Department of Health and Human Services
OFFICE OF 
   
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
IHS   CONTRACT HEALTH 
 
S P :
ERVICES  ROGRAM   
 
 
O P
VERPAYMENTS AND  OTENTIAL 
 
  S  
AVINGS
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
September 2009 
OEI-05-08-00410   
Office of Inspector General 
http://oig.hhs.gov 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs.  This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 
audits with its own audit resources or by overseeing audit work done by others.  Audits 
examine the performance of HHS programs and/or its grantees and contractors in carrying 
out their respective responsibilities and are intended to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, abuse, and 
mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud, waste, or abuse and promoting 
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 
of fraud and misconduct related to HHS programs, operations, and beneficiaries.  With 
investigators working in all 50 States and the District of Columbia, OI utilizes its resources 
by actively coordinating with the Department of Justice and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to criminal 
convictions, administrative sanctions, and/or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support for OIGs internal operations.  OCIG represents OIG in all civil and 
administrative fraud and abuse cases involving HHS programs, including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program guidance, publishes fraud alerts, and provides other 
guidance to the health care industry concerning the anti-kickback statute and other OIG 
enforcement authorities.   
 I N T R O D U C T I O N  
 EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY   
OBJECTIVES
 
1.  To determine the extent to which the Indian Health Service 
(IHS) and tribes paid for Contract Health Services (CHS) 
program hospital claims above the required Medicare rate. 
2.  To assess the potential savings if CHS program nonhospital 
claims were paid at the Medicare rate. 
BACKGROUND 
In fiscal year 2008, IHS was given a budget of $3.35 billion to provide 
health care to approximately 1.9 million American Indians and 
Alaska Natives belonging to federally recognized tribes.  IHS can 
provide health care directly or tribes can operate their own health 
care programs.  IHS and tribes provide direct health care to American 
Indians and Alaska Natives mainly at small health clinics offering 
routine health care. 
When an IHS or tribal health-care facility is not available or does not 
provide required emergency or specialty care, IHS and tribes rely on 
the CHS program.  IHS manages the CHS program through 84 area 
offices and local service units.  Tribes manage the CHS program 
through 175 tribally operated service units.     
Pursuant to the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) and IHSs implementing 
regulations, all Medicare-participating hospitals must accept 
reimbursement no greater than the Medicare rate as payment in full 
for patients eligible for CHS.  Nonhospital providers, such as 
physicians, are not covered by this MMA provision.       
We analyzed 716 paid CHS claims for services delivered between 
January and March 2008.  For each claim, we determined the 
Medicare rate.  We then calculated the difference between the 
Medicare rate and the CHS payment.  We projected all statistics to 
IHS and the 63 percent of tribes from which we received claims.     
FINDINGS 
IHS and tribes paid above the Medicare rate for 22 percent of 
hospital claims between January and March 2008, resulting in             
$1 million in overpayments.  While 22 percent of hospital claims 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  i 
   
 EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY   
were paid above the Medicare rate, the resulting overpayments only 
accounted for 3 percent of the total $33 million that IHS and tribes 
spent on hospital claims between January and March 2008.  Most 
overpayments were for hospital outpatient claims.  Tribes accounted 
for most dollars overpaid. 
If IHS and tribal payments for nonhospital claims were capped at 
the Medicare rate, they could have saved as much as $13 million 
between January and March 2008.  IHS and tribes paid above the 
Medicare rate for 71 percent of nonhospital claims.  Most of these 
claims paid above the Medicare rate were for physician services.   
RECOMMENDATIONS 
IHS and tribes should take appropriate action regarding overpaid 
CHS hospital claims.  We have forwarded all IHS hospital claims 
that we determined were overpaid to IHS, and all tribal hospital 
claims that we determined were overpaid to tribes. 
IHS should direct its fiscal intermediary to ensure that all future 
CHS hospital claims are paid at or below the Medicare rate.  We 
found that the IHS fiscal intermediary paid $231,000 over the 
Medicare rate for hospital claims. 
IHS should provide technical assistance to tribes to ensure proper 
payments of hospital claims.  As a first step, IHS and tribes could 
work together to determine why hospital claims were paid over the 
Medicare rate.  IHS could then develop guidance to prevent future 
overpayments.  
IHS should seek legislative authority to cap payments for CHS 
nonhospital services.  The passage of the MMA provision helped 
ensure lower rates for hospital services.  A separate provision may be 
necessary to ensure lower rates for nonhospital services. 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
IHS concurred with all four of our recommendations.  We did not 
make any changes based on IHS comments.  
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  ii 
   
 T A B L E   O F   C O N T E N T S  
 
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
 
I N T RO DUC T IO N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 
 
 
F I N D IN G S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8  
IHS and tribes paid above the Medicare rate for 22 percent of  
hospital claims between January and March 2008, resulting in          
$1 million in overpayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8  
If IHS and tribal payments for nonhospital claims were capped          
at the Medicare rate, IHS and tribes could have saved as much as       
$13 million between January and March 2008 . . . . . . . . . . . . . . . . 9  
   
R E C O MMEN D A T ION S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 
Agency Comments and Office of Inspector General Response . . . 13 
 
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 
  A:  Detailed Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 
  B:  Estimates and Confidence Intervals. . . . . . . . . . . . . . . . . . . . . 19 
  C:  Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 
 
A C K NO WL E D G M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26   
 I N T R O D U C T I O N  
 I N T R O D U C T I O N  
OBJECTIVES 
1.  To determine the extent to which the Indian Health Service 
(IHS) and tribes paid for Contract Health Services (CHS) 
program hospital claims above the required Medicare rate. 
2.  To assess the potential savings if CHS program nonhospital 
claims were paid at the Medicare rate. 
BACKGROUND 
Indian Health Service 
IHS provides health care to approximately 1.9 million American 
Indians and Alaska Natives belonging to federally recognized tribes.  
IHS can provide health care directly or may fund tribes to 
independently deliver health care.  The Indian Self-Determination 
and Education Assistance Act (ISDEAA) allows individual tribes, or 
consortia of tribes, the option to operate health care programs in lieu 
of IHS through self-determination contracts or self-governing 
compacts with IHS.1   
In fiscal year (FY) 2008, IHSs budget was $3.35 billion.2  With this, 
IHS and tribes provided health care directly at more than                       
700 facilities across the country, mainly on reservations or in rural 
communities.3  Most of these facilities were small health clinics 
providing routine health care.  In addition, IHS and tribes directly 
funded 46 hospitals, of which 20 had operating rooms.4   
Contract Health Services 
When an IHS or tribal facility is not available or does not provide 
required emergency or specialty care, IHS and tribes rely on the CHS 
program.  Over 17 percent of the IHS budget went to fund the CHS 
program in FY 2008.   
 
