Relatively Few Alaska Native Communities Contract Directly With IHS to Manage Health Services

Alaska Native communities that contract directly with IHS manage a relatively small share of health care services in Alaska. Because some communities have banded together for contracting purposes, the 34 communities are involved in a total of 21 contracts, which account for 6.5 percent of IHS’ total contract funding in Alaska under the Indian Self-Determination Act. Twenty-five communities have decided to stop obtaining some services through RHOs and to contract directly with IHS. These contracts are generally for a limited number of services—most often alcohol and mental health services, community health aides, community health representatives, and other community-based services. Individual Community Contracts Have Higher Administrative Costs

Administrative costs are higher under individual community contracts than under contracts with RHOs. IHS Determines Funding Needs With Native Organizations

Under the Indian Self-Determination Act, an Indian tribe or Alaska Native community that chooses to contract with IHS is entitled to funding for both direct program costs and contract support costs (CSC) to cover administrative functions. Our analysis of cost differences between RHO contracts and individual community contracts focused on the first two types of contract support costs—start-up and indirect costs. Small communities, however, generally have to build the administrative structure for these services alone. Native communities that are not in a financial position to absorb unfunded contract support costs may face the risk of having to divert funds from health services to cover their unfunded contract support needs. To Date, Service Availability Has Not Been Greatly Affected

When individual Alaska Native communities have contracted directly with IHS to provide some of their own health services, they generally have assumed management responsibility for existing, defined service programs being operated by IHS or an RHO. Generally, we did not find that a community’s takeover of services from an RHO in itself had a substantial effect on the types of services provided or service utilization. As a result, while IHS has agreed with each contractor on the amount of their CSC funding needs, it has not been able to fully fund those needs. As a mechanism for allocating available CSC funds among contractors, IHS maintains a waiting list for new contractors that have chosen to operate without full CSC funding. To the extent that Native communities assume management of a greater portion of their health services in a time of increasing CSC funding shortfalls, the risk for adverse impacts on health services delivery also increases. Comparison of IHS-Determined Funding Needs for Community and RHO Contractors

This appendix compares the recurring funding needs of the 12 community contractors that separated from RHOs with the funding needs of the RHOs for managing the same programs. The indirect cost need for each affiliated RHO is estimated by applying the RHO’s indirect cost rates to the community contractor’s program costs; it represents what the indirect costs would have been if the services provided by the community contractor had instead been managed by the RHO.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO reviewed the impact of individual Indian Health Service (IHS) contracts, focusing on the: (1) extent to which Alaska Native communities contract directly with IHS to manage their own health care services; and (2) effects these contracts are having on costs and the availability of services.

What GAO Found

GAO noted that: (1) relatively few Alaska Native communities have contracted directly with IHS, and those that have done so generally contracted for a limited range of health services and thus continue to receive many services through a regional health organization (RHO); (2) fifteen percent of the 227 Alaska Native communities have some form of direct contract with IHS; (3) the dollar amount of these direct contracts represents about 6.5 percent of all IHS contracts in Alaska under the Indian Self-Determination Act; (4) GAO found that communities with their own contracts have higher administrative costs than RHOs; (5) IHS works with each contractor to determine the amount of administrative costs needed to manage the contracts; (6) indirect costs--the major component of the administrative costs--include such expenses as financial and personnel management, utilities and housekeeping, and insurance and legal services; (7) community contracts need about twice the amount of indirect costs that a RHO would need to manage the same programs; (8) when a community chooses the contract directly with IHS for services previously provided by a RHO, it also has a need for one-time start-up costs that increase the administrative cost differences between community contracts and RHOs; (9) determining the effects of individual community contracts on service availability proved difficult because contracts involving a switch from RHOs to local communities are relatively few in number, cover few services, and some have been in effect for a short time; (10) the limited comparisons that can be made show that service levels have not been greatly affected by the switches thus far; (11) however, under current IHS funding limitations, new contractors are receiving only part of their funding needs for administrative costs and may have to wait several years to receive full funding; (12) if communities decide to contract for service programs but do not receive full funding for administrative costs and do not have other resources from which to pay for these costs, they face the risk of having to divert funds from services to cover their unfunded administrative costs; (13) while funding shortfalls have not yet resulted in widespread adverse effects on health services availability in Alaska, the long-term picture raises cause for concern; and (14) in choosing to operate their health services without waiting for sufficient administrative funding, Alaska Native communities may have little option but to accept a potential for reduced services as a trade-off for managing elements of their health care systems.