Indian Health Service
Updated Policies and Procedures and Increased Oversight Needed for Billings and Collections from Private Insurers Gao ID: GAO-10-42R October 22, 2009The Indian Health Service (IHS), an agency in the Department of Health and Human Services (HHS), provides health care services to American Indians and Alaskan Natives. For fiscal year 2009, Congress appropriated approximately $3.6 billion for health care services to be made available through IHS. The agency provides direct medical care, including primary care services, ancillary services, and some specialty services, through its network of facilities, including hospitals, health centers, and clinics. IHS also provides funding to direct care facilities that are operated by tribes. IHS headquarters oversees 12 area offices that cover 161 service units in 35 states. The Indian Health Care Improvement Act of 1976, as amended, authorizes IHS to collect reimbursement for services provided at IHS facilities from third-party insurers, including Medicare, the federal health insurance program for elderly and disabled individuals; Medicaid, a joint federal and state health financing program for certain low-income families and individuals; and private health insurers. IHS is allowed to retain funds collected from these insurers without a corresponding offset against its appropriations, so that all revenue collected by a facility remains with that facility, supplementing its appropriations. For fiscal year 2008, IHS reported that it collected about $795 million from all third-party insurers, of which about $94 million, or 12 percent, was collected from private insurers. The remaining 88 percent was collected from the Medicare and Medicaid programs. According to IHS, these funds were used to purchase new medical equipment and medical supplies, and to provide compensation and benefits for IHS employees. Given the importance of these collections to IHS's mission, Congress asked us to examine several areas related to IHS's billings and collections activities. Specifically, Congress asked us to review IHS's policies and procedures for writing off amounts owed to the agency by private insurers, internal control procedures related to billing and collection, and the amounts and reasons for denied claims and claims written off as uncollectible by IHS. Because IHS was unable to provide much of the information we requested on the amounts of denied and adjusted claims and amounts written off for more than 6 months after our requests for these data, this report examines (1) the design of IHS's policies and procedures for billing and collecting revenue from private insurers including write-offs of uncollectible claims, and (2) the adequacy of IHS headquarters' monitoring of area office and service unit compliance with policies and procedures for the billing and collection of revenue from private insurers.
The design of IHS's policies and procedures for billing and collection activities--as reflected in Part 5 and Part 9 of the Indian Health Manual, and IHS's Revenue Operations Manual--is generally consistent with FSIO's standard business processes for managing federal accounts receivable, which include key processes related to the four phases of IHS's business revenue cycle. For example, FSIO specifies that there typically are triggering events that require establishing a receivable as well as processes for capturing, verifying, and reviewing customer information. Consistent with these expectations, IHS's policies and procedures include specific guidance on obtaining and verifying patient data at registration and for recording these data in RPMS. IHS headquarters' monitoring activities of area office and service unit compliance with billing and collection policies and procedures are inadequate, but agency officials told us they are taking steps to increase oversight. Federal internal control standards require agency management to conduct monitoring of program quality and performance. Part 5 of the Indian Health Manual requires the Director of ORAP to monitor area office and service unit compliance with IHS policies and procedures for billing and collecting revenue through IHS-wide policy compliance reviews and internal audits. Before implementing the Web-based tool, ORAP's monitoring of policy compliance had consisted of a small number of on-site compliance reviews at IHS service units and through regular meetings with field staff.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-10-42R, Indian Health Service: Updated Policies and Procedures and Increased Oversight Needed for Billings and Collections from Private Insurers
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GAO-10-42R:
United States Government Accountability Office:
Washington, DC 20548:
October 22, 2009:
The Honorable Max Baucus:
Chairman:
Committee on Finance:
United States Senate:
Subject: Indian Health Service: Updated Policies and Procedures and
Increased Oversight Needed for Billings and Collections from Private
Insurers:
Dear Mr. Chairman:
The Indian Health Service (IHS), an agency in the Department of Health
and Human Services (HHS), provides health care services to American
Indians and Alaskan Natives. For fiscal year 2009, Congress
appropriated approximately $3.6 billion for health care services to be
made available through IHS. The agency provides direct medical care,
including primary care services, ancillary services, and some specialty
services, through its network of facilities, including hospitals,
health centers, and clinics.[Footnote 1] IHS also provides funding to
direct care facilities that are operated by tribes. IHS headquarters
oversees 12 area offices that cover 161 service units in 35 states.
The Indian Health Care Improvement Act of 1976, as amended, authorizes
IHS to collect reimbursement for services provided at IHS facilities
from third-party insurers, including Medicare, the federal health
insurance program for elderly and disabled individuals; Medicaid, a
joint federal and state health financing program for certain low-income
families and individuals; and private health insurers.[Footnote 2] IHS
is allowed to retain funds collected from these insurers without a
corresponding offset against its appropriations, so that all revenue
collected by a facility remains with that facility, supplementing its
appropriations.[Footnote 3] For fiscal year 2008, IHS reported that it
collected about $795 million from all third-party insurers, of which
about $94 million, or 12 percent, was collected from private insurers.
The remaining 88 percent was collected from the Medicare and Medicaid
programs. According to IHS, these funds were used to purchase new
medical equipment and medical supplies, and to provide compensation and
benefits for IHS employees.