1 Titles I and V of the Indian Self-Determination and Education Assistance Act,                    
P.L. No. 93-638 (as amended). 
2 IHS, FY 2009 Budget Justification.  Available online at 
http://www.ihs.gov/NonMedicalPrograms/BudgetFormulation/bf_cong_justifications.asp.  
Accessed on March 24, 2009. 
3 IHS, Fact Sheets:  Facilities Construction.  Available online at 
http://info.ihs.gov/FcltCnstr.asp.  Accessed on March 24, 2009. 
4 Access to Contract Health Services in Indian Country:  Hearing Before the U.S. Senate 
Committee on Indian Affairs, 107th Cong. 4 (2008).  Statement of Robert McSwain, Director 
of IHS. 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  1   
II NN TT RR OO DD UU CC TT II OO NN   
The CHS program contracts with private providers, such as hospitals 
and physicians, to deliver health care.  CHS program staff try to 
negotiate the lowest price possible to deliver services to the American 
Indian and Alaska Native population in their area.  Historically, IHS 
and tribes have had difficulty negotiating low rates due to the 
relatively small number of eligible individuals and because there are 
few private providers in rural areas.5 
The CHS program is administered and managed through                      
259 IHS- and tribally operated service units.  Service units contain 
one or more hospital, health clinic, or other health care facility.  IHS 
manages the CHS program through 84 area offices and local service 
units.  Tribes manage the CHS program through 175 tribally operated 
service units.  Compacting tribes can supplement and reallocate CHS 
funds without IHS approval.6   
CHS medical priorities.  Due to limited funding, the CHS program can 
typically only fund the highest medical priority care, such as 
emergency care.7  The CHS program often defers or denies                
lower-priority services, including specialty care.  Among IHS CHS 
programs, an estimated 200,000 services were deferred or denied in 
2008.  This figure only includes IHS CHS programs and thus would 
likely be significantly greater if tribes were included. 
CHS payments.  The CHS program is the payer of last resort.8  If an 
American Indian or Alaska Native receiving CHS has other insurance 
coverage such as Medicare or Medicaid, that insurance pays first and 
CHS funds pay for any remaining costs.9  If a patient does not have 
other insurance, the CHS program pays for claims in full or at a rate 
negotiated with a provider as long as there are CHS program funds to 
do so.     
Generally, IHS and tribes use different claims processing and 
reimbursement systems to pay private providers.  IHS contracts with 
BlueCross BlueShield of New Mexico as a centralized fiscal 
 
5  IHS, Contract Health Services.  Available online at http://info.ihs.gov/CHS.asp.  
Accessed on March 24, 2009. 
6 ISDEAA  506(e), 25 U.S.C.  458aaa-5(e). 
7 IHS, Fact Sheets.  Available online at http://info.ihs.gov/CHS.asp.  Accessed on              
April 14, 2009.  42 CFR  136.23(e). 
8 42 CFR  136.61.   
9 42 CFR  136.30(g). 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  2   
I N T R O D U C T I O N  
intermediary to process CHS claims.10  Eight tribes also use this 
fiscal intermediary.  The remaining tribes use other systems to pay 
providers.   
CHS and Hospital Services 
Pursuant to the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) and its implementing regulations, 
all Medicare-participating hospitals must accept reimbursement no 
greater than the Medicare rate as payment in full for patients eligible 
for CHS.11  This change took effect on July 5, 2007.   
The MMA provision applies to both hospital inpatient overnight stays 
and same-day hospital outpatient visits.  Hospital facilities include 
acute care hospitals, psychiatric hospitals, critical-access hospitals, 
and long-term care hospitals.12  We consider all claims for services 
provided in these facilities to be hospital claims.    
CHS and Nonhospital Services  
The MMA provision does not apply to nonhospital facilities.  For 
instance, independent laboratories, ambulatory surgical centers, and 
independent ambulance providers are not covered and therefore are 
free to bill and receive payment above the Medicare rate for patients 
eligible for CHS.  Additionally, physician services, including those 
provided in a hospital, are not covered by the MMA provision.  We 
consider all claims for physician services and services provided in 
nonhospital facilities to be nonhospital claims. 
Related Reports 
A 1999 Office of Inspector General (OIG) study found that in                  
1995, the CHS program paid almost $5 million more than the 
Medicare rate to hospitals.  That study focused on hospital inpatient 
stays funded only by IHS.  It did not review claims from tribes, or any 
claims for hospital outpatient visits.13  Subsequent to that study, IHS 
required Medicare-participating hospitals to accept reimbursement 
 
