ACTIVITY/MECHANISM BUDGET SUMMARY

Department of Health and Human Services

Indian Health Services -- 75-0390-0-1-551

**DIRECT OPERATION**

Program Authorization: Program authorized by U.S.C. 13, Snyder Act, and
P.L. 83-568, Transfer Acts, 42 U.S.C. 2001.

+-------------+-------------+-------------+-------------+-------------+
|             | 2002        | 2003        | 2004        | Increase    |
|             |             |             |             |             |
|             | Actual      | President's | Estimate    | or Decrease |
|             |             |             |             |             |
|             |             | Budget      |             |             |
+-------------+-------------+-------------+-------------+-------------+
| BA          | \           | \           | \           | +           |
|             | $54,819,000 | $55,312,000 | $56,607,000 | \$1,295,000 |
+-------------+-------------+-------------+-------------+-------------+
| FTE         | 384         | 334         | 334         | 0           |
+-------------+-------------+-------------+-------------+-------------+

**[PURPOSE AND METHOD OF OPERATION]{.underline}**

The Indian Health Service Headquarters provides leadership, oversight,
and executive direction to 12 regional offices to ensure that
comprehensive health care services are provided to approximately
1.6 million American Indians and Alaska Natives. In addition,
Headquarters actively administers the Agency's accomplishment of the
President's Management Agenda and HHS Secretarial priorities and
initiatives, while simultaneously maintaining the special Tribal-Federal
relationship based in treaty and law.

[Headquarters]{.underline} \-- The Headquarters operations are
determined by statute and administrative requirements set forth by the
Department of Health and Human Services, the Administration, the
Congress, and field operations (Headquarters West, 12 Area Offices and
153 Service Units). Headquarters actively works with the Department to
formulate and implement national health care priorities, goals, and
objectives. The agency also works with the Department to formulate a
budget and necessary legislation. In addition, it responds to
congressional inquiries, and interacts with other governmental entities
to enhance and support health services for Indian people. The
Headquarters also formulates policy and distributes resources, provides
general program direction and oversight for IHS Areas and Service Units,
provides technical expertise to all components of the Indian health
system (I/T/U), maintains national statistics, identifies trends and
projects future needs.

[Area Offices]{.underline} \-- The 12 Area Offices distribute resources,
monitor and evaluate the full range of comprehensive health care and
community oriented public health programs and provide technical support
to IHS direct and tribally operated programs. They ensure the delivery
of quality health care through the 153 Service Units and participate in
the development and demonstration of alternative means and techniques of
health services management and delivery to promote the optimal provision
of health services to Indian people through the I/T/U.

The funding for Direct Operations is discretionary and it funds
Headquarters (east and west) and 12 Area Offices operations across the
country. In FY 2004, it is expected the operating budget will mirror the
allocation and spending trend as shown below. In FY 2002, Headquarters
had an operating budget of \$24 million with 211 FTE and the 12 Area
Offices of \$31 million with 151 FTE. Included in these operating
budgets are Tribal shares for Titles I and V of approximately \$1.6
million and \$9.3 million, respectively. (See table below.)

+--------------------+---------------+-----------------+--------------+
|                    | FY 2002       | FY 2003         | FY 2004      |
|                    |               |                 | Request      |
|                    | Actual        | Pres. Budget    |              |
+--------------------+---------------+-----------------+--------------+
| Headquarters       | \             | \$23,784,000    | \$24,341,000 |
|                    | *\$23,792,153 |                 |              |
+--------------------+---------------+-----------------+--------------+
| Area Offices (12)  | [\*           | [31,528,0       | [32,266,000] |
|                    | 31,026,847    | 00]{.underline} | {.underline} |
|                    | ]{.underline} |                 |              |
+--------------------+---------------+-----------------+--------------+
| BA                 | \$54,819,000  | \$55,312,000    | \$56,607,000 |
+--------------------+---------------+-----------------+--------------+
| FTE                | 384           | 334             | 334          |
+--------------------+---------------+-----------------+--------------+
| Headquarters       | 211           | 183             | 183          |
+--------------------+---------------+-----------------+--------------+
| Area Offices (12)  | 172           | 151             | 151          |
+--------------------+---------------+-----------------+--------------+

\* Title I Tribal Shares of \$1.6M: HQ \$1.2M and Area \$462K (FY 2002
actual).

\* Title V Tribal Shares of \$9.3M: HQ \$4.0M and Area \$5.3M (FY 2002
actual).

In addition to providing management and administrative direction and
oversight, in FY 2004 Headquarters will continue frontline work on many
management and administrative priorities and initiatives. One of the
priorities that present a significant challenge is linking the
performance measurements to the budget and eventually to cost. Other
important challenges are the Human Resources development, work life
improvements, and recruitment and retention. The development and
refinement of Information Technology Planning, Capital Planning, Program
Evaluation, and Workforce Restructuring will also continue as important
challenges, as the environment changes in responses to tribal
contracting and compacting, changes in technology, and health care in
the U.S.