Given the importance of these collections to IHS's mission, you asked
us to examine several areas related to IHS's billings and collections
activities. Specifically, you asked us to review IHS's policies and
procedures for writing off amounts owed to the agency by private
insurers, internal control procedures related to billing and
collection, and the amounts and reasons for denied claims and claims
written off as uncollectible by IHS.[Footnote 4] Because IHS was unable
to provide much of the information we requested on the amounts of
denied and adjusted claims and amounts written off for more than 6
months after our requests for these data, we agreed with your staff to
provide you a report that examines (1) the design of IHS's policies and
procedures for billing and collecting revenue from private insurers
including write-offs of uncollectible claims, and (2) the adequacy of
IHS headquarters' monitoring of area office and service unit compliance
with policies and procedures for the billing and collection of revenue
from private insurers.
To examine the design of IHS's policies and procedures for third-party
collections, we identified key billing and collection policies and
procedures related to private insurers contained in IHS's Indian Health
Manual and its Revenue Operations Manual. We compared these policies
and procedures to the Financial Systems Integration Office's (FSIO)
standard business processes for administering and managing federal
accounts receivables.[Footnote 5] We also obtained written responses to
questions we developed and submitted to IHS officials in the nine area
offices and nine nonstatistically selected service units to gain an
understanding of the types of activities they were undertaking to
comply with IHS policies and procedures for billing and collection.
[Footnote 6] As agreed with your office, the scope of our review was
limited to IHS-administered facilities because under federal law,
tribally operated facilities are not generally subject to the policies,
procedures, and reporting requirements established for IHS-
administered facilities. Because IHS could not provide us with detailed
transaction-level billing and collection data until more than 6 months
after our initial data requests due to system limitations that are
discussed later in this report, we were unable to conduct testing to
determine whether IHS is actually complying with its policies and
procedures. As a result and as agreed with your staff, this report
covers the design of IHS's policies and procedures for billing and
collecting revenue from private insurers, but does not assess
implementation. To examine IHS headquarters' monitoring of area
offices' and service units' compliance with billing and collection
policies and procedures, we compared IHS headquarters' monitoring
activities to those described in its policies and procedures and to
GAO's Standards for Internal Control in the Federal Government.
[Footnote 7] We interviewed senior IHS officials about the policies and
procedures and their activities related to monitoring billings and
collections. We also reviewed IHS's documentation of one of the five
completed IHS on-site service unit compliance reviews as well as
components of IHS's new Web-based "Third-Party, Internal-Controls
Policy, Self-Assessment Audit Program." We did not assess the adequacy
of monitoring activities performed by IHS's area offices and service
units. Enclosure I provides additional details on our scope and
methodology.
We conducted this performance audit from June 2008 through September
2009 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
Results in Brief:
IHS has established policies and procedures for billing and collecting
revenue from private insurers that are generally consistent with
federal standard business processes for billings and collections.
However, IHS had not updated them to reflect its recent implementation
of HHS's new financial management system, Unified Financial Management
System (UFMS). The new system entirely automated some previous employee-
administered activities. Outdated policy and procedure manuals increase
the risk that management directives will not be met as well as the risk
of noncompliance with federal regulations. Also, ORAP officials
acknowledged that although IHS's debt management policies and
procedures included some specific requirements for service units and
area offices to develop debt management plans or programs, they
provided no guidance on implementation of these requirements.
Additionally, through interviews with service unit and area office
officials that addressed debt management activities, we found that none
of the area offices or service units we spoke with had developed and
implemented these location-specific debt management plans. Some area
office and service unit officials told us that they were developing a
program or plan, while others said that they were using the Indian
Health Manual, Part 9 "Debt Management" as their debt management
policies and procedures, rather than developing separate programs or
plans. Without well-defined debt management plans, area offices and
service units may not be conducting debt collection activities in
compliance with IHS's policies and procedures or federal regulations,
and may not be maximizing collection of the amounts due from private
insurers.
IHS headquarters' monitoring activities are inadequate to ensure area
office and service unit compliance with billing, collection, and debt
management policies and procedures. Although ORAP has been responsible
for performing policy compliance reviews since 2005, ORAP officials
reported that due to limited staff and the significant amount of time
required for each on-site review, they have only completed reviews at 5
of the 61 IHS-administered service units. They also reported that if
deficiencies were found, ORAP would communicate their review findings
to the service units and request corrective actions plans, but did not
have the authority to ensure that corrective actions were developed and
implemented. IHS has begun taking additional steps to increase its
oversight of IHS-wide billing and collection by expanding ORAP's
compliance review activities by implementing a new Web-based tool to
monitor service unit policy compliance, ensuring access to billing and
collection performance data contained in UFMS, and establishing direct
line authority over area offices through the creation of a Deputy
Director of Field Operations position. However, as currently designed,
these initiatives have shortfalls. For example, the Web-based tool does
not include questions on debt management activities, and IHS has not
completed development of management reporting capability either through
the Web-based tool or UFMS database. Full implementation of the current
initiatives, along with additional data and reporting, would enable
reporting to IHS management, including the Deputy Director of Field
Operations, and enhance IHS's monitoring of its billing and collection
activities. Until then, IHS management's ability to monitor area
offices and service units will continue to be limited.
We are making four recommendations to the Director of IHS to help
strengthen its management and oversight of billing and collection
activities, including updating policies and procedures; developing
additional debt management guidance, as needed; analyzing available
data and further developing tools to monitor and manage billings and
collections; and developing a risk-based approach using the information
obtained from the new data sources to prioritize which service units
receive future on-site compliance reviews.
