Jamestown S'Klallam Tribe v. Azar

Citation486 F.Supp.3d 83
Decision Date11 September 2020
Docket NumberCivil Action No. 19-2665 (JEB)
CourtU.S. District Court — District of Columbia
Parties JAMESTOWN S'KLALLAM TRIBE, Plaintiff, v. Alex M. AZAR, in his official capacity as Secretary, U.S. Department of Health & Human Services, et al., Defendants.

Geoffrey D. Strommer, Pro Hac Vice, Stephen D. Osborne, Pro Hac Vice, Hobbs, Straus, Dean & Walker, LLP, Portland, OR, Kaitlyn Elizabeth Klass, Lisa Marie Meissner, Hobbs, Straus, Dean & Walker, LLP, Washington, DC, for Plaintiff.

Diana Viggiano Valdivia, Benton Gregory Peterson, U.S. Attorney's Office for the District of Columbia, Washington, DC, for Defendants.

MEMORANDUM OPINION

JAMES E. BOASBERG, United States District Judge

The Jamestown S'Klallam Tribe is a federally recognized Indian tribe that owns and operates the Jamestown Family Health Center in Sequim, Washington. It brought this suit to challenge the Indian Health Service's rejection of its reimbursement request related to that facility. What makes this Health Center unusual is that, while it offers care to both Indians and non-Indians, the latter make up the overwhelming majority — over 97% — of its patients. The Tribe's funding proposal to IHS claimed that the Indian Self-Determination and Education Assistance Act (ISDEAA), 25 U.S.C. § 5301 et seq. , entitled the Tribe to compensation for certain costs (including depreciation, interest, and maintenance) associated with the use of the entire facility. IHS disagreed, contending that it did not owe compensation for the proportion of those costs that are attributable to the facility's provision of services to non-Indians. Each party renews these arguments before this Court in Cross-Motions for Summary Judgment. As the Government Defendants’ position is ultimately more persuasive, the Court will enter summary judgment in their favor.

I. Background
A. Legal Background

Intended to promote tribal self-determination and self-governance, the ISDEAA authorizes Indian tribes and tribal organizations to administer certain federal programs that would otherwise be carried out directly by federal agencies. See 25 U.S.C. § 5321(a)(1). Eligible programs include healthcare services normally offered by the Indian Health Service, a component of the Department of Health and Human Services, under the Indian Health Care Improvement Act (IHCIA). See 25 U.S.C. § 1601 et seq. Title V of the ISDEAA requires IHS to enter into self-governance compacts and associated funding agreements with tribes who wish to take over administration of IHS programs, essentially treating the tribe as a government contractor. See 25 U.S.C. §§ 5384 – 85.

The ISDEAA makes three types of funding available to a tribe as part of a Title V compact and funding agreement. First, the tribe is entitled to the baseline ‘Secretarial amount’ for "direct program costs," 25 U.S.C. § 5388(c), which "shall not be less than the [federal agency] would have otherwise provided for the operation of the programs or portions thereof for the period covered by the contract." 25 U.S.C. § 5325(a)(1). Providing that amount as a floor "ensures that the tribes receive funding equal to what the government would have spent if it provided the services at issue itself." Seminole Tribe of Fla. v. Azar, 376 F. Supp. 3d 100, 104 (D.D.C. 2019). Second, IHS must offer funding to offset certain "contract support costs," which are the reasonable additional costs (such as administrative or overhead expenses) of operating the particular program.

See 25 U.S.C. §§ 5325(a)(2)(3), 5388(c). Third, and at issue in this case, section 105(l ) of the ISDEAA requires IHS to enter into a "lease" of certain facilities from the tribe at the tribe's request. See 25 U.S.C. § 5324(l ). Although the agency does not physically occupy or take over the facility, it nonetheless must pay at least some amount of compensation as part of the lease agreement. See id.; see also 25 C.F.R. §§ 900.69 – 74 ; Maniilaq Ass'n v. Burwell, 72 F. Supp. 3d 227, 237–40 (D.D.C. 2014) ( Maniilaq I ) (concluding that section 105(l ) lease funds are available as part of a Title V compact and funding agreement).

To qualify for the section 105(l ) mandatory lease and associated compensation, a facility must be owned or leased by the tribe and "used by the [tribe] for the administration and delivery of" services under the ISDEAA. See 25 U.S.C. § 5324(l ). Under the statute, lease "compensation may include rent, depreciation[,] ... principal and interest paid or accrued, operation and maintenance expenses, and such other reasonable expenses that the Secretary determines, by regulation, to be allowable." Id. § 5324(l )(2). Although the statute states only that compensation "may" include such items, applicable regulations further specify the "elements ... included in the compensation for a lease." 25 C.F.R. § 900.70 ; see also id. § 900.74.