**[ACCOMPLISHMENTS]{.underline}**

[Self-Determination]{.underline} \-- In FY 2002, the IHS received a \$20
million increase in its appropriation for Contract Support Costs (CSC). 
This increase was specified as available for the CSC needs associated
with new or expanded contracts or compacts.  There was no general
increase appropriated for the CSC associated with ongoing programs,
i.e., current services.  The same allocation methodology used in FY 2000
and FY 2001 was used in FY 2002 to allocate these increases.

The IHS is continuing to work with Tribes to contain ongoing program
contract support costs and to promote consistency throughout the IHS
system in the types of CSC awarded by the Agency for new and expanded
programs.

 

The anticipated pace of self-determination activities in FY 2002 showed
a dramatic increase in contracting over previous years.  This was
primarily due to contracting initiatives undertaken by the Navajo Nation
and the Eastern Band of Cherokee Indians who assumed major IHS programs
resulting in the outsourcing of over \$72 million in programs and 1,052
FTEs.  The IHS is continuing to work with Tribes on the orderly transfer
of programs from IHS management to Tribal control.  This pace is totally
at the discretion of the Tribes as specified in Public Law 93-638,
Indian Self-Determination and Education Assistance Act, as amended.

#### 

#### Self-Governance -- In FY 2000, the Congress made Tribal Self-Governance Authority permanent. In FY 2002 the implementing regulations were developed in a joint rule making process, published in the Federal Register for public comment and subsequently published in final, May 17, 2002. The regulations contain significant provisions that will strengthen the Federal-Tribal relationship. In FY 2003, the IHS anticipates that over \$840 million will be transferred to support 61 compacts with tribes. Collaboration with Self-Governance Tribes will continue in FY 2003 and FY 2004 to improve health data reporting and audit compliance and resolution. Over 25 Tribes have expressed an interest or intent to enter into Self-Governance in FY/CY 2004.  A report is being compiled on the successful outcomes of the Self-Governance tribes.

#### 

[Organizational Change]{.underline} \-- In FY 2002, the IHS worked with
Tribal leaders to develop restructuring options for the IHS. The work
group, comprised of 16 Tribal Leaders and 4 senior IHS managers,
identified changes in the Indian health care system that will best
enable accessible and acceptable health care services for American
Indians and Alaska Natives during the next 5-7 years. The work group
considered proposals in the President's Management Agenda and the HHS
Secretary's Workforce Restructuring Plan in crafting its recommendations
for the IHS.

"Transitions 2002, A 5-Year Initiative to Restructure Indian Health"
addressed critical foundational issues concerning the special
Federal-Indian relationship, including the requirement of Tribal
consultation as set forth in Presidential Executive Order on involvement
of Tribes in policy matters. The elimination of health disparities
experienced by Indian people was identified as the top priority for the
IHS during the next 5-7 years. The report offers options for IHS
consolidation. Among these are internal realignment and reorganization
of administrative support functions from Area Offices into 3-4 regional
sites. Regional centers offer the best combination of potential savings,
improved support, and lower transition costs for operations support
functions such as human resources, financial management, and
acquisitions. IHS Area Offices would continue providing technical
assistance especially in coordinating the health professions and for
expertise on local health issues.

To eliminate Indian health disparities and sustain health over the long
run, the report recommends a new balance of health care services for
treatment and rehabilitation, and greater emphasis on disease prevention
and public health programs. Achieving these reforms will require
addressing the IHS work force, facilities, and technological
infrastructure.

The workgroup's restructuring recommendations together with feedback
obtained during consultation will provide an important framework for
guiding agency organization. Already drafted is a plan to reorganize IHS
headquarters consistent with the new approach. Technical analyses of
costs and benefits of the regionalizing administrative functions are
underway. The agency expects to use this plan as a template for change
during the next 5-7 years.

[Workforce Report]{.underline} -- The Indian Health Service finished FY
2002 with 14,899 FTE on board, which is 117 over the target level of
14,782, and approximately 1,020 were assigned to tribes through
Inter-Governmental Act Assignments or Memoranda of Agreements. Also, of
the 14,899 FTE, 14,014 are working at the Service Unit level providing
direct health care to 1.6 million American Indians and Alaska Natives.
IPA and MOA are important to achieving self-determination, as they
minimize recruitment problems at the time of the transfer of programs to
the tribes. Continued Federal support through Direct Operations includes
such costs as payroll processing and workman's compensation for FTE
assigned to tribes.

[Business Plan]{.underline} \-- In 1996, the Director, IHS established a
workgroup to research methods to assist the IHS in shifting to a more
business-oriented way of operating. The Business Plan Workgroup (BPWG)
completed its charge in 1997 and recommended many changes to adopt more
business-like practices into key segments of the IHS operations.

A second BPWG was established in 2002, with a charge to recommend a
business plan that enhances the level of patient care through increased
revenue, reduced costs and improved processes. In keeping with the
President's Management Agenda, this will include adopting more
corporate-like practices into key segments of the Indian health system.

