Medicare-participating hospitals are  required to accept CHS program patients at rates no higher than the rates  paid by the Centers for Medicare & Medicaid Services’ (CMS) Medicare  program, while federal and tribal CHS programs pay physicians and other  nonhospital providers at either their billed charges or at reduced rates an  IHS area office or tribal CHS program negotiates with them. IHS’s Federal CHS Program Primarily Paid Physicians at Their Billed Charges, Which Were Significantly Higher than What Medicare and Private Insurers Would Have Paid

More than 80 percent of IHS’s federal CHS program payments to  physicians for services provided in 2010 were paid to noncontracted  physicians at billed charges, rather than to contracted physicians at  negotiated, reduced rates. With the exception of uninsured patients, who  are expected to pay providers at billed charges, other public and private  payers typically pay providers at lower rates.$62.5 million that federal CHS programs paid physicians, they paid about  $50.5 million (about 81 percent) to noncontracted physicians at billed  charges and about $12.1 million (19 percent) to contracted physicians at  negotiated, reduced rates. IHS’s federal CHS program payments to physicians for services provided  in 2010 were higher than what we estimate Medicare and private insurers  would have paid for these same services. IHS’s federal CHS programs paid, in total, two times what we estimate  Medicare would have paid for the same physician services provided in  2010. Specifically, of the $62.5 million in total payments for services  provided in 2010, the federal CHS programs could have saved an  estimated $31.7 million if they paid physicians what Medicare would have  paid for the same services. Further, savings for the overall CHS program may be  even higher, as this analysis does not include payments for other types of  nonhospital services paid by the federal CHS programs, as well as  payments by tribally operated CHS programs, which receive over half of  annual CHS program funding and have also been found to pay for  nonhospital services above the Medicare rates. The federal CHS programs’ contracts with physicians were  sometimes for negotiated rates that exceeded what Medicare would have  paid. However,   8 of the 10 physicians said total CHS program payments constituted   10 percent or less of the total payments they received from all payers. Physicians We Interviewed Identified Both Advantages and Concerns with Capping CHS Program Payments at Medicare Rates

The 10 physicians we interviewed identified advantages of capping CHS  program payments for nonhospital services, including physician services,  at Medicare rates, but also expressed concerns about the effect of such a  cap on their finances. Most Hospitals We Interviewed Indicated Little Negative Effect from the Current MLR Requirement, as They Already Had CHS Program Contracts to Be Paid at Medicare Rates

Officials from most of the nine hospitals that we interviewed indicated that  the MLR requirement has had little or no financial effect on their  hospital. Officials from two hospitals indicated that the MLR requirement reduced  their payment rate. IHS and Tribal Officials Said the MLR Requirement Allowed Them to Expand Access and Said That a Similar Cap for Nonhospital Services Could Have Similar Benefits

IHS and tribal officials we interviewed said that setting payments for  hospital services at MLRs (as required by statute) allowed the CHS  program to reduce payments and expand access to care. The  MLR requirement required these hospitals to accept Medicare rates. However, IHS headquarters officials told us that they would not  be able to implement a cap for nonhospital services, including physician  services, unless the agency received explicit statutory authority to do so,  because the current law requiring MLRs is limited to hospital services. Some tribal officials indicated that a cap on nonhospital  services at Medicare rates could save them money. If trends in payments for other types of nonhospital services and  the tribal CHS programs are similar to the payments for the federal CHS  program physician services that we examined, we estimate that savings  from capping all nonhospital services paid by federal and tribal CHS  programs at Medicare rates could be significantly higher. These savings  could be used to pay for some of the many services that the CHS  program is unable to fund each year. Recommendation for Executive Action

Should the Congress decide to cap payments for physician and other  nonhospital services made through IHS’s CHS program, we recommend  that the Secretary of Health and Human Services direct the Director of  IHS to monitor CHS program patient access to physician and other  nonhospital care in order to assess how any new payment rates may  benefit or impede the availability of care.
Why GAO Did This Study

