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Circular 07-01


DEPARTMENT OF HEALTH AND HUMAN SERVICES
INDIAN HEALTH SERVICE
ROCKVILLE, MARYLAND 20852

Refer to: OMS

INDIAN HEALTH SERVICE CIRCULAR NO. 2007-01

Effective Date: March 1, 2007

ADMINISTRATIVE CONSOLIDATIONS

  1. PURPOSE.  This circular provides standard procedures and guidelines to govern the consolidation, regionalization, or sharing of administrative functions at the Indian Health Service (IHS) Headquarters, Area Office, and service unit levels.  This circular also recommends specific processes and formats for accomplishing the consolidation of administrative functions that include human resources, acquisitions, personal property, finance, and other functions identified in this policy.  The elements of this policy are intended to provide guidance where needed and desired.  It is intended to provide for maximum flexibility in each circumstance, and does not constitute a set of formal, mandatory requirements that must be followed, if the needs and circumstances of a particular agreement can be met through a less formal structure.

  2. POLICY.  It is the policy of the IHS to encourage and promote administrative consolidation, regionalization, and/or sharing of administrative functions at all IHS operational levels when feasible, cost effective, or otherwise appropriate.  In developing these agreements, this policy will be helpful to establish greater accountability among consolidation participants, and to ensure a clear understanding of all parties.

  3. AUTHORITIES.  This policy is established in accordance with Department of Health and Human Services (HHS) policy and the following:

    1. Budget and Accounting Act of 1921, Public Law (P.L.) 67-13

    2. The Government Management Reform Act of 1994, P.L. 103-356

    3. The Federal Financial Management Improvement Act of 1996, P.L. 104-208

    4. National Performance Review/Workforce Restructuring Act of 1994

    5. Workforce Planning and Restructuring, Office of Management and Budget (OMB) Bulletin No. 01-07, May2001

  4. BACKGROUND.  The IHS has developed general redesign plans through several restructuring initiatives but has operated without a comprehensive policy regarding the streamlining, consolidation, or sharing of administrative functions among the various operational components of the Agency.  Ideally, redesign plans and restructuring initiatives should be developed at a pace set by the Agency, but mandated consolidation requirements from HHS and the OMB have limited Agency options and shortened timelines that would normally be established for this effort.  The IHS must develop flexible strategies to expedite assessments that are amenable to consolidation and will yield quick returns.

    In fiscal year (FY) 2005 the Director’s Executive Council (DEC) conducted a detailed policy analysis and review for the efficient and effective implementation of administrative consolidation, regionalization, and/or sharing of administrative functions that may be undertaken by the Agency.  The DEC is a policy advisory group to the Director, IHS, that focuses on issues related to strategic direction, organizational adjustments, and policy recommendations for addressing changes in the health systems environment.

    The IHS Administrative Consolidations Leadership Team developed an “Administrative Consolidations Survey,” and administered it Agency-wide.  This Team (established by the Director) and the IHS Administrative Consolidations Workgroup, performed a detailed analysis of the surveys to gauge the level of ongoing activities related to the sharing of resources, regionalization, and administrative consolidation.  The workgroup also examined recent consolidation efforts and experiences in several administrative areas that included Equal Employment Opportunity (EEO), human resources, acquisitions, finance, and United States (US.) Public Health Service Commissioned Corps personnel management.  The survey findings are reflected in this Administrative Consolidations policy and should guide the strategies and implementation processes for administrative consolidations, where applicable and appropriate.

    The IHS continues to face consolidation requirements from HHS and other central authorities to streamline and operate with fewer resources.  Efforts are currently underway for consolidating or regionalizing EEO and Finance/Accounting Human resource and acquisition agreements have already been developed and are currently being implemented throughout the Agency to meet executive initiatives.  As consolidation efforts move forward, Headquarters and Area top management will address those issues that challenge consolidation and sharing of services.

  5. DEFINITIONS.

    1. Administrative Consolidation.  A strategic organizational restructuring that includes the sharing, combining, streamlining, or contracting of administrative functions or services to increase the administrative efficiency of one or more of the organizations involved with the function, i.e., finance, accounting, human resources, information resources, procurement, contracting, property, inventory management, records management, etc.

    2. Business Plan.  A flexible planning document that identifies, provides, and communicates a basis for managing or monitoring business operations for any project, activity, or program, or other endeavor that requires resources to achieve specific objectives or accomplish an overall mission.

    3. Centers of Excellence.  An organization or program that has distinguished itself by exemplary accomplishment through the highest achievement of quality, effectiveness, standards, accreditation, teamwork, partnerships, and/or overall successful demonstration of its operations and leadership.

    4. Consolidation Agreement.  A non-contractural document that is established to define roles, responsibilities, and authorities between one or more organizations and stakeholders after a determination has been made that certain administrative functions will be shared, combined, or otherwise performed in common.