10 IHS, Contract Health Services Data Quality Workgroup, CHS 101.  Available online 
at http://www.ihs.gov/NonMedicalPrograms/dqwg/dqwg-section1-home.asp.  Accessed on 
March 24, 2009. 
11 Medicare Prescription Drug, Improvement, and Modernization Act of 2003  506,             
P.L. No. 108-173; 42 CFR  136.30. 
12 42 CFR  489(b). 
13 OIG, Review of the Indian Health Services Contract Health Service Program,                  
A-15-97-50001, January 1999. 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  3   
I N T R O D U C T I O N  
equal to or lower than the Medicare rate for patients eligible for CHS, 
pursuant to the authority granted in the MMA provision.    
METHODOLOGY 
Below we provide a basic description of our methodological approach.  
See Appendix A for a more detailed description of our methodology. 
Scope 
We analyzed paid CHS claims for services provided between              
January and March 2008.  We excluded claims for services that did 
not have a corresponding Medicare rate and claims in which the 
patient had another form of insurance, such as Medicare, Medicaid, or 
private insurance.   
While we calculated the extent to which claims were paid at a rate 
greater than the Medicare rate for hospital and nonhospital services, 
we did not make a causal determination as to why some claims were 
overpaid. 
Sample and Data Collection 
We requested paid CHS claims from the IHS fiscal intermediary and 
the 167 tribes that do not use the fiscal intermediary for services 
delivered between January and March 2008.  We requested that 
programs submit only CHS claims that were not covered by another 
type of insurance.  We also requested that programs separate hospital 
and nonhospital claims. 
We received claims from the fiscal intermediary for all 84 IHS area 
offices and local service units administering the CHS program and 
the 8 tribes processing claims through the fiscal intermediary.  We 
received information directly from 102 of the 167 tribes that do not 
use the fiscal intermediary.  Despite repeated requests, we did not 
receive any information from 65 tribes.   
Next, we reviewed the claims submitted by IHS and tribes and 
excluded any claims that were outside of our scope.  After this, we had 
80,043 claims.     
From these 80,043 claims, we pulled a stratified random sample of 
800 claims.  The four strata were:  IHS hospital, tribal hospital, IHS 
nonhospital, and tribal nonhospital.  Each stratum contained                     
200 claims.  To improve the precision of our estimates, we further 
stratified the 80,043 claims by the amount paid (small, medium, and 
large).   
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  4   
II NN TT RR OO DD UU CC TT II OO NN   
We also collected and reviewed all relevant laws, regulations, and 
guidance regarding CHS programs and Medicare pricing for services.     
Data Analysis 
In total, we analyzed 716 of the 800 sampled claims.  We excluded the 
remaining 84 claims primarily because, upon further review, they fell 
outside of our scope.  Unless otherwise noted, we project all statistics 
to IHS and the 63 percent of tribes from which we received claims.  
See Appendix B for a list of 95-percent confidence intervals for all 
statistical projections. 
Determining the Medicare rate.  To determine the Medicare rate, we 
used the appropriate pricing software and fee schedules for 2008.  For 
inpatient hospital claims, the Medicare rate is based on the inpatient 
prospective payment system (IPPS).14  We used the Centers for 
Medicare & Medicaid Services (CMS) publicly available IPPS pricing 
software system to determine the Medicare rate for inpatient CHS 
claims.   
For outpatient hospital claims, the Medicare rate is based on an 
outpatient prospective payment system.15  Most services are classified 
into clinically similar groups called Ambulatory Payment 
Classifications (APC).  For hospital outpatient claims, we used pricing 
software developed by MediRegs16 to determine the APC price.  
However, some services do not use an APC code.  In these cases, we 
used various fee schedules, including the 2008 clinical laboratory fee 
schedule.   
For claims from cost-based facilities, such as critical-access hospitals, 
the Medicare rate is based on each hospitals per diem and                 
cost-to-charge ratio.  We relied on the per diem and cost-to-charge 
ratio from the most recently settled cost report to determine the 
Medicare rate for cost-based facilities.   
For nonhospital claims, the Medicare rate is based on a variety of 
methods, including Relative Value Units (RVU) for physician services 
and fee schedules for other nonhospital services.  We used the 
 
14 42 CFR  136.30(c). 
15 42 CFR  136.30(c). 
16 MediRegs is a private company that developed health care compliance software in 
collaboration with the National Institutes of Healths Health Services Research Library. 
Mediregs, Coding and Reimbursement Resources.  Available online at 
http://hsrl.mediregs.com/cgi-bin/_trial/index_gen?page=q.  Accessed on August 22, 2008. 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  5   
II NN TT RR OO DD UU CC TT II OO NN   
MediRegs RVU pricing software for physician services and various 
Medicare fee schedules, including the 2008 ambulance fee schedule, 
for other nonhospital services.   
Determining the difference between CHS payments and the Medicare 
rate.  After we calculated the Medicare rate for sampled hospital 
claims, we calculated the difference between the Medicare rate and 
CHS payment.  We calculated the percentage of claims paid above the 
Medicare rate.  We determined whether there was a difference in the 
percentage of claims paid above the Medicare rate between IHS and 
tribes.  We tested whether the difference was statistically significant 
at the 95-percent confidence level.  If the paid amount was above the 
Medicare rate, we determined by how much.  We also calculated the 
percentage of claims paid at or below the Medicare rate. 
We performed a similar analysis of nonhospital claims to determine 
any potential savings. 
We also estimated the number of additional claims IHS and tribes 
could have paid with hospital overpayments and the potential  
nonhospital savings.  To do this, we calculated an average Medicare 
rate for hospital claims in our sample.  We then divided total 
overpayments for hospital claims by our calculated, average hospital 
Medicare rate.  We performed a similar analysis for potential savings 
from nonhospital claims. 
Limitations                                                                                                       
When determining the Medicare rate for sampled claims, we priced 
the services as they were coded.  We did not attempt to check the 
accuracy of the coding.  IHS and tribes may have applied edits to 
incorrectly coded claims.  We expect that most of these edits would 
reduce CHS payments because IHS and tribes would likely apply 
edits to ensure that providers did not bill at higher rates than 
appropriate.  Thus, we expect that in most cases, edits reduce 
payments to providers. Therefore, if IHS and tribes performed edits 
on claims in our sample, we expect that it would only affect the 
distribution between claims paid at the Medicare rate and claims 
below the Medicare rate.  We do not expect that it affected our 
estimates of claims paid above the Medicare rate. 
We were unable to determine the exact wage index to apply to 
hospital claims.  The wage index adjusts for health-care costs across 
geographic regions and types of hospitals.  A hospitals wage index 
changes slightly within a year, changing its Medicare rate.  We 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  6   
I N T R O D U C T I O N  
controlled for this by using multiple versions of the inpatient and 
outpatient pricing software.  As a result, we expect any differences 
attributable to changing wage indexes to be minimal.   
When determining the Medicare rate, we did not consider whether 
services were provided in a Health Professional Shortage Area17 or 
Physician Scarcity Area.18  Medicare pays providers in these areas 
quarterly bonuses based on their volume of claims.  Thus, the total 
Medicare payments for claims in these areas may be slightly higher 
than the Medicare rate we calculated.  
Standards 
This study was conducted in accordance with the Quality Standards 
for Inspections approved by the Council of the Inspectors General on 
Integrity and Efficiency. 
    
