Navajo Health Found.—Sage Mem'l Hosp., Inc. v. Burwell

• Decision Date: 03 November 2016
• Docket Number: No. CIV 14–0958 JB/GBW,CIV 14–0958 JB/GBW
• Citation: 263 F.Supp.3d 1083
• Parties: NAVAJO HEALTH FOUNDATION—SAGE MEMORIAL HOSPITAL, INC., Plaintiff, v. Sylvia Mathews BURWELL, Secretary of the United States Department of Health and Human Services; Mary Smith, Acting Director of Indian Health Services; Douglas Gene Peter., M.D., Acting Area Director, Navajo Area Indian Health Service ; and Margaret Shirley–Damon, Contracting Officer, Navajo Area Indian Health Service, Defendants.
• Court: U.S. District Court — District of New Mexico

263 F.Supp.3d 1083

NAVAJO HEALTH FOUNDATION—SAGE MEMORIAL HOSPITAL, INC., Plaintiff,

v.Sylvia Mathews BURWELL, Secretary of the United States Department of Health and Human Services; Mary Smith, Acting Director of Indian Health Services; Douglas Gene Peter., M.D., Acting Area Director, Navajo Area Indian Health Service ; and Margaret Shirley–Damon, Contracting Officer, Navajo Area Indian Health Service, Defendants.

No. CIV 14–0958 JB/GBW

United States District Court, D. New Mexico.

Signed November 3, 2016

Paul E. Frye, Frye Law Firm, Albuquerque, New Mexico, Stephen D. Hoffman, Lewis Brisbois Bisgarrd & Smith, LLP, Phoenix, Arizona, Lloyd B. Miller, Sonosky, Chambers, Sachse, Miller, & Munson, LLP, Anchorage, Alaska, Attorneys for the Plaintiff.

Damon P. Martinez, United States Attorney, Karen F. Grohman, Assistant United States Attorney, United States Attorney's Office, District of New Mexico, Albuquerque, New Mexico, Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Robert E. Kirshman, Jr., Director, Steven J. Gillingham, Assistant Director, Devin Wolak, Russell J. Upton, Trial Attorneys, United States Department of Justice, Washington, D.C., Attorneys for the Defendants.

MEMORANDUM OPINION AND ORDER

JAMES O. BROWNING, UNITED STATES DISTRICT JUDGE

THIS MATTER comes before the Court on: (i) the Plaintiff's Motion for Partial Summary Judgment on the Issues of Allocation, filed August 1, 2016 (Doc. 199)("Allocation MSJ"); and (ii) the Plaintiff's Motion for Partial Summary Judgment on the Issue of Duplication, filed August 1, 2016 (Doc. 200)("Duplication MSJ"). The Court held a hearing on September 16, 2016. The primary issues are: (i) whether funding that third parties provide is considered part of federal programming for the purposes of reimbursement under the Indian Self–Determination and Education Assistance Act, 25 U.S.C. § 450 etseq. ("ISDEAA"); (ii) whether the Indian Health Service ("IHS") only is responsible for that portion of Sage Hospital's PFSAs funded with appropriated dollars; and (iii) whether the ISDEAA duplication provision prohibits IHS from providing any CSC funding for activities funded in the Secretarial amount.

FACTUAL BACKGROUND

"Sage is a Navajo tribal organizational for purposes of contracting with the Indian Health Service under the ISDEAA that operates a health care facility in Ganado, Arizona, within the exterior boundaries of the Navajo Reservation." MSJ¹ ¶ 1, at 3 (stating this fact). See Combined Response to Plaintiff's Motions for Summary Judgment on the Issues of Duplication and Allocation ¶ 1, at 5, filed August 25, 2016 (Doc. 222)("Response")(not disputing this fact). "IHS is an agency within the United States Department of Health and Human Services (HHS) and is responsible for providing federal health services to American Indians and Alaska Natives." MSJ ¶ 2, at 3 (stating this fact). See Response ¶ 2, at 5 (not disputing this fact). "Since fiscal year 2005, Sage [Hospital] has contracted with IHS under the ISDEAA to provide health services to a largely Navajo patient population." MSJ ¶ 3, at 3 (stating this fact)(bracketed material added). See Response ¶ 3, at 5 (not disputing this fact). "Defendant Burwell is the HHS Secretary and has responsibility for carrying out all the functions, authorities, and duties of HHS including contracting on behalf of the United States with Indian tribal organizations under the ISDEAA to provide health care to Native Americans." Allocation MSJ ¶ 4, at 3 (stating this fact).² See Response ¶ 4, at 5 (not disputing this fact).

"Defendant Smith is the Principal Deputy Director of the IHS and had the overall responsibility for carrying out all the functions, authorities, and duties of the IHS within HHS regarding contracting with Indian tribal organizations under the ISDEAA to provide health care to Native Americans." MSJ ¶ 5, at 3–4 (stating this fact). See Response ¶ 5, at 5 (not disputing this fact). "Defendant Shirley–Damon is the Contracting Officer for the Navajo Area IHS and is responsible for ISDEAA contracts and funding agreements for IHS programs, functions, services, and activities (PFSAs) undertaken by ISDEAA contractors within the Navajo Area IHS, including Sage." MSJ ¶ 6, at 4 (stating this fact). See Response ¶ 6, at 5 (not disputing this fact). "Shirley–Damon has the authority to sign ISDEAA contracts and funding agreements with Sage for such IHS programs and to award funds pursuant to those agreements." MSJ ¶ 6, at 4 (stating this fact). See Response ¶ 6, at 5 (not disputing this fact).³

"In 2009 Sage contracted with IHS under the ISDEAA.... Sage and IHS were parties to successive ISDEAA contracts and AFAs [Annual Funding Agreements] for FY 2009 through FY 2013, without interruption." MSJ ¶ 7, at 4 (stating this fact)(bracketed material added).⁴ See Response ¶ 7, at 5 (not disputing this fact).