    5. Metrics.  Any type of measurement used to gauge some quantifiable component of organizational or program performance such as efficiency, cost savings, or customer satisfaction, etc.

    6. Third Party Revenue.  Funds that are due or received from third-party payers and/or non-beneficiaries that have a legal obligation to pay for health care services that have been provided at IHS or Tribal facilities.  Third-party payers include Federal, State, and local or private entities from which the IHS and Tribes are authorized to collect reimbursements, i.e., Medicare, Medicaid, State Children's Health Insurance Program, Federal Medical Care Recovery Act, Workman's Compensation, private insurance, and others, as appropriate.

    7. Tribal Shares.  The equitable share of the Federal budget that is made available to Tribes for programs, functions, services, and activities (including administrative support services) that the U.S. Government would normally provide, but have been assumed by the Tribes through contract or compact under the authority of the Indian Self-Determination and Education Assistance Act, P.L. 93-638.

  6. RESPONSIBILITIES.

    1. Director, Indian Health Service.  The Director, IHS, is responsible for ensuring that management officials throughout the IHS understand the importance and necessity for administrative consolidation as mandated by executive initiatives and HHS policy.  This includes establishing the necessary mechanisms that will enable IHS managers to implement the systems and processes required to meet this initiative in a timely and effective manner.

    2. Area Directors.  Area Directors are responsible for managing and directing all consolidation efforts in compliance with this policy and applicable legislative, regulatory, and other policy guidelines.  They are also responsible for overall coordination, communication, and facilitation between the organizational units involved with implementation and for ensuring that appropriate processes, procedures, reporting mechanisms, and interoffice communications are established.  This includes developing and documenting Area-specific policy or procedures for implementation of administrative consolidations and planning and budgeting for those activities necessary for systems development and implementation.

    3. Chief Executive Officer.  Service Unit Chief Executive Officers (CEO) are responsible for specific oversight of local administrative consolidation efforts and for implementing processes or procedures that are consistent with the requirements of this policy.  The CEO:

      1. assists in the planning and development of consolidation efforts;

      2. provides adequate staffing and budget; making changes and suggesting improvements as deemed necessary;

      3. ensures that the specific needs of their facilities are met while ensuring compliance with this policy and related regulatory or policy requirements;

      4. provides consultation and orientation for employees who are impacted by the consolidation process and ensure that related information or data is readily available and timely distributed; and

      5. makes assignments and ensures preparation of summary reports during the consolidation process.

  7. OPERATIONAL REVIEWS.

    1. Review of Administrative Functions.  A review of administrative functions that have potential for consolidation may be performed at all IHS operational levels.  Headquarters, Area Offices, and Service Units may explore a variety of possibilities for consolidation, regionalization, or sharing of the following (but not limited to) administrative functions:

      1. Financial Management

      2. Human Resources (HR) Management

      3. Recruitment/Retention

      4. Acquisition Management

      5. Property Management

      6. Information Technology

      7. Medical Records Consultant

      8. Records Management

      9. Privacy Act Consultant

      10. All Training Activities

      11. Transportation Coordination

      12. Travel

      13. Collecting Third Party Revenue.

    2. Review of Currently Shared Services or Consolidations.  Administrative functions that have already been consolidated, regionalized, or are currently shared should be reviewed for efficiency, effectiveness, and for the possibility of application of methodology in other administrative areas.  Existing formats, templates, and processes may be useful for application in other administrative functions.

    3. Review of Current Organizational Structure and Delegations of Authority.  Current organizational structures and delegations of authority should be reviewed for possible integration, adjustment, and/or revision to accommodate administrative consolidations.

    4. Internal Assessment/Review.  A detailed internal assessment of programs and needs within each Area is a critical first step in the development of an interoffice agreement and should be performed prior to the development or implementation of a service sharing agreement.  Headquarters Offices or Area components should consider employing an expansive definition of the term “consolidation,” to include sharing, regionalizing, or otherwise consolidating various functional responsibilities.  Consolidation need not necessarily lead to centralization or relocation of staff, and may take the form of sharing of resources among and/or between Areas without formally reorganizing the organizational structure in which the function is performed.  Changes to approved IHS organizational structures must be accomplished within IHS delegated authorities.

  8. PROCESS/METHODOLOGY.

    1. Consolidation Agreements.  Area Offices and other organizational components that decide to share services must develop written consolidation plans that include clearly defined authorities and roles of the various stakeholders in the effort.  The development of standardized systems, templates, etc., may be most effective for carrying out consolidation efforts or decisions and should be adopted as needed.  The roles, responsibilities, and interrelationships of various components at all organizational levels must be clearly defined in the consolidation plan and implementation agreement.  This plan may vary substantially with different consolidation projects and Areas.