The business plan drafted by the 2002 work group has been distributed
for review and comment by all components of the Indian health system
(the IHS, Tribes and Urban Indian Health programs). The BPWG expects to
complete its work at the upcoming January meeting and shortly thereafter
present a plan to the Director.

The plan presented to the Director will include strategies to:

-   Stabilize the IHS, permitting it to progress towards its goals and
    objectives but challenging it to "do things better".

-   Obtain new resources from both internal and external sources.

-   Position IHS services within the market in relation to its
    competitors.

-   Concentrate efforts on six strategic business units:

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-   the health delivery system

-   contract health services and managed care

-   business operations

-   infrastructure

    -   information technology

    -   training

    -   administrative support and facilities

    -   alliances, partnerships and collaborations, and

    -   marketing.

At the January meeting the BPWG will also complete work to support to
the Restructuring Initiatives Workgroup by providing a business case
analysis to the RIW recommendations that involve cost. This will include
information as to whether the cost is supportable in the context of the
financial outlook of the Agency.

> In collaboration with CMS, IHS continues to improve its cost report
> data to base CY 2004 Medicare and Medicaid rates. Ongoing Business
> office operations improvements include training on certified
> procedural coding of professional services using industry standards,
> patient benefits alternate resource access, and third party billing
> and accounts receivable follow-up. IHS wide training will be held
> targeting IHS managers at the Areas, hospitals and clinic levels on
> strengthening the revenue generation cycle and compliance. Additional
> Medicare Part B training will be developed in collaboration with CMS
> and Trailblazer, the designated Fiscal Intermediary for IHS. The IHS
> continues to improve its information system to process claims
> electronically and auto post payments in the accounts receivable
> system.

##### PERFORMANCE PLAN

The Direct Operations budget contributes to the performance indicators
that are included in the IHS FY 2004 Annual Performance Plan. These
indicators address some of the administrative aspects of providing
health care to American Indian and Alaska Native population.

[Indicator 40]{.underline}: During the FY 2004 reporting period, the IHS
will have improved the level of Contract Health Services (CHS)
procurement of inpatient and outpatient hospital services for routinely
used providers to at least 1 percent over the FY 2003 level of the total
dollars paid to contract providers or rate quote agreements at the
IHS-wide reporting level.

[Indicator 41]{.underline}: By the end of FY 2004, the IHS will have
completed a systematic assessment of the public health infrastructure
for Headquarters in three additional Area Offices.

[Indicator 43]{.underline}: By the end of FY 2004, the IHS will increase
by 10 percent over the FY 2003 level the proportion of IHS facilities
who have implemented Hospital and Clinic Compliance Plans to assure that
claims meet the rules, regulations, and medical necessity guidance for
Medicare and Medicaid payment.

[Indicator 44]{.underline}: During FY 2004, the IHS will support the
efficient, effective and equitable transfer of management of health
programs to tribes submitting proposals or letters of intent to contract
or compact IHS programs under the Indian Self-Determination Act by:

a.  Providing technical assistance to each tribe submitting proposals or
    letters of intent based on identified areas of need and with
    specific technical assistance in the area of calculating contract
    support costs.

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a.  Reviewing each initial contract support cost requests submitted
    using IHS Contract Support Cost Policy Review Protocol to assure the
    application of consistent standards in order to assure equitable and
    approvable requests.

[Indicator 46]{.underline}: During FY 2004, the IHS will systematically
work to improve nurse attrition rates by:

a\. Implementing the National Council of Nurses Recruitment and
Retention Plan in all IHS Areas and Headquarters.

b.  Assessing Area vacancy and attrition rates, on-line exit interviews,
    and job satisfaction surveys to include salary and benefits analysis
    to identify those locations where nursing vacancy and attrition
    rates are most problematic.

Following are the funding levels for the last 5 fiscal years:

  -------------------- ----------------------- ------------------- -----------------------------------------
  [Year]{.underline}   [Funding]{.underline}   [FTE]{.underline}   

  1999                 \$49,309,000            729                 

  2000                 \$50,988,000            \*\*1,629           

  2001                 \$52,946,000            \*\*1,483           

  2002\*               \$54,819,000            384                 

  2003                 \$55,312,000            334                 President's Budget
  -------------------- ----------------------- ------------------- -----------------------------------------

\* Reflects rescission of \$504,000 in Administrative Expenses per P.L.
107-206, Sec. 1403(a), August 2, 2002.

\*\* Includes IPA/MOA with Tribal contracts or compacts.

##### RATIONALE FOR THE BUDGET REQUEST

**[TOTAL REQUEST]{.underline}** \-- The request of \$56,607,000 is an
increase of \$1,295,000 and no change in FTE over the FY 2003
President's Budget request of \$55,312,000.

#### Pay Cost Increases: +\$1,295,000

The request of \$1,295,000 would fund pay cost increases for
federal/tribal/urban FTE.

The IHS continues to strive to increase access for the IHS patient
population. Maintaining the current I/T/U health system is necessary in
eliminating disparities in health status between American Indians and
Alaska Natives and the rest of the U.S. population.