GAO-10-42R IHS Private Insurance Billings and Collections 

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. 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.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.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 

 

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). 
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. 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.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. 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 

 

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 IHSadministered service unit for which IHS did not have data at the time of our request. 

Page 2 GAO-10-42R IHS Private Insurance Billings and Collections 
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.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, SelfAssessment 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. 

 

7

GAO, Standards for Internal Control in the Federal Government GAO/AIMD-00-21.3.1 (Washington 

D.C.: November 1999). 

Page 3 GAO-10-42R IHS Private Insurance Billings and Collections 
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. 

Page 4 GAO-10-42R IHS Private Insurance Billings and Collections 
IHS Business Revenue Cycle 

The IHS business revenue cycle consists of four major phases: patient registration, 

coding, billing and collection, and debt management (see fig. 1). 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 

Source: GAO analysis of IHS policies and procedures.

Registration Debt

management

Billing and

collections

Coding

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. 

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. 

IHS bills the

insurer for services

provided and collects

payment from the

insurer. 

Coding involves

documenting the provider’s

description of disease,

injury, and treatment in a

standardized form which

is used to generate a bill. 

FINAL

NOTICE

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. 

 

8

IHS’s business revenue cycle policies and procedures cover revenue from both private insurers and 

government programs such as Medicare and Medicaid. 

Page 5 GAO-10-42R IHS Private Insurance Billings and 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,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.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 

 

9

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. 

10FSIO, Financial Management Systems Standard Business Processes for U.S. Government Agencies

(November 2008). 

Page 6 GAO-10-42R IHS Private Insurance Billings and Collections 
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,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 

 

11GAO/AIMD-00-21.3.1. 

Page 7 GAO-10-42R IHS Private Insurance Billings and Collections 
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.12 Part 5 of the Indian Health Manual requires the Director of ORAP to 

 

12GAO/AIMD-00-21.3.1. 

Page 8 GAO-10-42R IHS Private Insurance Billings and Collections 
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.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 onsite 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.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, 

 

13The 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. 

14GAO/AIMD-00-21.3.1. 

Page 9 GAO-10-42R IHS Private Insurance Billings and Collections 
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.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, SelfAssessment 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 onsite 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 

 

15In 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. 

Page 10 GAO-10-42R IHS Private Insurance Billings and Collections 
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 

Page 11 GAO-10-42R IHS Private Insurance Billings and Collections 
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. 

Page 12 GAO-10-42R IHS Private Insurance Billings and Collections 
________________ 

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 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, 

Kay L. Daly 

Director, Financial Management and Assurance 

Kathleen M. King 

Director, Health Care

Page 13 GAO-10-42R IHS Private Insurance Billings and Collections 
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.1

 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.2 We also considered GAO’s Standards for 

Internal Control in the Federal Government.

3

 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 

 

1

FSIO, Financial Management Systems Standard Business Processes for U.S. Government Agencies

(Washington D.C.: November 2008). 

2

We did not assess the extent to which the FSIO standard processes reflect the appropriate 

implementation of applicable laws, regulations, or standards. 

3

GAO/AIMD-00-21.3.1. 

Page 14 GAO-10-42R IHS Private Insurance Billings and Collections 
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.4

 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.

5

 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 

 and 

ndards 

ur 

 

comments from HHS on October 19, 2009, and have summarized those comments

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 sta

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 o

findings and conclusions based on our audit objectives. 

4

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 IHSadministered 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. 

 

5

GAO, Standards for Internal Control in the Federal Government GAO/AIMD-00-21.3.1 (Washington 

D.C.: November 1999). 

Page 15 GAO-10-42R IHS Private Insurance Billings and Collections 
Enclosure II: Comments from the Department of Health and Human Services 

Page 16 GAO-10-42R IHS Private Insurance Billings and Collections 
Page 17 GAO-10-42R IHS Private Insurance Billings and Collections 
Page 18 GAO-10-42R IHS Private Insurance Billings and Collections 

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. 

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