      1. Specific Deliverables.  The plan and implementation agreement should specify the deliverables from the service provider that define the following items, where applicable:

        1. Timelines for the delivery of services;

        2. expectations, such as work products;

        3. matrices, where appropriate;

        4. participants or parties to the agreement;

        5. customers to be served;

        6. baseline standards and service criteria, where applicable;

        7. feedback and tracking processes, such as balanced scorecards or other reporting mechanisms;

        8. expected outcomes to meet IHS, Tribal, Urban Indian Health Program needs; and

        9. interface with Tribal customers.

      2. Existing Networks.  Existing networks, along geographic or other lines, may provide an effective means of developing sharing agreements.  Area Offices have successfully implemented sharing agreements for HR based upon the groupings recommended by the Division of Human Resources, IHS.  A few Areas have entered into consolidation or sharing agreements for acquisition and EEO services.

      3. Templates and Standard Formats.  Headquarters and Area Offices should consider using templates and structures that have been successfully tested through functional consolidations.  Agreement documents should be simple, and flexible in order to facilitate concurrence from all participants in the consolidation or sharing agreement.  (Lengthy, overly detailed agreements may require excessive monitoring and an inordinate amount of time and other resources to gauge the effectiveness of the results.)

      4. Regional Agreements.  Regional shared services may provide the best returns on consolidation.  Regionalization provides for wider accessibility to specific areas of expertise and permits a broader set of functions to be available where expertise would otherwise be limited to individual Area Offices.  Area Offices may alternatively and jointly form 'centers of excellence,’ where practical, to ensure that administrative expertise is maintained.

      5. Annual Evaluations.  Each consolidation agreement should be reviewed on a periodic basis, annually where possible, to ensure that defined outcomes are being met and roles or responsibilities have not changed.  As appropriate, these evaluations will include a check for proper delegated authorities, justification, and individual responsibility.

    2. Business Plans.  Administrative consolidations should be based upon a business plan approach for the allocation of resources and assignment of financial obligations.  A sound business plan for administrative consolidation has common elements that may include some or all of the following:

      1. A cover sheet with signatures of principals;

      2. executive summary;

      3. statement of purpose;

      4. table of contents;

      5. a detailed description of shared or consolidated services or functions;

      6. identification of the population to be served;

      7. description of the service are that includes geographics;

      8. comparative analysis of other shared service partnerships;

      9. operating procedures, including service metrics;

      10. staffing and salary costs required to carry out the functions;

      11. supervision or management authorities;

      12. location of the principle office;

      13. capital equipment and supply list;

      14. reporting requirements (includes content and frequency);

      15. dissolution process for the agreement; and

      16. supporting documentation that includes copies of the following:

      1. a detailed funding agreement, including accounting, appropriation data, funds transfer data, and tracking methodology;

      2. a proposed agreement for office space;

      3. resumes of all principles to the agreement;

      4. a proposed organizational chart;

      5. an acquisition plan for supplies, equipment and services; and

      6. a marketing plan for getting information to customers.

    3. Commitment to Quality Services.  A commitment to continued quality services must be a central factor in all consolidation efforts.  Partners should begin all planning with a primary focus on customer service and maintain this commitment by concentrating on outcomes that can be evaluated by customers.  The assurance of outcomes is best protected by incorporating metrics of quality service that are developed by the participants and validated by customers.  These metrics should be verified at various organizational authority levels in order to ensure compliance with fundamental consolidation principles and may be further advanced by the incorporation of trust, bilateral influence, and feedback.  The metrics governing any consolidation activity may include:

      1. assurance of equitable access to consolidation services with no reductions in current services;

      2. consideration of political factors and agendas;

      3. maintenance of system integrity by planning within system limitations;

      4. incorporating assessment tools to monitor system capacity;

      5. cost effectiveness;

      6. effective communication between consolidation partners;

      7. appropriate staffing; and

      8. checking all consolidation activities routinely and systematically at all organizational authority levels.

    4. Consideration of Benefits.  The process of developing, negotiating, and implementing interoffice service sharing agreements has many benefits.  Negotiations among the parties promote greater benefits to the Agency beyond monetary cost-savings, for example, improved interoffice cooperation, problem-solving, and expertise that results from the combined efforts and knowledge of partners to the consolidation effort.  Other benefits that should be assessed are:

      1. cost savings from economies of scale;

      2. job placement and preservation;

      3. improved planning systems; and

      4. best practices.

    5. Mitigation of Negative Financial Impact.  Options should be explored to ensure that the consolidation effort does not have a negative financial impact on the parties to the agreement.  (Example:  The distribution of non-core HR functions previously performed by local HR staff to individual service units may require the exploration of options other than hiring additional staff to support these functions.)