We received written comments from HHS on a draft of this report
(reprinted in their entirety in enclosure II). HHS agreed with the
draft report and discussed actions IHS was taking to improve its
monitoring of billings and collections at IHS headquarters. HHS also
recognized the need for IHS to update its policies and procedures and
outlined how IHS would complete this action. IHS also provided separate
technical comments which we have considered and incorporated into this
report as appropriate.
Background:
IHS operates a large decentralized health delivery system comprised of
12 area offices, which include all or part of 35 states where many
American Indian and Alaskan Native communities are located. The area
offices provide guidance and technical support to the facilities in
their area, which are organized into 161 service units. Each service
unit may include federally or tribally operated hospitals, health
centers, clinics, and other smaller health facilities.
IHS Business Revenue Cycle:
The IHS business revenue cycle consists of four major phases: patient
registration, coding, billing and collection, and debt management (see
figure 1).[Footnote 8] Complete and accurate reporting of data at each
phase of the cycle is necessary for generating accurate billings, as
well as collecting payments from insurers in a timely manner. Debt
management occurs at the end of the business cycle, and refers to IHS's
activities to collect amounts owed from insurance companies that have
been outstanding more than 30 days including procedures for when the
collection attempts are not successful. Typically, facilities perform
all four phases of the business revenue cycle, while area offices and
service units have primary responsibility for monitoring these
processes.
Figure 1: IHS Business Revenue Cycle:
[Refer to PDF for image: illustration]
Registration:
When a patient arrives, registration staff gather information for the
patient‘s record, including the patient‘s identification, demographic,
and third-party insurance coverage information.
Coding:
Coding involves documenting the provider‘s description of disease,
injury, and treatment in a standardized form which is used to generate
a bill.
Billing and collections:
IHS bills the insurer for services provided and collects payment from
the insurer.
Debt management:
IHS attempts to collect amounts not paid by insurers by sending follow-
up letters or referring the debt to private collection agencies. If
collection attempts fail, the amount may be written off as
uncollectible.
Source: GAO analysis of IHS policies and procedures.
[End of figure]
To assist area offices and service units in managing the business
revenue cycle, IHS developed and implemented the Resource and Patient
Management System (RPMS) to provide comprehensive admissions, clinical,
billing, and collection information on all health services provided at
IHS facilities. RPMS is a computerized system that captures detailed
patient-level transaction information, such as amounts owed from
private insurers, as well as amounts collected. The detailed
transaction information is then summarized and recorded automatically
into UFMS, the primary financial management system for HHS. IHS fully
implemented UFMS in October 2008.
Monitoring:
IHS headquarters shares monitoring responsibilities with its area
offices and service units. Part 5 of the Indian Health Manual delegates
the primary responsibility for monitoring the day-to-day performance of
billing and collection activities to the area offices and service
units. In general, service unit business office staff use RPMS
reporting to monitor billing and collection activities. They also
monitor patient registration and coding activities in order to detect
errors and backlogs that can delay billings and hinder collections.
The service unit Chief Executive Officer, or designee, performs
evaluations and reviews these reports on a periodic basis. Some
reports, such as those on patient registration, coding, billing, and
the status of claims,[Footnote 9] are reviewed weekly while others,
such as those on outstanding balances and deleted claims, are reviewed
monthly. The reports are also forwarded to the area office, where
officials review and summarize them, and provide feedback on
performance to service unit and facility management, as well as
recommend periodic follow-up and corrective action when needed. Within
headquarters, ORAP was established in 2004 to provide leadership and
direction to the area offices and service units to increase third-party
revenue collections, and to monitor compliance with IHS policies
governing business revenue cycle processes. In addition, ORAP is
involved in providing leadership on payment policy in coordination with
HHS, Centers for Medicare & Medicaid Services, and area offices.
Further, ORAP is responsible for technical assistance to the area
offices, IHS-wide training and consultation, hospital cost report and
rate development, review of legislation and regulations that may impact
revenue, and program technical support. As of July 2009, ORAP had five
staff members.
Design of Policies and Procedures for Billing and Collection Is
Generally Consistent with Federal Standard Business Processes, but Some
Are Outdated, and Others Lack Necessary Guidance:
The design of IHS's policies and procedures for billing and collection
activities--as reflected in Part 5 and Part 9 of the Indian Health
Manual, and IHS's Revenue Operations Manual--is generally consistent
with FSIO's standard business processes for managing federal accounts
receivable, which include key processes related to the four phases of
IHS's business revenue cycle.[Footnote 10] For example, FSIO specifies
that there typically are triggering events that require establishing a
receivable as well as processes for capturing, verifying, and reviewing
customer information. Consistent with these expectations, IHS's
policies and procedures include specific guidance on obtaining and
verifying patient data at registration and for recording these data in
RPMS.
Another FSIO expectation is that procedures exist for ensuring critical
data elements are captured in the supporting documentation which are
necessary to establish a receivable such as dates of performance,
description of services, and amounts to be billed. Along these lines,
IHS's polices and procedures include activities for the proper and
complete coding of medical services and the billing of these services
to private insurance companies. Another FSIO expectation is that
agencies, on a periodic basis, determine the age of outstanding
receivable balances and review the status of these outstanding accounts
receivable balances. We confirmed that IHS's policies and procedures
included requirements that periodic review, research, and follow-up
action must be performed and properly documented. An additional FSIO
expectation is that procedures exist for determining debts that are
uncollectible and therefore should be written off. We identified that
IHS's policies and procedures include a requirement that debts are
written off when an authorized IHS official has determined, after using
all appropriate collection tools, that the debt is uncollectible.
