for example, to see one state official calling another state official ‘asinine.’ Would you have changed your language if you were to do it again?

Secretary Cansler: As with most letters to come out of this office I don’t write them, I have other folks that write them. And the managers of the project wrote the response and I weighed, “do I send in this tone or do I not send it in this tone?”

We were a little concerned that the auditor had released a draft of the document at a previous legislative meeting without letting us know she was going to release the draft, and without any response. And we did feel strongly about some of the things.

So, should it have been toned differently? Maybe.

I think my staff felt very strongly about it and they were the ones that were really being accused of not managing well and I wanted them to have the opportunity to say it if they wanted to say it. And so I agreed with them, and I signed it.

NCHN: Of course it has your name on it so you have to take the responsibility for it

Secretary Cansler: Of course. That’s part of the job.

NCHN: It’s seemed in the past that leadership in DHHS has been an issue, that in some divisions there was real ossification in the leadership, the bureaucracy. But it seems that now, DHHS is a little more open. How did you go about doing that?

Secretary Cansler: I came in at the beginning of the administration and and you always have the option of changing division directors. I had a little bit of an advantage because I have served 4 years earlier as the deputy, I knew the personalities and knew the people.

There were some that were transitioning anyway, but I rearranged the chairs a little bit. I made the business manager an assistant secretary. I made the chief deputy the deputy secretary for health services because 85 percent of our budget is health. We added an assistant secretary for health IT because that’s a major issue right now.

I wanted to raise the level of attention about what we were doing in mental health that’s why I created the assistant secretary for mental health, developmental disabilities and substance abuse services. I brought in a new Medicaid director.

We started an initiative called DHHS Excels that’s been focused on changing the culture. It’s based on five principles. One is consumer focus, we focus… every decision how does it impact the people that we serve. Two is being anticipatory, instead of reacting to the next crisis how do we anticipate what the issues are going to be and get ahead of them.

Number three is being transparent, because when you try to hide your problems it’s very difficult to solve your problems. Four is being collaborative, that we have to collaborate among ourselves in the department, we also have to collaborate with our partners, local DSS and public health, local providers, physicians, hospitals – because if you just try to mandate everything you have limited your ability for any kind of innovation. And the fifth principle is an outcome focus.

We’ve done webinars with all the employees. I update them on issues that are happening with the legislature and they e-mail in their questions and I answer them. And after we have done it live, we’ve posted on the web, so anyone can see it.

We made some really tough examples with the zero-tolerance policy in our state hospitals. We’ve gone beyond that in our facilities where we got some extra money to do some training.

When we came in we had state facilities that were decertified, weren’t getting Medicaid funding, all that’s been fixed, all of that is going well.

NCHN: You left state government last time and you started a consulting firm. What happens now?

Secretary Cansler: I’ll set up a little consulting firm, same kind of thing. I hope…

NCHN: Will you be representing CSC (Comptuer Sciences Corporation)?

Secretary Cansler: No I’m not going to work for CSC. I’m just going to start my own little consulting firm… pretty much been focused on healthcare.

I am working with the commission that the governor has set up on affordable and sustainable healthcare.

I really believe that the battle over the Medicaid budget is just a symptom of the bigger issue of how do we have a sustainable healthcare system. Part of the issue is that until we evaluate the system, and create a vision for our healthcare delivery system… A vision that we can sustain long term, we are going to continue to be looking at reducing rates and limiting services.

NCHN: In Medicaid? Or in the whole system?

Secretary Cansler: Either… both. We are going to continually pay more and it is becoming evident that we cannot do that or we are going to pay providers less and at some point in time you lose access. Or we are going to eliminate services that we decide are not important which oftentimes just rolls into a different service.

I always quote this physician who was a client of mine when I started as a CPA. He started practicing in the early 50’s and retired in the 80’s. I asked him at his retirement reception, “You have been around in 30 years have you seen a lot of changes in healthcare?”

And his response was “Lanier, we started by practicing medicine and now we’re in the business of medicine.”

If you think about how the hospitals operate, you know the Wakemed and Rex thing is about cardiovascular. It doesn’t have to do with access to care it has to do with the revenue generation and market dominance… that sort of thing. It’s business, it’s not healthcare.

Our rules, our regulations, our statutes, everything, all that was designed and developed at a time when healthcare was a totally different animal.

We need to decide, what is our vision for healthcare? How do we operate? And then start reworking our statutes, our reimbursement processes. It may take a period of some years, maybe five, maybe ten, to go where we need to go so that we can sustain it. Because I truly believe that if we do not do that, we are going to have to accept what healthcare system results from our constant reduction in rates.

I would rather be involved in trying to develop the vision, than sitting here trying to figure out what rate we are going to cut next. Or what service we are going to eliminate next.

NCHN: Finally, that vision of healthcare means you have to work through the political process. Last week in your parting comments to the General Assembly, you asked the legislators to put aside partisanship, that it does no one any good.

Secretary Cansler: This is the most frustrating part of a job like this.

I can individually sit down the folks in the legislature and talk about the issues, and they will agree. But there’s also this partisanship, the legislature versus the governor. How you get anything done when it becomes so personal?

I mean I can tell people about the Medicaid Management Information System thing and they will understand, but in the public, before the press it’s political. It’s become a political issue that’s focused at the administration.

And part of my frustration with the legislature was that everything was focused on – I’m saying this very broadly in terms because not everybody is like this – but there is a real focus on how we keep control? Or how to we get control back? And my attitude has always been if I am there, I want try to do the best job I can for the people.

A lot of the folks that I have worked with in the agency get very frustrated because they are more focused on the policy and they get frustrated when they can’t make it happen because of it getting blocked somewhere in the legislature.

And that’s the game. It’s the reality of the game, but it’s also frustrating.

NCHN: Of course, when you made those comments, the room was almost empty, because everyone was downstairs at the hearing about immigration, which got the attention because it’s so political.

Secretary Cansler: That’s right.

NCHN: Well, thank you very much for talking with me.

Secretary Cansler: Thank you. I enjoyed it.

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