When it comes to the actual amount of compensation that must be paid to the tribe under a mandatory lease, however, the regulations are somewhat inscrutable. As an earlier court in this district put it, "[D]rafting imprecisions" and "apparent textual contradictions" "pervade the regulations" and "frustrate the Court's search for a steady place to get its footing." Maniilaq Ass'n v. Burwell, 170 F. Supp. 3d 243, 250–51 (D.D.C. 2016) ( Maniilaq II ). Deriving some order from the chaos, the Maniilaq II court offered two principles drawn from section 105(l ) and the implementing rules: IHS need not grant lease "compensation requests that [are] ‘duplicative’ [of funding already provided by the government] ... or [are] not ‘reasonable.’ " Id. at 255 (citing 25 C.F.R. § 900.70 and 25 U.S.C. § 5324(l )(2) ). It is the reasonableness upon which this case turns.

B. Factual Background

The Plaintiff Tribe involved here is the Jamestown S'Klallam Tribe, members of which live in the State of Washington. See ECF No. 1 (Complaint), ¶ 8; ECF No. 13-1 (Pl. SMF), ¶ 1. The Jamestown Family Health Center, which they operate, is a nearly 35,000 square-foot facility that provides healthcare to both Indians and non-Indians in the service area. See Pl. SMF, ¶ 2. The full operating budget of the Health Center is close to $18 million. See ECF No. 21-11 (2018 Tribe Report) at 17. The Tribe is a participant in the ISDEAA's Title V self-governance program and has a compact and funding agreement with IHS pertaining to the Health Center. See Pl. SMF, ¶ 2. It received nearly $1.6 million in Secretarial amount and contract-support-cost funding from IHS under those agreements in fiscal year 2018. See ECF No. 13-9 (Rejection Letter) at 2; ECF No. 21-12 (Tribe 2018 Funding); see also ECF No. 13-10 (Funding Agreement) at 11 ($1.4 million provided for FY 2015).

On August 30, 2018, the Tribe submitted a proposal to IHS seeking, for the first time, lease compensation for the Health Center for fiscal year 2018. See Pl. SMF, ¶ 4–5. It proposed an amount of $981,402 and requested that such compensation be incorporated into the existing funding agreement, as is appropriate under the ISDEAA. See id., ¶ 4; Maniilaq I, 72 F. Supp. 3d at 238. After some negotiations, the Tribe and IHS agreed that the lease-reimbursement "costs for the entire Health Center for FY 2018 totaled $514,826," not the nearly $1 million the Tribe initially requested. See Pl. SMF, ¶ 6; see also Rejection Letter at 3.

IHS, though, did not agree to pay that amount as lease compensation. Citing the "reasonableness requirement of sec[tion] 105(l )(2)," the agency explained that it had to consider the fact that only 460 of the Health Center's 17,000 registered patients — less than 3% — are Indians. See ECF No. 13-7 (Email from Michael Weaver) at 3; Rejection Letter at 2. Although non-Indians are generally ineligible for services from IHS under the IHCIA, the Tribe treats them on a fee-for-service basis under paragraph 1680c(c)(2) of that Act, which authorizes tribes operating under an ISDEAA compact to do so if they determine that "the provision of such health services will not result in a denial or diminution of health services to eligible Indians." 25 U.S.C. §§ 1680c(c)(1)(B), (c)(2) ; see Pl. SMF, ¶ 3. IHS nonetheless believed that it could not and should not pay section 105(l ) lease compensation for the entire Health Center when the Center is "far larger than necessary to serve" the eligible Indian population. See Weaver Email at 2.

The agency accordingly proposed to reduce the compensation by a pro rata amount based on comparing the total square footage of the facility with the square footage necessary to provide services to Indian beneficiaries. See id. at 3; Rejection Letter at 3. Using a "supportable space methodology" drawn from an agency manual pertaining to a different funding context, IHS concluded that the Tribe needed only 7,060 square feet to serve the eligible population of 460 individuals. See Rejection Letter at 3. Because that represented 20.4% of the Health Center's total square footage, the agency proposed paying only that percentage of the $514,826 in full recoverable costs, or $105,025. Id. IHS reduced that proposed amount by a further $38,703, which the parties had already agreed was duplicative of costs covered by other reimbursements, leading to total lease compensation of $66,322. See id.; Pl. SMF, ¶¶ 7–8.

The agency invited the Tribe to furnish additional information regarding use of the Health Center by non-beneficiaries to enable IHS to "more accurately identify the applicable funding level of the proposed lease." Weaver Email at 3. Plaintiff, however, "fundamental[ly] disagree[d]" with the agency's view of section 105(l ). See ECF No. 13-2 (Pl. SJ Mot.) at 2. As the Tribe read the statute and implementing regulations, they require IHS to "fully fund the reasonable [and non-duplicative] costs of operating and maintaining" the entire facility, regardless of whether it is used to serve non-Indians. Id. at 1. The Tribe thus submitted a "final offer" to IHS proposing that the...

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