While generally consistent with FSIO, we determined that some of IHS's
policies and procedures did not reflect current operations because they
were not updated to reflect IHS's recent implementation of its new
financial management system, UFMS, in October 2008. As a result, IHS
policies and procedures include requirements that still refer to the
previous financial management system, CORE, such as:
* area business office coordinators ensure that service unit data to be
entered into CORE are submitted timely by service units;
* area office financial management officers ensure that all third-party
accounting transactions are recorded timely in CORE's accounts
receivable application; and:
* financial management officers should reconcile balances from the RPMS
accounts receivable system with the CORE general ledger.
However, with the switch to UFMS, these routines have been mostly
automated. For example, previously, data recorded in RPMS had to be
summarized by the service units and then forwarded to the area offices
where the data were manually recorded in CORE. With the implementation
of UFMS, transaction data recorded in RPMS are automatically uploaded
to a central UFMS database, then summary data are uploaded from this
database into the UFMS general ledger and the manual recording is no
longer necessary.
According to federal internal control standards,[Footnote 11] formally
documented policies and procedures that are clear and readily available
are an essential part of an agency's internal control system. They
provide guidance to staff in the performance of their day-to-day
activities; help to ensure that activities are performed consistently
across an agency; communicate management's directives; and help ensure
that the agency is in compliance with federal laws and regulations.
These control standards require that policies and procedures be
reviewed regularly and updated, when necessary. In discussions, the
Director of ORAP told us that ORAP's goal is to perform in-depth
reviews of relevant policies and procedures every 3 to 5 years. The
officials said they plan to update Part 5 of the Indian Health Manual
by the end of calendar year 2009 to reflect any changes in their
operations and systems since the manual was implemented in calendar
year 2005. Similarly, in 2010, they may update Part 9 of the Indian
Health Manual and the Revenue Operations Manual, which were implemented
in calendar years 2007 and 2006, respectively.
Because Parts 5 and 9 of the Indian Health Manual had not been updated,
ORAP officials told us they conducted regional accounts receivable
training during fiscal year 2009 to help address the differences
between the guidance in the unrevised policies and procedures and
actual practice due to switching to UFMS. We reviewed the training
slides used in the sessions and noted that they covered the activities
involved in IHS's business revenue cycle (registration, coding,
billings and collections, and debt management), RPMS management
reports, compliance with policies related to accounts receivable, debt
management, and third-party internal controls. Nonetheless, policies
and procedures that are not updated increase the risk that management
directives will not be followed, as well as the risk that the agency
may not be in compliance with federal regulations. For example, billing
and collection data, if submitted to an area office, could potentially
be recorded twice, which could affect the agency's financial records
and financial statements.
We also found that while Part 9 of the Indian Health Manual included
policies and procedures for managing and collecting debts owed to IHS,
it also included requirements for area offices to develop area debt
management programs and for each service unit to develop location-
specific debt management plans. However, the policies and procedures
did not include guidance on what should be included in either the debt
management programs or plans, or how the area offices and service units
would implement them. Additionally, the training provided by ORAP
included guidance on debt management policies and procedures, but did
not include guidance on what is expected or required in the location-
specific debt management programs or plans. Location-specific debt
management programs and plans help ensure that agencywide policies and
procedures are implemented at specific locations with special
considerations for the various operating environments of the area
offices and service units.
When we discussed these particular requirements with ORAP officials,
they agreed that the policies and procedures lacked the necessary
guidance to allow the area offices and services units to implement
location-specific programs or plans required by the policies and
procedures. When we discussed debt management activities with officials
from the nine IHS-administered area offices and nine of IHS's service
units, none of them indicated that they had location-specific programs
or plans in place. Some area office and service unit officials told us
that they were developing a program or plan, while others said that
they were using the Indian Health Manual, Part 9 "Debt Management" as
their debt management policies and procedures, rather than developing
separate programs or plans. Without well-defined debt management plans,
area offices and service units may not be conducting debt collection
activities in compliance with IHS's policies and procedures or federal
regulations, and may not be maximizing collection of the amounts due
from private insurers.
IHS Headquarters' Monitoring of Area Office and Service Unit Compliance
with Billing and Collection Policies and Procedures Is Inadequate, but
Initiatives are Under Way to Increase Oversight:
IHS headquarters' monitoring activities of area office and service unit
compliance with billing and collection policies and procedures are
inadequate, but agency officials told us they are taking steps to
increase oversight. Federal internal control standards require agency
management to conduct monitoring of program quality and
performance.[Footnote 12] Part 5 of the Indian Health Manual requires
the Director of ORAP to monitor area office and service unit compliance
with IHS policies and procedures for billing and collecting revenue
through IHS-wide policy compliance reviews and internal audits. Before
implementing the Web-based tool, ORAP's monitoring of policy compliance
had consisted of a small number of on-site compliance reviews at IHS
service units and through regular meetings with field staff.[Footnote
13]
Since the policy was implemented in 2005, ORAP has not conducted any
area office reviews, and has conducted on-site compliance reviews of
only 5 of the 61 IHS-administered service units--all of which were
completed in 2007 and 2008. During the on-site reviews, ORAP assessed
service unit compliance with key policies and procedures included in
Part 5 of the Indian Health Manual. For example, ORAP determined
whether the service unit was billing for outpatient services within 6
business days from the date of service as required by obtaining and
reviewing the data from specific RPMS reports to identify items of
noncompliance. If there were any deficiencies noted during the review,
ORAP communicated its findings and requested the service unit to
develop and submit a corrective action plan to address them. However,
ORAP officials told us they lacked direct authority over the service
units to ensure that the corrective action plans were prepared or
implemented. Additionally, ORAP officials told us that they were only
able to accomplish the 5 on-site reviews because these reviews are time
consuming and require significant staff resources to perform. These on-
site reviews also did not assess compliance with IHS's debt management
policies and procedures contained in Part 9 of the Indian Health
manual. Therefore, ORAP lacked assurance that the service units were
taking all required actions to collect outstanding debts from private
insurers.