 
17 A Health Professional Shortage Area is a federally designated area reflecting a 
shortage of primary medical care, dental, or mental health providers.  Providers in these 
areas are paid a 10-percent quarterly bonus on all claims.  See SSA  1833(m).  
18 A Physician Scarcity Area is an area with a shortage of primary care physicians or 
specialty care physicians.  Physicians in these areas are paid a 5-percent quarterly bonus on 
all claims.  See SSA  1833(u). 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  7   
F I N D I N G S  
 F I N D I N G S  
IHS and tribes paid above the Medicare rate for      Despite the MMA provision, 
22 percent of hospital claims between January and  IHS and tribes overpaid for 
22 percent of hospital claims 
March 2008, resulting in $1 million in overpayments  
between January and March 
2008.  As a result, IHS and tribes overpaid $1 million in this period.  
IHS and tribes could have used this money to pay for approximately  
570 additional hospital claims, based on the average Medicare rate of 
$1,900 per hospital claim.  These overpayments could have paid for 
hospital services that might otherwise have been deferred or denied.           
On the other hand, this $1 million only accounts for 3 percent of the 
total $33 million that IHS and tribes spent on hospital services 
between January and March 2008.  In fact, most claims were paid in 
accordance with the MMA provision just 6 months after its 
implementing regulation went into effect.   
IHS and tribes paid at or below the Medicare rate for 78 percent of 
hospital claims.  Specifically, IHS and tribes paid at the Medicare rate 
for 59 percent of hospital claims and paid below the Medicare rate for 
19 percent of hospital claims.   
When hospital claims were overpaid, most overpayments were 
modest.  The median amount overpaid was $24.  The average 
overpayment was $280.  Yet, there were a few significant 
overpayments.  In our sample, IHS and tribes overpaid between 
$10,000 and $34,000 on four hospital claims.  The largest 
overpayment was for a claim covering primarily laboratory tests and 
drugs.   
Most overpaid hospital claims were for outpatient services 
Ninety percent of the overpaid hospital claims were for hospital 
outpatient claims, totaling $752,000.  In addition, hospital outpatient 
claims were overpaid 24 percent of the time.  In contrast, inpatient 
claims were overpaid only 12 percent of the time.       
Some overpayments for outpatient services may be attributable to 
varying pricing software or to confusion about the payment 
methodology.  Because there is no publicly available outpatient claims 
pricing software, IHS and tribes use a variety of pricing software.  IHS 
generally recommends purchasing pricing software from a commercial 
vendor or contracting with a fiscal intermediary.  Varieties of pricing 
software differ in their comprehensiveness.  For example, one type of 
software only calculates the Medicare rate for services with an APC 
code, requiring the user to access additional fee schedules for services 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  8   
F I N D I N G S  
without an APC code.  On the other hand, another type of software 
calculates the Medicare rate for all services, including those without an 
APC code.   
Only 10 percent of claims paid over the Medicare rate were for 
inpatient hospital services.  For pricing inpatient claims, IHS 
recommends the use of CMSs IPPS pricing software.  IHS has worked 
with CMS to provide a step-by-step guide to pricing inpatient claims 
using this software, including guidance on how often to download the 
most recent version of the CMS software.     
Tribes accounted for most dollars overpaid  
Tribal CHS hospital claims accounted for 79 percent of the $1 million 
overpaid for hospital claims.19  Tribes paid $860,000 above the Medicare 
rate while IHS paid $231,000 above the Medicare rate for hospital 
claims. 
There is no statistically significant difference between IHS and tribes in 
the percentage of claims paid above the Medicare rate; however, tribes 
paid higher amounts above the Medicare rate for hospital claims.  On 
average, tribes overpaid $534 per overpaid hospital claim.  IHS overpaid 
$101 per overpaid hospital claim. 
If payments for nonhospital 
If IHS and tribal payments for nonhospital claims     
claims were capped at the 
were capped at the Medicare rate, IHS and tribes could     
Medicare rate, potential 
have saved as much as $13 million between     
savings to IHS and tribes 
January and March 2008   would have ranged from   
$10 million to $13 million.  
IHS and tribes paid $13 million above the Medicare rate for 
nonhospital claims, representing 71 percent of claims.  IHS and tribes 
are not required to pay for nonhospital services at or below the 
Medicare rate.  Instead, IHS and tribes pay nonhospital claims in full 
or at rates negotiated with the provider.  There is no statistically 
significant difference in the percentage of claims paid above the 
Medicare rate between IHS and tribes.     
If all nonhospital claims were paid at the Medicare rate, including 
those claims that were paid below the Medicare rate, IHS and tribes 
would still have realized a net savings of $10 million between 
 
19 The total amount overpaid for hospital claims was $1.1 million.  This explains why            
79 percent equals $860,000.   
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  9   
F I N D I N G S  
January and March 2008.  While the majority of nonhospital claims 
were paid above the Medicare rate, 29 percent were paid at or below 
the Medicare rate.  Of these, 14 percent were paid at the Medicare 
rate.  Additionally, for 15 percent of claims, providers accepted CHS 
payments below the Medicare rate.  This 15 percent of claims total   
$3 million below the Medicare rate.  
Imposing a cap may result in claims that are currently being paid 
below the Medicare rate rising to the Medicare rate.  However, IHS 
and tribes proved that it is possible to successfully negotiate rates 
lower than the Medicare rate when a payment cap is in effect.  For 
instance, 19 percent of hospital claims were paid below the Medicare 
rate after the MMA provision went into effect.  Thus, it is possible 
that IHS and tribes could have saved $13 million if nonhospital 
services were capped at Medicare rates. 
The $13 million paid above the Medicare rate for nonhospital claims 
represents almost half of the total $28 million spent on nonhospital 
claims during this period.  IHS and tribes could have used the              
$13 million in savings to pay for approximately 41,000 additional 
nonhospital claims between January and March 2008, based on the 
average Medicare rate of $321 per nonhospital claim.  Among IHS 
CHS programs, an estimated 200,000 services were deferred or denied 
in 2008.20  This figure only includes IHS CHS programs and thus 
would likely be significantly greater if tribes were included. 
The median amount paid above the Medicare rate for nonhospital 
claims was $98 and the average was $327.  There were some 
particularly large payments over the Medicare rate.  In our sample, 
IHS and tribes paid between $10,000 and $49,000 above the Medicare 
rate on 14 nonhospital claims.  The largest payment above the 
Medicare rate was for a claim covering physician services from a 
cardiothoracic surgical group.   
 
