Document Type



Medicare has put into effect a reimbursement payment policy of inpatient hospital care that is known as the Diagnosis Related Groups (DRGs). This change has forced hospitals to know specifically what the operational costs are, especially as it relates to patient care. This change by Medicare of the reimbursement payment system has resulted in complex cost accounting systems that tie together the medical and financial data. The knowledge produced by these systems enable hospitals to evaluate performance as it relates to the DRG reimbursement. The Indian Health Service currently is reimbursed by DRG. The problem involves changing medical information systems so that it will provide the groundwork necessary for financial resource management and patient care information systems. The Patient Care Information System (PCIS) under development by IHS for some time can be described as an outpatient medical management system. Although highly praised by the IHS medical staff it is limited by financial and inpatient capabilities. The Indian Health Service will use the PCIS as the foundation when developing a system that incorporates both patient and financial data. The purpose of the study was to evaluate the readiness of IHS to develop an integrated cost accounting system containing both medical and financial information.The data collection procedures used in the evaluation consisted of: 1) examining documents of the current IHS management information systems (MIS); 2) interviewing IHS employees with the purpose of documenting IHS intentions, plans, and progress toward a more comprehensive management information systems; 3) examining activities by other agencies of the federal government who attempted to develop a health care MIS; and 4) develop a draft statement of work by using previous information gathered.The Indian Health Service has made the PCIS the core system and is currently utilizing or adapting systems presently in use by other federal agencies such as the Veterans Administration system. The current approach also includes the conversion of the PCIS language so that it is compatible with others. The plan of action further involves the development of software and communications that would allow for a full communication network between all IHS facilities, as well as purchasing the necessary computer hardware and supporting software for each area office and service unit. Although IHS is seriously committed to updating its management systems, there are technical areas that remain unresolved. First, the agency supports medical management more than cost management. In other words, IHS uses the approach that patient care should be the most important consideration rather than cost implications. This was found to be confusing by the evaluators because numerous decisions by IHS concerning patient care were made due to financial considerations, e.g., contractual decisions for health care. Problems found in the present IHS approach include: 1) relying on PCIS as the core--inpatient systems, rather than outpatient systems, seems more adequate as a base because It produces more cost; 2) relying on present systems used in other agencies which may not be fully developed. e.g., the VA system which was partially adopted by IHS does not contain cost accounting; 3) greater amounts of new systems design and programming will be required, when commercially produced systems are currently available; and 4) costly mistakes are more likely made when plans proceed without a blueprint of the systems requirements. It was determined by the evaluators that any approach for the enhancing of management information capabilities will require 5 or more years to complete.The IHS should undertake a systems requirements study before proceeding further. New systems designs and programming should not be developed until an examination takes place of available commercially produced systems that include the integration of financial and medical data. The adaptation of portions of the VA system should not take place until the examination of commercial systems are found to be inadequate. Finally, the enhancement of PCIS and the purchase of hardware should also be delayed.

Publication Date



Indian Health Service, Staff Office of Planning, Evaluation and Research, Rockville, MD 20857 (E-83).