HHS Reorganization Takes Shape

Federal agencies have undergone significant changes recently due to the Trump Administration's priorities for improving efficiency in the federal workforce and operations.

On February 11th, the White House issued Implementing The President’s “Department of Government Efficiency” Workforce Optimization Initiative. The executive order calls on agency leaders to prepare for large-scale reductions in force (RIFs) and develop reorganization plans.

The subsequent OMB memorandum, Guidance on Agency RIF and Reorganization Plans Requested by Implementing The President’s “Department of Government Efficiency” Workforce Optimization Initiative provides instructions to agencies on how to execute agency RIF and reorganization plans (“ARRP”). It requires Phase 2 of the plans to be submitted by April 14th for approval.

Ahead of the April 14th deadline, HHS announced its departmental restructuring intentions last week. The Transformation to Make America Healthy Again outlines workforce reductions and organizational consolidations. Specifically, the plan merges 28 divisions into 15, reduces 10 regional offices to 5, and centralizes HR, IT, and procurement functions.

The plan includes downsizing 10,000 more employees, reducing personnel to 62,000 for the entire department.  Workforce reductions, which began this week at HHS, include: 3,500 at the FDA, 2,400 at CDC, 1,200 at NIH, and 300 employees at CMS.

Additional elements of the plan:

• Creates the Administration for a Health America (AHA) and centralizes HR, IT, procurement, external affairs and policy under it
  • Combines several agency and office components under AHA including Office of the Assistant Secretary for Health (OASH), Health Resources and Services Administration (HRSA), Substance Abuse and Mental Health Services Administration (SAMHSA), Agency for Toxic Substances and Disease Registry (ATSDR), and National Institute for Occupational Safety and Health (NIOSH)
• Transfers the Administration for Strategic Preparedness and Response (ASPR) to the Centers for Disease Control and Prevention (CDC)
• Creates a new Assistant Secretary for Enforcement to head HHS oversight offices such as the Departmental Appeals Board (DAB), Office of Medicare Hearings and Appeals (OMHA), and Office for Civil Rights (OCR), which previously resided under the Office of the Secretary.
• Merges the Assistant Secretary for Planning and Evaluation (ASPE) with the Agency for Healthcare Research and Quality (AHRQ) under the new Office of Strategy
• Dissolves the Administration for Community Living (ACL), transferring support services for older adults and those with disabilities among the Administration for Children and Families (ACF), Assistant Secretary for Planning and Evaluation (ASPE), and Centers for Medicare and Medicaid Services (CMS)

According to the plan’s fact sheet, “The consolidation and cuts are designed not only to save money, but to make the organization more efficient and more responsive to Americans’ needs, and to implement the Make America Healthy Again goal of ending the chronic disease epidemic.”

Moreover, the plan touts that, “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.”

FY 2024 HHS Agency and Office Spending

It is hard to say for certain how the consolidation and restructuring will shape the HHS contract spending environment. However, we can start by reviewing current spending.

Below is a snapshot of FY 2024 spending among the HHS agencies and offices that are impacted by the plan. (Note that the oversight offices being consolidated had very little to no spending in FY 2024). HHS spent over $128B in FY 2024, with much of the spending conducted at CDC ($9.2B), CMS ($8.4B) and NIH ($7.7B). (For more information on HHS organization and contract spending, please visit GovWin’s HHS Agency Profile.) Spending among offices impacted by the restructuring plan represent 6%, or $7.4B, of total FY 2024 HHS spend. Thus, contract spending impact by the plan might not be THAT significant.

Source: GovWin Federal Spending Analytics

The chart below represents a breakdown of the above spending by top 10 primary requirements among the impacted entities. It may be safe to presume that given the workforce reductions and centralizing of core functions, reduced spending on professional services, certain areas of IT, and the lease and operation and maintenance of facilities can be expected. Again, determining the extent remains challenging.

Source: GovWin Federal Spending Analytics

As for what to expect ahead at HHS, it is likely some amount of disruption and delays in programs, procurements and operations will take place as a result of the department’s ARRP. The fact sheet states that no additional cuts are planned, though “doing more with less” will continue to be top of mind at the department. With regards to IT, we know that agencies are looking at the technology and contracts associated with public-facing websites as well as software licenses per the new federal CIO, Greg Barbaccia. And so, our “wait and see” game continues.

For more on the movements of the new administration, refer to GovWin’s First 100 Days Resource Center.