Federal internal control standards require that agency management
conduct effective monitoring to assess program quality and performance
over time and work to address any identified deficiencies.[Footnote 14]
While ORAP had some limited processes for reviewing compliance with
policies and procedures, we found that ORAP does not monitor actual
performance of billing and collection activities. ORAP officials told
us that IHS headquarters does not have access to RPMS to routinely
monitor IHS-wide billing and collection data. This is a major
limitation because they also have not been able to readily obtain
detailed reports on area offices' and service units' performance on key
business revenue cycle activities, such as amounts billed, amounts
collected, amounts outstanding, and amounts adjusted or written off.
However, Part 5 of the Indian Health Manual does not include
requirements for ORAP, or any other office in headquarters, to collect
billing and collection data from area offices and service units, and
ORAP officials have not developed a process for routinely collecting
and analyzing data on amounts billed, amounts outstanding, as well as
debts that have been written off. On occasion, when prompted by
internal or external requests, ORAP has called upon area offices and
service units to submit detailed billing and collection data; however
it does not request these data on a routine basis. In addition, ORAP
cannot ensure that data are submitted in a timely manner because of
system limitations and lack of authority. For example, when we asked
ORAP officials for data on billing, adjustment, write-off, and
collections related to private insurers covering all IHS facilities for
fiscal years 2006 through 2008, officials told us they would need to
contact each area office and service unit, who would then need to
access the data from RPMS and forward them to IHS headquarters. For
most of the requested data, ORAP required several months to provide the
information to us.[Footnote 15]
To increase its oversight, IHS headquarters officials told us they have
begun taking steps to expand ORAP's compliance review activities,
ensure access to billing and collection performance data, and establish
direct line authority over area offices. In April 2008, ORAP developed
the "Third-Party, Internal-Controls Policy, Self-Assessment Audit
Program," a Web-based tool to assess service unit compliance with the
IHS's internal control policy and procedures on a more frequent basis
than the on-site reviews allowed. The tool, modeled after the on-site
review, contains questions on policies and procedures related to
billing and collection. Each service unit is required to complete the
tool on a quarterly basis and upload supporting documentation with its
responses. Supporting documentation includes detailed billing and
collection information, such as the aging account summary report used
by the service unit to monitor outstanding accounts. ORAP officials
told us that they plan to produce management reports from the Web-based
tool to enhance operations and assess compliance with policies and
procedures for billings and collections. As of August 2009, ORAP
officials had not developed or produced these reports. Additionally,
the Web-based tool does not include questions on key policies and
procedures from IHS's debt management policy, Part 9, which includes
procedures for following up on delinquent debt and writing off balances
deemed uncollectible. As a result, ORAP's ability to monitor service
unit compliance with IHS's debt management policy is limited.
To further increase its oversight, ORAP plans to monitor billing and
collection data that are now captured in UFMS since its implementation
in October 2008. According to IHS officials, the integration of RPMS
with UFMS permits the consolidation of financial data across all IHS
facilities to support timely and reliable financial reporting to IHS
headquarters. ORAP officials told us that by the end of calendar year
2009, they expect to begin producing management reports from the UFMS
database to help them monitor performance of billing and collection
activities. As of July 2009, ORAP had engaged a contractor to help it
develop a plan for producing management reports from UFMS.
Additionally, IHS has established a Deputy Director of Field Operations
position, which reports directly to the Director of IHS, to oversee
area offices' compliance with policies and procedures for billing and
collection by monitoring the performance of the area directors.
Recognizing the need for increased oversight of the area offices, IHS
gave the new Deputy Director of Field Operations position a direct line
of authority over area office directors. As part of this
responsibility, the new Deputy Director of Field Operations is expected
to evaluate area office directors' performance. We verified that the
area office directors' performance contracts contain performance
measures related to compliance with policies and procedures for billing
and collection and some contained performance measures for area
offices' collection performance. While ORAP does not report directly to
the new Deputy Director of Field Operations, IHS officials expect that
the new Deputy Director of Field Operations will work closely with ORAP
to communicate and enforce service unit corrective action plans for
deficiencies, if any, identified by ORAP through its utilization of the
Web-based tool. Per the Deputy Director of Field Operations position
description, a major responsibility of the position will be to provide
direction to area offices to ensure IHS policies are consistently
applied in the field and that field operations and programs do not
conflict with laws and regulations and HHS/IHS policy. As of August
2009, IHS had not permanently filled this position, although there is
currently an acting Deputy Director in place performing these functions.