 
 
 
20 As we only know the number of services deferred or denied, we cannot determine the 
number of claims deferred or denied.  One claim can include many services.   
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  10   
F I N D I N G S  
Ninety-one percent of nonhospital claims paid above the Medicare 
rate were for physician services.  Overall, physician services made up            
88 percent of all nonhospital claims.  The remaining 9 percent of   
nonhospital claims paid above the Medicare rate were for ambulance 
services, durable medical equipment, and services provided in 
ambulatory surgical centers.    
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  11   
F I N D I N G S  
 R E C O M M E N D A T I O N S  
Within 6 months after the MMA requirement went into effect, IHS 
and tribes paid above the Medicare rate for 22 percent of hospital 
claims.  As a result, IHS and tribes overpaid $1 million for hospital 
claims between January and March 2008.  The majority of overpaid 
claims were for hospital outpatient services.   
If IHS and tribal payments for nonhospital claims were capped at the 
Medicare rate, IHS and tribes could have saved as much as                  
$13 million between January and March 2008.  These savings could 
have allowed IHS and tribes to pay for a significant number of 
services to American Indians and Alaska Natives who might 
otherwise have gone without needed health care. 
Our findings led us to the following recommendations:     
IHS and Tribes Should Take Appropriate Action Regarding Overpaid 
CHS Hospital Claims 
IHS and tribes paid above the Medicare rate for 22 percent of 
hospitals claims, in violation of the MMA provision.  We have 
forwarded all IHS hospital claims that we determined were overpaid 
to IHS for followup.  We have forwarded all tribal hospital claims that 
we determined were overpaid to tribes.  IHS should take action to 
collect any overpayments paid through the IHS fiscal intermediary.  
Tribes should do likewise. 
IHS Should Direct Its Fiscal Intermediary To Ensure That All Future 
CHS Hospital Claims Are Paid at or Below the Medicare Rate   
We found that the IHS fiscal intermediary paid $231,000 over the 
Medicare rate for hospital claims.  IHS should direct the fiscal 
intermediary to ensure that no future hospital claims are paid above 
the Medicare rate.  In addition, IHS could review the claims that we 
determined were overpaid to pinpoint specific problem areas that led 
to overpayments.   
IHS Should Provide Technical Assistance to Tribes To Ensure Proper 
Payments of Hospital Claims   
We found that tribes paid $860,000 over the Medicare rate for 
hospital claims.  IHS should provide tribes with technical assistance 
in determining the Medicare rate for hospital claims.  Because IHS 
receives limited information from tribes, it should determine why 
tribes paid over the Medicare rate.  It can determine this using a 
variety of techniques.  We have sent IHS basic service information 
about tribal claims paid over the Medicare rate.  IHS could review 
these claims to pinpoint specific problem areas that led to 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  12   
R E C O M M E N D A T I O N S  
overpayments.  In addition, it could survey tribes to determine their 
challenges and successful practices in determining the Medicare rate.   
Once IHS determines potential barriers to proper payments, IHS 
could develop guidance to prevent future overpayments.  For example, 
it could share the identified challenges and successful practices with 
all tribes.   
IHS Should Seek Legislative Authority To Cap Payments for CHS            
Nonhospital Services 
Historically, IHS and tribes have had difficulty negotiating low rates 
for CHS due to the relatively small number of American Indians and 
Alaska Natives and because there are few private providers in rural 
areas.  The passage of the MMA provision helped ensure lower rates 
for hospital services.  A separate provision may be necessary to 
ensure lower rates for nonhospital services.  Whatever method IHS 
uses to cap payments reasonably and accurately should be 
determined after careful determination of the impact of the new rates 
on the provider community, as well as other potential barriers to 
implementing the new rates. 
One option would be to extend Medicare rate requirements to                 
nonhospital services.  We have shown that IHS and tribes would have 
realized considerable savings if they had paid at the Medicare rate for 
nonhospital services.  In fact, IHS and tribes could have saved                
up to $13 million if nonhospital claims were capped at Medicare rates.  
These savings could also have paid for nonhospital claims for 
American Indians and Alaska Natives who might otherwise be denied 
CHS health-care services. 
IHS could also pursue other methods to cap payments to nonhospital 
providers.  For instance, IHS could create a national fee schedule for 
nonhospital CHS services or adapt other, existing payment 
methodologies for health-care services. 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
IHS concurred with all four of our recommendations.  IHS also noted 
two potential weaknesses with the pricing software that we used to 
calculate Medicare rates for hospital outpatient claims.  We did not 
make any changes to the report based on IHSs comments.  For the 
full text of IHSs comments, see Appendix C. 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  13   
R E C O M M E N D A T I O N S  
In response to our first recommendation, that IHS and tribes take 
appropriate action regarding overpaid CHS hospital claims, IHS stated 
that it will direct the fiscal intermediary to review the claims identified 
by OIG as overpaid and, where appropriate, initiate refunds.   
In response to our second recommendation, that IHS direct its fiscal 
intermediary to ensure that all future CHS hospital claims are paid at 
or below the Medicare rate, IHS stated that it will instruct the fiscal 
intermediary to conduct random claims sampling for financial and 
claims processing accuracy.  The findings from these monthly audits will 
be submitted to IHS and used to track improvement in this area. 
In response to our third recommendation, that IHS provide technical 
assistance to tribes to ensure proper payments of hospital claims, IHS 
stated that a thorough review of our report, along with any additional 
agency findings, will enable IHS to tailor training to address claims 
identified as overpaid and provide guidance to help tribes more 
consistently calculate claims payments in accordance with regulations. 
In response to our fourth recommendation, that IHS seek legislative 
authority to cap payments for CHS nonhospital services, IHS stated 
that it will continue to meet with tribes and tribal organizations to 
develop a plan to cap payments for nonhospital services.  
IHS noted that the MediRegs Ambulatory Payment Classification 
software OIG used to calculate outpatient hospital claims payment 
does not include outlier payments or the 7.1-percent add-on for rural 
sole community hospitals.  OIG recognizes that some differences in 
the Medicare price may be attributed to different pricing software.   
Specifically, we acknowledge, in the limitations section, that when 
determining the Medicare rate for sampled claims, we priced the 
services as they were coded and did not attempt to check the accuracy 
of the coding.  Thus, we could not identify outlier payments. 
We also acknowledge, in the limitations section, that we did not take 
shortage or scarcity area bonuses into account when calculating the 
Medicare rate for hospital claims.  This could have caused the total 
Medicare payments for claims in these areas to be slightly higher 
than the Medicare rate we calculated.  
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  14   
 A P P E N D I X   ~   A  
DETAILED METHODOLOGY 
Sample 
We pulled a stratified random sample of 800 claims.  The four strata 
were:  Indian Health Services (IHS) hospital, tribal hospital, IHS    
nonhospital, and tribal nonhospital.  We further stratified by the 
amount paid.  We categorized paid amounts as small, medium, or 
large.  See Table A-1 for claims sampled by strata. 
 