Indians and Alaska Natives. When care at an IHS-funded facility is unavailable, IHS's CHS program pays for care from external providers. Hospitals are required to accept Medicare rates from federal and tribal CHS programs, while physicians and other nonhospital providers are paid at either billed charges or negotiated, reduced rates. The Patient Protection and Affordable Care Act requires GAO to compare CHS program payment rates with those of other public and private payers. GAO examined (1) how payments to physicians by IHS's federal CHS programs compare with what Medicare and private health insurers would have paid for the same services, (2) physicians' perspectives about how a cap on payment rates could affect them, (3) hospitals' perspectives about how the MLR requirement affected them, and (4) IHS and tribal officials' perspectives about the MLR requirement and a potential cap on nonhospital services. GAO compared 2010 physician claims data for federal CHS programs with the Medicare Physician Fee Schedule and claims from private insurers. GAO also spoke to a nongeneralizable sample of 10 physicians and 9 hospitals that interacted frequently with IHS and spoke to IHS and tribal officials where these providers practiced.

What GAO Found

The Indian Health Service's (IHS) federal contract health services (CHS) programs primarily paid physicians at their billed charges, which were significantly higher than what Medicare and private insurers would have paid for the same services. IHS's policy states that federal CHS programs should purchase services from contracted providers at negotiated, reduced rates. However, of the almost $63 million that the federal CHS programs paid for physician services provided in 2010, they paid about $51 million (81 percent) to physicians at billed charges and about $12 million (19 percent) to physicians at negotiated, reduced rates. Payments for other types of nonhospital services followed similar trends, with about $40 million out of $52 million (77 percent) paid at billed charges. GAO estimated that IHS's federal CHS programs paid two times as much as what Medicare would have paid and about one and a quarter times as much as what private insurers would have paid for the same physician services provided in 2010. If federal CHS programs had paid Medicare rates for these services, they could have used an estimated $32 million in savings to pay for many of the services that IHS is unable to fund each year. Savings for the overall CHS program may be even higher, as this analysis does not include other types of nonhospital services or the CHS program funding that goes to tribal CHS programs, which the Department of Health and Human Services' (HHS) Office of Inspector General found also paid for nonhospital care above Medicare rates.
Although the 10 physicians GAO interviewed were among those most frequently paid by federal CHS programs, 8 said their CHS program payments constituted 10 percent or less of their total payments. Some physicians identified ways that capping CHS program payments for nonhospital services, including physician services, at Medicare rates could benefit the CHS program and physician practices. However, other physicians were concerned that reducing payment rates to Medicare levels could negatively affect their practices.
Seven of nine hospitals GAO interviewed said the Medicare-like rates (MLR) required by statute had little negative effect, generally because they already had contracts with the CHS program to be paid Medicare rates. While two hospitals previously paid by the CHS program at or near billed charges said they were financially affected by the MLR requirement, both said it had not affected their delivery of care to CHS program patients.
IHS and tribal officials GAO interviewed said the MLR requirement for hospital services generated savings that allowed CHS programs to expand access to health care. They said that a cap on nonhospital service payments, including physician services, could have benefits and challenges. Most IHS officials indicated that it was unlikely they could negotiate many more contracts. Some tribal officials said that some physicians might think Medicare rates were too low and decide to no longer accept tribal patients, although they agreed that a cap at these rates could save money. IHS officials noted, however, that they would not be able to implement a cap for nonhospital services, including physician services, unless the agency received explicit statutory authority to do so.
HHS stated in its comments that it concurred with GAO's conclusions and recommendation and added that imposing a cap at Medicare rates would allow IHS to fund additional services.

What GAO Recommends

Congress should consider capping CHS program payments for nonhospital services, including physician services, at rates comparable to other federal programs. Should Congress cap payments, we recommend HHS direct IHS to monitor access to care.