Full implementation of the current initiatives, along with additional
data and reporting, would enable reporting to IHS management, including
the Deputy Director of Field Operations, and enhance IHS's monitoring
of its billing and collection activities. Until then, IHS management's
ability to monitor area offices and service units will continue to be
limited.
Conclusions:
While the design of IHS's policies and procedures relating to its
billings and collections from private insurers is consistent with
federal standards, to remain useful these policies and procedures must
be periodically evaluated to ensure that they are still relevant and up
to date. Policies and procedures that include outdated processes that
do not reflect IHS's current operating environment could lead to
operational inefficiencies and errors in recording transactions that
negatively impact IHS's program management and financial reporting.
Further, the lack of complete guidance related to the location-specific
debt management plans increases the risk that IHS offices and
facilities will not consistently implement the debt collection actions
necessary to comply with federal law or maximize the amounts collected
and used to provide needed services.
Until recently, IHS headquarters had largely delegated its monitoring
responsibilities for billing and collection activities to the area
offices and service units and did not have direct or timely access to
performance data to effectively manage the program. IHS headquarters
has now focused increased attention on monitoring the billing and
collection activities of its area offices and service units and has
recently developed tools for collecting compliance and performance
data. While these tools provide more data to IHS headquarters on
billing and collection activities, the data captured by these new tools
have not yet been analyzed and communicated back to management in a
manner that would assist in monitoring compliance with IHS policies and
procedures and improving agency operations and collection activity.
Moreover, IHS has an opportunity to enhance the tools by considering
other data sources and performance metrics to provide a more
comprehensive assessment of service unit and area office debt
management activities. Such enhancements could also be used to
prioritize the on-site compliance reviews to focus on the units with
the most risk using the data captured in these tools. These efforts can
help IHS make decisions regarding the resources expended in its
monitoring efforts based on the potential benefits of those activities
based on risk.
Recommendations:
We recommend that the Director of IHS strengthen IHS's management and
oversight of billing and collection activities by updating and
providing additional guidance in the agency's policies and procedures
for billing and collection from private insurers. As part of this
effort, the Director of IHS should direct IHS officials to take the
following actions:
* Review and update the outdated parts of the Indian Health Manual to
reflect IHS's implementation of UFMS.
* Develop and establish location-specific guidance for implementing the
requirements in Part 9 of the Indian Health Manual for area offices and
service units to individually develop and implement debt management
programs and operational plans, and direct the Area Office Directors
and Service Unit CEOs to provide training at the local level to ensure
the programs and plans are effectively implemented.
* Develop specific tools and reporting mechanisms to monitor and manage
the business revenue cycle, including billing and collection, and debt
management activities.
* Develop a risk-based approach using the information obtained from the
new data sources (i.e., the UFMS database and Web-based tool) to
prioritize which service units receive future on-site compliance
reviews.
Agency Comments and Our Evaluation:
In written comments on a draft of this report (reprinted in their
entirety in enclosure II), HHS stated that it agreed with the draft
report and offered some comments that focused on steps being taken by
IHS to improve its oversight over billings and collections. In
particular, the letter discussed IHS's plans to use revenue reports
from its new financial management system, UFMS, in conjunction with the
new Web-based "Third-Party, Internal Controls Policy, Self-Assessment
Audit Program" tool to improve monitoring of the third-party revenue
program at IHS headquarters. HHS also recognized the need for IHS to
update its policies and procedures and stated that IHS wanted to allow
time to train staff on the new UFMS system, test new processes,
evaluate those results, and make any additional changes that may be
necessary before undertaking revisions to the policies and procedures
in 2010. This is a reasonable approach and we encourage IHS to move
forward expeditiously. Finally, HHS acknowledges that IHS had some
initial implementation issues with UFMS and stated that the issues have
now been resolved, which will allow IHS to focus on developing and
producing the planned management reports. IHS provided separate
technical comments which we considered and incorporated into this
report as appropriate.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution of it until 30
days from the date of this report. We will then send copies to the
Director of the Indian Health Services, appropriate congressional
committees, and other interested parties. In addition, the report will
be available at no charge on GAO's Web site at [hyperlink,
http://www.gao.gov].
If you or your staff have questions about this report, please contact
Kay L. Daly at (202) 512-9095 or at dalykl@gao.gov or Kathleen M. King
at (202) 512-7114 or at kingk@gao.gov. Contact points for our Office of
Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this
report are listed in enclosure III.
Sincerely yours,
Signed by:
Kay L. Daly:
Director, Financial Management and Assurance:
Signed by:
Kathleen M. King:
Director, Health Care:
[End of section]
Enclosure I: Scope and Methodology:
To examine the design of Indian Health Service's (IHS) key policies and
procedures for billing and collecting revenue from private insurers, we
obtained and reviewed the following sections of the Indian Health
Manual:
* Part 5, Chapter 1 "Third-party Revenue Accounts Management and
Internal Controls" dated March 3, 2006, which provides policies and
procedures for establishing, documenting, and monitoring IHS's accounts
receivable; and:
* Part 9, Chapter 4 "Debt Management" dated December 13, 2007, which
establishes IHS policy, responsibilities, procedures to be followed for
collecting debts owed to IHS, and writing off debts when they are
determined to be uncollectible.
We also reviewed IHS's Revenue Operations Manual dated July 2006 which
provides standardized policies, procedures, and guidelines for each
task associated with the business revenue cycle activities of IHS
facilities.