 Table A-1:  Stratified Sample Structure  
 
  Small  Medium  Large  Small  Medium  Large  Total 
Stratum  Claims:   Claims:   Claims:   Claims:   Claims:   Claims:   Number 
Description  Population  Population  Population  Sample  Sample  Sample  of Claims 
per 
Stratum 
  Paid      Paid     
  Paid  amount  Paid  Paid  amount  Paid 
Hospital claims  amount  $1,000.01 amount  amount  $1,000.01 amount 
<=$1,000  $10,000  >$10,000  <=$1,000  $10,000  >$10,000 
  IHS hospital  8, 748  2, 587  443  65  65  70  200 
  Tribal hospital  5, 973  1, 526  193  65  65  70  200 
  Paid      Paid     
  Paid  amount  Paid  Paid  amount  Paid 
Nonhospital claims  amount  $500.01 amount >  amount  $500.01 amount > 
<=$500  $4,000  $4,000  <=$500  $4,000  $4,000 
  IHS nonhospital  25,475  7,919  996  65  65  70  200 
  Tribal nonhospital  22,119  3,711  353  65  65  70  200 
    Total  62,315   15,743  1,985  260  260  280  800 
Source:  Office of Inspector General (OIG) analysis, 2009. 
 
Data Collection 
We collected paid claims from the Contract Health Services (CHS) 
program for services delivered between January and March 2008.  We 
chose this period for two reasons.  First, most claims during this 
period should have been processed and paid by the time we requested 
them in October 2008.  Second, limiting our scope to 3 months 
lessened the resource burden on IHS and tribes, while providing a 
reliable snapshot of CHS payments.   
We selected claims for services delivered during this period rather 
than claims paid in this period to ensure that all claims were covered 
under the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) provision.  There is a delay 
between when services are provided and when IHS and tribes pay the 
claim.  Thus, hospital claims paid during this time may have been for 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  15   
A P P E N D I X   ~   A  
services delivered prior to July 2007 and thus not covered by the 
MMA provision.   
Data Analysis 
For each analyzed claim, we calculated the Medicare rate for each line 
item.  A claim can have multiple line items representing separate 
services provided in one provider visit.  Next, we added the Medicare 
rate for each line item to determine the total Medicare rate for the 
claim and compared that to the total CHS payment for the claim. 
We could not analyze 84 of the 800 claims in our sample.  Of these,  
56 were for services that were outside of our scope.  For instance, they 
did not have a corresponding Medicare rate or were outside of our 
time period.  The remaining claims were missing information needed 
to determine a Medicare rate, such as service codes.   
Twenty-three sampled claims were incorrectly labeled hospital or 
nonhospital and thus placed in an incorrect stratum.  We recognized 
that they were incorrect by the type of bill or the provider name.  We 
analyzed these claims in their correct strata.  This explains why there 
are more IHS hospital claims analyzed than sampled.  See                  
Table A-2 for the number of claims analyzed and the number removed 
from analysis in each of the four strata.   
 
 
Table A-2:  Claims Analyzed and Removed From Analysis Within Each 
 
Stratum 
 
 
Stratum of Claims  Sampled  Analyzed  Removed From 
Analysis 
 
IHS hospital  200  205  0 
Tribal hospital  200  169  35 
 
IHS nonhospital  200  182  13 
Tribal nonhospital  200  160  36 
 
  Total  800  716  84 
Source:  OIG analysis of CHS claims, 2009. 
 
Determining the Medicare rate for hospital services.  We used separate 
methods to determine the Medicare rate for hospital inpatient 
services, hospital outpatient services, and services provided in               
cost-based hospitals.   
To determine the Medicare rate for inpatient services, we used the 
Centers for Medicare & Medicaid Services (CMS) Inpatient 
Prospective Payment System.  We used this system because IHS 
recommended it.  In addition, we referenced IHS guidance on 
determining a Medicare rate for hospital inpatient services. 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  16   
AA PP PP EE NN DD II XX    ~~    AA   
To determine a Medicare rate for outpatient services, we used 
MediRegs Ambulatory Payment Classifications (APC) pricing 
software.  It calculates a Medicare rate for outpatient claims based on 
the service code, provider name, and date of claim.  We included             
copayments when determining the Medicare rate for hospital 
outpatient claims because the CHS program covers all costs of the 
visit, including copayments.  We also took into account all modifiers 
and status indicators, relying on CMS manuals and MediRegs data to 
determine how they affected the Medicare rate.   
MediRegs APC pricing software only accounts for hospital outpatient 
services with an APC code.  For other services on a hospital 
outpatient claim, we referenced the corresponding fee schedule, such 
as the clinical laboratory fee schedule and the durable medical 
equipment fee schedule.  We chose MediRegs because the company 
has a history of providing support to Government entities, including 
the National Institutes of Health Library.21  According to MediRegs, 
more than 800 hospitals and thousands of health-care professionals 
also use MediRegs pricing software.22 
To determine the Medicare rate for cost-based hospitals, we used the         
per-diem and cost-to-charge rates from the most recently settled cost 
report.  We received these rates from the IHS fiscal intermediary.  
Some new critical-access hospitals in our sample did not yet have a 
settled cost report.  This occurred for 12 hospital claims.  For these 
hospitals, we used the amount that IHS or tribes paid as the 
Medicare rate.         
Controlling for the provider wage index.  The Medicare rate changes at 
various times throughout the year when a providers wage index 
changes.  Therefore, we controlled for wage index changes when 
determining the Medicare rate for inpatient and outpatient claims. 
For inpatient claims, we priced each claim using the two different 
versions of CMSs 2008 Inpatient Prospective Payment System.  
Because we sampled based on service date, we do not know when IHS 
or tribes paid for each claim and thus what version of the Inpatient 
 