    6. Supervisory Control.  Supervisory controls should remain with the Area Offices or service units to the extent practicable.  Strategies should be adopted to avoid the dilution or fragmentation of management's control of performance, best practices, and effective results.

  9. COMMUNICATION/INFORMATION INFRASTRUCTURE.  Headquarters Office Directors and Area Directors are responsible for maintaining an effective communication infrastructure for the various components within their jurisdictions.  Agency leadership will institute communications processes for keeping consolidation policies current and relevant.  Periodic reassessment of the sharing or consolidation processes is required at all levels and should include feedback from customers on the continued effectiveness and applicability.  Management must be open to direct feedback from customers to ensure customer satisfaction, including suggestions for management action where performance measures are not acceptable.

    1. Open Communication and Understanding.  The IHS is unique within HHS in that it is the only HHS agency with a mission of providing direct medical services to beneficiaries.  Management should present consolidation plans and any related new organizational structures to affected parties early in the process to promote the understanding of staff members that will be affected by consolidations.

    2. Customer Acceptance.  Decisions regarding consolidation will often include input from local staff to identify needs and priorities.  Personal consultation sessions and letters to local leaders may be utilized to improve communications and reaching agreement on consolidation proposals.

    3. Cooperation and Collaboration.  Cooperation and collaboration will be a priority to prevent the perception of coercion among the affected staff that could result in active opposition.  Staff of affected programs should be included as active participants in accomplishing the objectives of consolidation efforts.

    4. Awareness of Influencing Factors.  Implementation of improved management systems will include consideration and incorporation of those factors that will impact consolidation efforts.  Management will maintain an awareness of a range of factors that may directly influence the scope, direction, and pace of consolidation efforts.  The factors include but are not limited to:

      1. economics (i.e., limited resources and pressures for cost containment);

      2. regulatory issues and mandated “rightsizing;”

      3. externally driven (such as HHS-Office of Management and Budget) initiated consolidations;

      4. customer satisfaction;

      5. practicality; and

      6. functionality.

    5. Acknowledgment of Existing Requirements.  Consolidation activities should begin with the practical acknowledgment of a number of fundamental principles or policy assumptions that need to be understood by all parties.  These principles or policies may be unfamiliar to potential consolidation partners, so it will be important to acquaint the parties with these issues during the consolidation process.

      1. Negotiated Tribal Shares or Tribal Compacts and Contracts.  Negotiated Tribal shares or existing Tribal compacts and contracts must be preserved and honored in the consolidation process.  All parties to the agreements must maintain a system for the identification and tracking of Tribal shares associated with the shared services and include this system as an element in the shared services agreement.  In addition, adherence to national, Area, and local Tribal consultation requirements is necessary to ensure that existing agreements are incorporated and not unintentionally violated during planning for regionalization, sharing, or consolidation.

      2. External and Internal Regulations and Policies.  External and internal regulations and policies may restrict, control, or otherwise modify consolidation activities.  Early consolidation planning is important to identify any internal Agency policies (including delegated authorities for reorganizations) or external Federal, State, and Tribal standards that may impact the activities under consideration.  Parties to the agreements must ensure compliance with these regulations and policies.

      3. Requirements of External Review Agencies.  Requirements of external review agencies such as the Joint Commission on Accreditation of Healthcare Organizations should be incorporated where applicable, and at the earliest stages of consolidation.

      4. Existing Area Office Shared Service Agreements.  Existing inter-Area Office shared service agreements may be found in various formats covering a limited range of administrative functions.  (Examples:  The Oklahoma City, Albuquerque, and Nashville Areas have entered into agreements related to HR, Acquisitions, and EEO.  The Phoenix and Tucson Areas share HR services through a formal agreement, complete with metrics and specific responsibilities.)

  10. OPTING OUT.  Consolidation agreements should provide for a process to be followed if fewer than all of the parties to the agreement wish to opt out of an existing agreement.  Many factors such as sharing of staff, space, and other resources will possibly need to be considered.

  11. RECORDKEEPING

    1. Administrative Consolidation Records.  All parties to the consolidation effort at all organizational levels must maintain files and records pertinent to the administrative consolidation process.

    2. Maintenance and Disposition.  All records shall be maintained and disposed of in accordance with Part 5, Chapter 15, “Records Management Program,” Indian Health Manual.  Current retention schedules may be obtained from the Area Records Management Officer or the Service Unit Records Management Liaison.

  12. SUPERSEDURE.  None.

  13. EFFECTIVE DATE.  This circular becomes effective on the date of signature.

/Charles W. Grim, D.D.S./
Charles W. Grim, D.D.S., M.H.S.A.
Assistant Surgeon General
Director, Indian Health Service

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