We compared IHS's documented policies and procedures with the Financial
Systems Integration Office's (FSIO) standard business processes for
administering and managing federal accounts receivables.[Footnote 16]
We selected the FSIO standard business processes because they were
developed to standardize common financial business activities and
processes to ensure that financial managers assess programs and make
decisions with timely and accurate data.[Footnote 17] We also
considered GAO's Standards for Internal Control in the Federal
Government.[Footnote 18] Further, we interviewed relevant IHS officials
about the agency's policies and procedures for billing and collection
including the Director of Office of Resource Access and Partnerships
(ORAP), and the Director of the Division of Business Office
Enhancement. We limited the scope of our review to IHS-administered
facilities because under federal law, tribally operated facilities are
not generally subject to the policies, procedures, and reporting
requirements established for IHS-administered facilities. Due to
systems limitations, IHS could not provide us with detailed transaction-
level billing and collection data in a timely manner. IHS required more
than 6 months to provide the data we requested on the amounts of claims
written off and adjusted and the reasons for those adjustments. As a
result, we were unable to conduct testing to determine whether IHS is
actually complying with its policies and procedures. Accordingly and as
agreed with your staff, we limited our review to the design of IHS's
policies and procedures over billing and collecting from private
insurers, not their implementation. At the area office and service unit
levels, we obtained written responses to questions we developed and
submitted, and conducted follow-up interviews with 9 of the 12 IHS area
offices, as well as the Chief Executive Officers, or their designees,
of 9 of the 61 service units.[Footnote 19] At each level, we asked
officials about the types of activities they typically undertake to
comply with IHS's policies and procedures related to billing and
collection.
To examine the adequacy of IHS headquarters monitoring of area office
and service unit compliance with IHS policies and procedures for the
billing and collection of revenue, including debt management, we
evaluated IHS headquarters' monitoring activities using the policies
and procedures contained in Parts 5 and 9 of the Indian Health Manual
and GAO's Standards for Internal Control in the Federal Government.
[Footnote 20] At IHS headquarters, we interviewed the Director and
other officials within ORAP--whose responsibilities include developing
policies and procedures for the agency--to ask them about the
availability of billing and collection data and their monitoring
activities. We also interviewed the acting Deputy Director of Field
Operations. In addition, we reviewed IHS's documentation of one of the
five completed IHS on-site service unit policy compliance reviews as
well as components of IHS's new Web-based "Third-Party, Internal-
Controls Policy, Self-Assessment Audit Program." We also reviewed the
performance contracts of area office directors for fiscal year 2009 to
identify performance measures related to billing and collection
activities. We examined the adequacy of monitoring activities at IHS
headquarters, but did not examine the adequacy of monitoring at the
area office or service unit levels.
We requested comments on a draft of this report from IHS. We received
written comments from HHS on October 19, 2009, and have summarized
those comments and our responses in the Agency Comments and Our
Evaluation section of this report. We conducted this performance audit
from June 2008 through September 2009 in accordance with generally
accepted government auditing standards. Those standards require that we
plan and perform the audit to obtain sufficient, appropriate evidence
to provide a reasonable basis for our findings and conclusions based on
our audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit
objectives.
[End of section]
Enclosure II: Comments from the Department of Health and Human
Services:
Department Of Health & Human Services:
Office Of The Secretary:
Assistant Secretary for Legislation:
Washington, DC 20201:
October 19, 2009:
Kay L. Daly:
Director, Financial Management and Assurance:
U.S. Government Accountability Office:
441 G Street N.W.
Washington, DC 20548:
Dear Ms. Daly:
Enclosed are comments on the U.S. Government Accountability Office's
(GAO) report entitled: Indian Health Service: Updated Policies and
Procedures and Increased Oversight by IHS Headquarters Needed for
Billings and Collections from Private Insurers (GAO 10-42R).
The Department appreciates the opportunity to review this report before
its publication.
Sincerely,
Signed by:
Andrea Palm:
Acting Assistant Secretary for Legislation:
Enclosure:
[End of letter]
HHS Comments to the Draft GAO Report GAO-10-42R:
The Department of Health and Human Services agrees with the subject
Draft Report. We offer the following general comments:
1. In reference to the need for "Increased Oversight by IHS
Headquarters," we are making improvements. The current initiative to
access the Unified Financial Management System (UFMS) database will
provide IHS wide revenue reports that Headquarters can use to monitor
the revenue program in conjunction with the online Internal Controls
Policy reporting tool. IHS will consider the development of a risk-
based approach to using the information obtained from the new data
sources (i.e., the UFMS database and the Web-based "Third-Party,
Internal-Controls Policy, Self-Assessment Audit Program" tool) to
prioritize which Service Units receive future onsite compliance
reviews.
2. IHS recognizes that its policies and procedures must be updated. The
accounts Receivable Module in UFMS and Subsidiary link to RPMS were not
interfaced until October 1, 2008. With any transition of this
magnitude, there is always a specified amount of time it takes to
stabilize the new environment, train on new processes, test new
processes, monitor and evaluate those results, and make any changes
that may be necessary to ensure the validity of the data and outcome
are stable.
We are working expeditiously to update policies and operations affected
by the implementation of this new system. This will be accomplished
once implementation and testing of new processes are fully designed,
and training is provided to all sites. The new policies are scheduled
to be completed in 2010. Development and implementation of centralized
reporting capabilities using the UFMS database is also scheduled to be
completed in 2010.