21 Federal Business Opportunities, Medi-regs Database.  Available online at: 
https://www.fbo.gov/index?s=opportunity&mode=form&id=b36a4365c874323eba878548dd6f
4b5b&tab=core&_cview=0.  Accessed on April 7, 2009. 
22 MediRegs, Our Clients:  Testimonials.  Available online at 
http://www.mediregs.com/clients/our-clients.  Accessed on April 6, 2009. 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  17   
A P P E N D I X   ~   A  
Prospective Payment System was used.  Therefore, we determined 
that the claim was paid at the Medicare rate if the amount paid 
matched either version of the Medicare rate.  If the amount paid did 
not match either version, we determined the Medicare rate using the 
pricing software in effect between January and October 2008.   
For outpatient claims, we priced each claim using both the 2008 and 
2009 MediRegs APC pricing software.  MediRegs updates the 
outpatient pricer annually to account for wage index changes.  We 
took a conservative approach and accepted the amount paid as the 
Medicare rate if it fell within 2008 and 2009 prices.  If the amount 
paid was not within that range, we compared the amount paid to the 
2008 Medicare rate.   
Determining the Medicare rate for nonhospital services.  Each type of                 
nonhospital service required a different process to determine the 
Medicare rate.  For physician services, we used MediRegs Relative 
Value Unit calculator to determine the Medicare rate.  We took into 
account all modifiers on the claims, relying on CMS manuals to 
determine how physician modifiers affect the Medicare rate.  For all 
other nonphysician services, we used the appropriate source to 
determine the Medicare rate.  See Table A-3 for the systems that we 
used to determine the Medicare rate for nonhospital services. 
 
Table A-3:  Identifying the Medicare Rate for Nonhospital Services 
 
   
Nonhospital Service  CMS Pricing Source, 2008 
Anesthesiologist  Anesthesia base units and conversion factor 
Ambulance  Ambulance fee schedule 
Durable medical equipment  Durable medical equipment fee schedule 
  Ambulatory surgical center fee schedule and MediRegs ambulatory surgical 
Ambulatory surgical center  center wage index 
Independent laboratories  Clinical laboratory fee schedule  
End-stage renal disease center  End-stage renal disease center prospective payment calculator 
Source:  OIG analysis of the systems used for determining the Medicare rate, 2009. 
 
       
 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  18   
A P P E N D I X   ~   B  
 A P P E N D I X   B  
ESTIMATES AND CONFIDENCE INTERVALS 
See Tables B-1B-4 for the point estimates and confidence intervals 
for the results discussed in the first finding.   
 
 
Table B-1:  Hospital Claims Paid At, Below, and Above the Medicare Rate 
 
      95-Percent Confidence 
Estimate Description  Sample Size  Point Estimate  Interval 
Percentage of hospital claims paid above the     
Medicare rate  374  22.0%  16.1%27.9% 
Percentage of hospital claims paid at or     
below the Medicare rate  374  78.0%  72.1%83.9% 
Percentage of hospital claims paid at the     
Medicare rate  374  59.4%*  52.4%66.3% 
Percentage of hospital claims paid below the     
Medicare rate  374  18.7%*  13.2%24.1% 
* Numbers do not add up to exactly 78.0 due to rounding. 
Source:  Office of Inspector General (OIG) analysis of hospital claims, 2009. 
 
 
Table B-1a:  Indian Health Service Hospital Claims Paid At, Below, and Above the 
Medicare Rate 
 
      95-Percent Confidence 
Estimate Description  Sample Size  Point Estimate  Interval 
Percentage of Indian Health Service (IHS)     
hospital claims paid above the Medicare rate  205  18.7%  11.5%25.9% 
Percentage of IHS hospital claims paid at or     
below the Medicare rate  205  81.3%  74.1%88.5% 
Source:  OIG analysis of IHS hospital claims, 2009. 
 
 
Table B-1b:  Tribal Hospital Claims Paid At, Below, and Above the Medicare Rate 
 
      95-Percent Confidence 
Estimate Description  Sample Size  Point Estimate  Interval 
Percentage of tribes hospital claims paid     
above the Medicare rate  169  29.1%  18.7%39.5% 
Percentage of tribes hospital claims paid at     
or below the Medicare rate  169  70.9%  60.5%81.3% 
Source:  OIG analysis of tribes hospital claims, 2009. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  19   
   A P P E N D I X   ~   B  
 
Table B-2:  Dollars Spent on Hospital Claims  
 
      95-Percent Confidence 
Estimate Description  Sample Size  Point Estimate  Interval 
Dollars spent above the Medicare rate for     
hospital claims  80  $1.1 million  $0.8 million$1.4 million 
Dollars spent on hospital claims  374  $32.8 million  $29.6 million$36.0 million 
Average Medicare rate per claim  374  $1,907  $1,691$2,124 
Average amount overpaid among hospital     
claims paid above the Medicare rate  80  $280  $179$382 
Tribes dollars spent above the Medicare rate     
for hospital claims  48  $860,446  $585,443$1.1 million 
IHS dollars spent above the Medicare rate for     
hospital claims  32  $230,682  $139,931$321,432 
Tribes average amount overpaid among     
hospital claims paid above the Medicare rate  48  $534  $363$705 
IHS average amount overpaid among     
hospital claims paid above the Medicare rate  32  $101  $61$141 
Source:  OIG analysis of hospital claims, 2009. 
 
 
Table B-3:  Hospital Claims Paid Over the Medicare Rate by Type of Claim  
 
      95-Percent Confidence 
Estimate Description  Sample Size  Point Estimate  Interval 
Percent of overpaid claims that were     
outpatient  80  90.5%  86.2%94.7% 
Percent of overpaid claims that were inpatient  80  9.5%  5.3%13.8% 
Percentage of outpatient claims that were     
paid over the Medicare rate  174  24.0%  17.2%30.9% 
Percentage of inpatient claims that were paid       
over the Medicare rate  200  12.0%  6.1%18.0% 
Source:  OIG analysis of hospital claims, 2009. 
 