The 2009 contract included the following PFSAs: Inpatient Services, General Ambulatory and Specialty Care Services, Emergency Department, Emergency Medical Transport, Optometry Clinic, Behavioral Health Services, Radiology, Pharmacy, Laboratory, Physical Therapy, Public Health Nursing, Employee Health Services, Health Education, Transportation Services, School Based Services, Diabetes Program, Traditional Medicine, Dental Clinic, and Podiatry Clinic.

MSJ ¶ 8, at 4 (stating this fact).⁵ See Response ¶ 8, at 5 (not disputing this fact). The 2009 through 2013 contracts also state:

In addition to general descriptions of services provided above, NHF/Sage [Sage Hospital or Sage] will provide the following services, among other related services, in operating and administering the PFSAs under the ISDEAA Contract and providing health care services for eligible beneficiaries ...

5. Business Functions: Including, but not limited to, billing and collecting third party reimbursements, conducting utilization review, compliance activities, insurance verification, and collection activities.

MSJ ¶ 9, at 5 (stating this fact)(bracketed material added in the MSJ). See Response ¶ 9, at 5 (not disputing this fact).

The IHS Contracts stated "[e]ach provision of the [ISDEAA] and each provision of this Contract shall be liberally construed for the benefit of Sage to transfer certain programs, functions, services, and activities (hereinafter 'PFSAs'), or portions thereof, and associated resources, that are otherwise contractible under section 102(a) of the [ISDEAA] ( 25 U.S.C. § 450(f)(a) ), including all related administrative functions, from the Secretary to Sage."

MSJ ¶ 11, at 5–6 (stating this fact)(bracketed material and single quotation marks around PFSAs in the MSJ).⁶ See Response ¶ 11, at 5 (not disputing this fact).

The IHS Contracts provided that "[a]ll program income collected by Sage shall be treated as additional supplemental funding to that negotiated in the AFA and Sage may retain all such income pursuant to section 106(m) of the [ISDEAA] ( 25 U.S.C. § 450j–1(m) ) to be used to further the general purposes of the Contract. Such program income shall not result in any off-set or reduction in the negotiated amount of the current or successor AFAs.

MSJ ¶ 12, at 6 (stating this fact)(bracketed material in the original). See Response ¶ 12, at 6 (not disputing this fact).

Sage's Annual Funding Agreements (AFAs) for each year provided that, "[f]or PFSAs provided under this AFA, Sage shall exercise its right pursuant to Section 405 of the Indian Health Care Improvement Act, as amended by P.L. 106–417, to submit claims directly to and recover directly from Medicare and Medicaid. All funds recovered from Medicare and Medicaid shall be used as allowed by law."

MSJ ¶ 13, at 6 (stating this fact)(bracketed material in the original). See Response ¶ 13, at 6 (not disputing this fact).

The AFAs also stated that "[a]ny funds recovered by Sage through filing, litigating, or settling a claim against a third party to pay for services previously provided to IHS-eligible beneficiaries by Sage, or for such services previously provided by the IHS through PFSA now operated by Sage, shall be considered program income to be utilized by Sage in support of the PFSAs contracted herein."

MSJ ¶ 14, at 7 (stating this fact)(bracketed material in the original).⁷ See Response ¶ 14, at 6 (not disputing this fact). "The funding tables in each AFA noted 'third party resources' as part of the Area Office direct operations budget."⁸ MSJ ¶ 15, at 7 (stating this fact). See Response ¶ 15. at 6 (not disputing this fact). "By letter dated August 25, 2014 to then-Contracting Officer Dayish, Sage submitted to IHS a CSC claim for FY 2009 through 2013 for a total of $62,569,681." MSJ ¶ 16, at 7 (stating this fact). See Response ¶ 16, at 6 (not disputing this fact).

By letter dated July 16, 2015, IHS asserted a counterclaim against Plaintiff for FY 2009 through 2013 in the amount of $4,218,357.... This counterclaim was based on IHS's assertions that "Plaintiff did not expend the indirect CSC funding on activities that the parties agreed were eligible for indirect CSC funding (i.e., reasonable, necessary, non-duplicative costs incurred for activities carried on to operate the Federal program.... This counterclaim was later dismissed."

MPSJ ¶ 17, at 7–8 (stating this fact). See Response ¶ 17, at 6 (not disputing this fact). "Despite the fact that Defendants dismissed their counterclaim, their expert continues to reduce her calculations of Sage's damages because 'Sage claimed all actual costs without applying a funding ratio to prorate the indirect costs between IHS and third-party funding.' " MSJ ¶ 18, at 8 (stating this fact).⁹ See Response ¶ 18, at 6 (not disputing this fact).

IHS asserts that "CSC ... is only generated by the Secretarial amount, not additional amounts a tribal contractor may choose to contribute to its ISDEAA programs from other sources.... [T]he purpose of CSC funding is to ensure that tribal contractors are not required to reduce the program, as operated by the Secretary, to cover

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