3. On page 14, paragraph 2, last sentence, "however, as of July 2009,
ORAP had only taken an initial step of engaging a contractor to help
them develop a plan for producing management reporting." IHS had on-
going discussions between the Finance Office and the UFMS contractor
back in FY 2007 and FY 2008 regarding UFMS implementation and reporting
capabilities. Challenges with UFMS implementation have been ongoing
because the UFMS system required numerous changes and adjustments
throughout the implementation process. We were unable to interface the
billing program with UFMS in October of 2007 as planned because the
system did not have the capacity to handle the volume. This issue has
now been resolved as of October 1, 2009.
[End of section]
Enclosure III: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Kay L. Daly, (202) 512-9095 or dalykl@gao.gov:
Kathleen M. King, (202) 512-7114 or kingk@gao.gov:
Staff Acknowledgments:
In addition to the individuals named above, key contributions were made
to this report by Phillip McIntyre, Assistant Director; Catina Bradley,
Assistant Director; Carolyn Yocom, Acting Director; Jehan Abdel-Gawad;
Devin Barnas; William Brown; Anthony Eason; Michael Grimes; Darryl
Joyce; Drew Long; Kevin Milne; and Jasleen Modi.
[End of section]
Footnotes:
[1] Primary care services include medical, dental, and vision;
ancillary services include laboratory, diagnostic imaging, and pharmacy
services; and specialty care includes services provided by
cardiologists, surgeons, and other physician specialists.
[2] 25 U.S.C. § 1621e(a). The act authorizes IHS to collect
reimbursement for reasonable expenses incurred to the same extent that
an individual or nongovernmental provider would be eligible to receive
reimbursement.
[3] 25 U.S.C. § 1621(b).
[4] A write-off is an accounting action that results in reporting a
debt as having no value on IHS's financial statements and internal
management reports. However, a write-off does not waive IHS's right to
the amount in question and does not preclude IHS from pursuing debt
collection. IHS also makes accounting adjustments to claims to reduce
the outstanding balance for amounts that are not collectible from the
private insurance companies such as for copayments, deductibles, and
other amounts.
[5] FSIO, Financial Management Systems Standard Business Processes for
U.S. Government Agencies (Washington D.C.: November 2008). FSIO assumed
the standards-setting function of the Joint Financial Management
Improvement Program, and has been tasked with developing standard
business processes, data specifications, and business rules for core
financial management functions to be adopted by all federal agencies to
help federal agencies meet the objectives of the Federal Financial
Management Improvement Act of 1996 and Office of Management and Budget
Circular A-127.
[6] IHS is organized into 12 area offices, 9 of which support a total
of 61 IHS-administered service units. Of the 3 remaining area offices,
California and Alaska support only tribally administered service units.
The Nashville area office supports tribally administered service units
and one recently converted IHS-administered service unit for which IHS
did not have data at the time of our request.
[7] GAO, Standards for Internal Control in the Federal Government
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington
D.C.: November 1999).
[8] GAO, Standards for Internal Control in the Federal Government
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington
D.C.: November 1999).
[9] IHS's business revenue cycle policies and procedures cover revenue
from both private insurers and government programs such as Medicare and
Medicaid.
[10] Claims for medical services provided by IHS facilities are
submitted to private insurance companies for payment. The private
insurance companies make a determination on which services they cover
and how much the reimbursement will be. In addition, in some cases they
may decide not to reimburse the IHS facility for some or all of the
billed items for various reasons such as the claim was not submitted
within the allowed period of time as defined by the insurance company.
[11] FSIO, Financial Management Systems Standard Business Processes for
U.S. Government Agencies (November 2008).
[12] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[13] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[14] The Director of ORAP told us the office routinely facilitated
monthly teleconferences and quarterly meetings with business office
staff from the area offices and service units to discuss issues related
to business revenue cycle activities. These meetings allow ORAP to
disseminate information, discuss RPMS issues, and obtain service units'
collection reports. However, the reports from these meetings have not
been used to produce annual performance reports or used for programwide
decision making.
[15] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[16] In order to provide the requested data, ORAP officials designed a
software program to extract the data from RPMS and instructed each of
the 61 service units to install the software as it could not be done
centrally. After installation, each service unit generated the required
reports and submitted data to ORAP where they were summarized for our
use.
[17] FSIO, Financial Management Systems Standard Business Processes for
U.S. Government Agencies (Washington D.C.: November 2008).
[18] We did not assess the extent to which the FSIO standard processes
reflect the appropriate implementation of applicable laws, regulations,
or standards.
[19] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[20] IHS is organized into 12 area offices, 9 of which support a total
of 61 IHS-administered service units. Of the 3 remaining area offices,
California and Alaska support only tribally administered service units.
The Nashville area office supports tribally administered service units
and 1 recently converted IHS-administered service unit for which IHS
did not have data at the time of our request. We interviewed IHS
officials at the 9 IHS-administered area offices, including Aberdeen,
Albuquerque, Bemidji, Billings, Navaho, Oklahoma, Phoenix, Portland,
and Tucson area offices. Within each of the 9 areas, we generally
selected on a nonstatistical basis the service unit with the largest
outstanding accounts receivable balance and interviewed cognizant
officials in these service units.
[End of section]
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