 
Table B-4:  Dollars Spent Over the Medicare Rate for Outpatient Claims  
 
      95-Percent Confidence 
Estimate Description  Sample Size  Point Estimate  Interval 
Dollars spent above the Medicare rate for       
outpatient services  174  $751,633  $468,218$1.0 million 
Source:  OIG analysis of hospital claims, 2009. 
 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  20   
A P P E N D I X   ~   B  
See Tables B-5B-7 for the point estimates and confidence intervals 
for the results discussed in the second finding. 
 
 
Table B-5:  Dollars Spent on Nonhospital Claims 
 
      95-Percent Confidence 
Estimate Description  Sample Size  Point Estimate  Interval 
Dollars spent above the Medicare rate for     
nonhospital claims  273  $13.1 million  $11.4 million$14.9 million 
Dollars spent below the Medicare rate for     
nonhospital claims  36  $3.2 million  $500,000$5.9 million 
       
Dollars spent on nonhospital claims  342  $28 million  $25.3 million$30.7 million 
Average overpaid among nonhospital claims     
above the Medicare rate  273  $327  $281$374 
Average Medicare rate  342  $321  $256$386 
Source:  OIG analysis of nonhospital claims, 2009. 
 
 
Table B-6:  Nonhospital Claims Paid At, Below, and Above the Medicare Rate 
 
      95-Percent Confidence 
Estimate Description  Sample Size  Point Estimate  Interval 
Percentage of nonhospital claims paid above     
the Medicare rate  342  71.4%  64.6%78.2% 
Percentage of nonhospital claims that were     
paid at or below the Medicare rate  342  28.6%  21.9%35.4% 
Percentage of nonhospital claims paid at the       
Medicare rate  342  14.0%  8.8%19.1% 
Percentage of nonhospital claims paid below     
the Medicare rate  342  14.6%  9.5%19.7% 
Source:  OIG analysis of nonhospital claims, 2009. 
 
 
Table B-6a:  IHS Nonhospital Claims Paid At, Below, and Above the Medicare Rate 
 
      95-Percent Confidence 
Estimate Description  Sample Size  Point Estimate  Interval 
Percentage of IHS nonhospital claims paid     
above the Medicare rate  182  71.2%  62.1%80.3% 
Percentage of IHS nonhospital claims paid at     
or below the Medicare rate  182  28.8%  19.7%37.9% 
Source:  OIG analysis of IHS nonhospital claims, 2009. 
 
 
Table B-6b:  Tribal Nonhospital Claims Paid At, Below, and Above the Medicare Rate 
 
      95-Percent Confidence 
Estimate Description  Sample Size  Point Estimate  Interval 
Percentage of tribes nonhospital claims paid     
above the Medicare rate  160  73.3%  63.1%83.5% 
Percentage of tribes nonhospital claims paid     
at or below the Medicare rate  160  26.7%  16.5%36.9% 
Source:  OIG analysis of tribes nonhospital claims, 2009. 
 
 
 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  21   
A P P E N D I X   ~   B  
 
 
Table B-7:  Payments for Physician Services 
 
      95-Percent Confidence 
Estimate Description  Sample Size  Point Estimate  Interval 
Percentage of nonhospital claims paid over     
the Medicare rate that were for physician     
claims  273  90.8%  87.1%94.5% 
Percentage of all nonhospital claims that     
were for physician claims  342  88.4%  84.5%92.3% 
Source:  OIG analysis of nonhospital claims, 2009. 
 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  22   
 A P P E N D I X   C  
AGENCY COMMENTS 
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  23   
A P P E N D I X   ~   C  
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  24  A P PEN 0
x c
Plle 3 - Iipotor Genera
r.ations with denstrons ~wUn how to cacula difer,nt McdiCl .burscment
metodologi.. ,_ '
In Iui 2008, tM AgOl reI_ad anIHS-dovolope Web site Untitled "McdcIU.iib Rates
rnfonnon," toprvi4e Tribo an Trl~ otpntions with an overvew of th nigury
cba~, along with other teclu resour.. Inorion aval~l. frm th Weo page
includ th, folloWing: ML Freuently Ased Quetioii sale ptovidet le_ to issit
Tribal rons in noting ptovi_ oerate chages; ust\ lin to reaton roloVan
CFR sIte, et. The Web sito iill is htt:/l\,ih.lJv/noniciiro~in.
Thugut tb yea an 2010, in conjuicugn with other Agay trg semi cudy
bl:SPlaied th topic Wil be inlud IS II rcur iiei itent
Attch at Tab D is th agon for tl most  reenty scheuled CMS TratUii Sein,held _
May 12 t1ugl is, 2009, in Denvet,  Colota, and MLR Web site infortion.
4. TIl. JH should seekloplativ. aullority to oa'P payienta for CH Iloiiosplta somiiii.
The IH concur with t1 reoinndaon. 'fe Aiienoy reiz the potential1inetlts of,
extendbith. Medcll Prption Druiilirovellnt iid Modoniztion Ac oi2D03
rouliitions iid ha be dig th. and rolate isues with Trbe at varous 1age-le
meeti sub. as the Direct Seri~ Trib IUd the National Indi Health BoW Confernc.
TheUlS wil contue to met with Trlbt ll Triba Orgaizaons to devcdop a plan to ca
paymts fo nonhspita sltCC
for aloWIS th,1H to provida coinen on tM oro's dr report .
TI you 
Yvette Raubidwe MD., M.P.H.
Attcbilita
Tab A RSepeto~ 1"u 10t08 Miomuora.um  .t .CM S "C.laf icao'n f or M,odiCl-iike Rato
Tab B May 12.15, 2009 CHS Tra Sou Aionda n ML Web site iifomon
OEI-OS-OS.00410 IHS CONTRACT HEALTH SERVICES PROGRAM: OVERPAYMENTS AND POTENTIAL SAVINGS 25  
 A C K N O W L E D G M E N T S  
This report was prepared under the direction of Ann Maxwell, 
Regional Inspector General for Evaluation and Inspections in the 
Chicago regional office, and Thomas Komaniecki, Deputy Regional 
Inspector General.   
Anne Bracken served as the team leader for this study and Beth 
McDowell served as the lead analyst.  Other principal Office of 
Evaluation and Inspections staff from the Chicago regional office who 
contributed to the report include Di Zhang; other central office staff 
who contributed include Robert Gibbons and Talisha Searcy.  
  OEI-05-08-00410  IHS CONTRACT HEALTH SERVICES PROGRAM:  OVERPAYMENTS AND POTENTIAL SAVINGS  26