Swinomish Indian Tribal Cmty. v. Azar

• Decision Date: 09 September 2019
• Docket Number: No. 18-cv-1156 (DLF),18-cv-1156 (DLF)
• Citation: 406 F.Supp.3d 18
• Parties: SWINOMISH INDIAN TRIBAL COMMUNITY, Plaintiff, v. Alex M. AZAR, et al., Defendants.
• Court: U.S. District Court — District of Columbia

406 F.Supp.3d 18

SWINOMISH INDIAN TRIBAL COMMUNITY, Plaintiff,

v.Alex M. AZAR, et al., Defendants.

No. 18-cv-1156 (DLF)

United States District Court, District of Columbia.

Signed September 9, 2019

Patrick Michael Sullivan, Dickinson Wright PLLC, Kaitlyn Elizabeth Klass, Hobbs, Straus, Dean & Walker, LLP, Washington, DC, Geoffrey D. Strommer, Pro Hac Vice, Stephen D. Osborne, Pro Hac Vice, Hobbs, Straus, Dean & Walker, LLP, Portland, OR, Rachel Sage, Pro Hac Vice, Stephen T. LeCuyer, Office of Tribal Attorney, Swinomish Indian Tribal, La Conner, WA, for Plaintiff.

Christopher Charles Hair, Benton Gregory Peterson, U.S. Attorney's Office for the District of Columbia, Washington, DC, for Defendants.

MEMORANDUM OPINION

DABNEY L. FRIEDRICH, United States District Judge

The plaintiff Swinomish Indian Tribal Community brings this action under the Contract Disputes Act, 41 U.S.C. § 7101 et seq. and the Declaratory Judgment Act, 28 U.S.C. § 2201, as allowed by the Indian Self Determination and Education Assistance Act, 25 U.S.C. § 5331(a), for an alleged breach of contract and statutory violation by the Indian Health Service (IHS). Before the Court are the parties' cross-motions for summary judgment. Dkts. 21, 28. For the reasons that follow, the Court will grant the defendants' motion and deny the plaintiff's motion.

I. BACKGROUND

A. Statutory Background

The Indian Health Service (IHS), an agency in the U.S. Department of Health and Human Services (HHS), delivers health-related programs, services, and activities to American Indians. See Compl. ¶ 11–12, Dkt. 1. When it delivers these services directly to tribal beneficiaries, it operates its own service unit facilities. See id. ¶ 18; see also Pl.'s Mem. at 8, Dkt. 21-2. Alternatively, the Indian Self Determination and Education Assistance Act (ISDEAA), 25 U.S.C. § 5301 et seq. , authorizes federally recognized Indian tribes and tribal organizations to assume responsibility for the health care programs that the IHS would otherwise provide.

Title V of the ISDEAA, id. § 5381 et seq. , establishes the guidelines for Tribes who wish to enter into self-governance contracts with the IHS. Such tribes do so by negotiating multiyear funding agreements to carry out their contracts. See id. § 5388(a)–(b). Title V entitles tribes with self-governance contracts to two types of funding: "amounts for direct program costs specified under section 5325(a)(1) ... and amounts for contract support costs specified under section 5325(a) (2), (3), (5), and (6)." Id. § 5388(c). Title I, in turn, defines those types of funding. See id. § 5325(a).

The first type of funding, an amount for "direct program costs," id. § 5388(c), includes an "amount of funds" that "shall not be less than the [IHS] Secretary would have otherwise provided for the operation of the programs or portions thereof for the period covered by the contract," id. § 5325(a)(1). In other words, a tribe receives "the amount the Secretary would have provided for the [programs, functions, services, and activities] had the IHS retained responsibility for them." Compl. ¶ 15. Funding provided for direct program costs under § 5325(a)(1) is known as the "Secretarial amount." Id.

The second type of funding, an amount for contract support costs (CSC), "shall be added" to the Secretarial amount for:

reasonable costs for activities which must be carried on by a tribal organization as a contractor to ensure compliance with the terms of the contract and prudent management, but which—

(A) normally are not carried on by the respective Secretary in his direct operation of the program; or

(B) are provided by the Secretary in support of the contracted program from resources other than those under contract.

Id. § 5325(a)(2). The CSC amount includes two kinds¹ of "reasonable and allowable costs":

(i) direct program expenses for the operation of the Federal program that is the subject of the contract, and

(ii) any additional administrative or other expense related to the overhead incurred by the tribal contractor in connection with the operation of the Federal program, function, service, or activity pursuant to the contract[.]

Id. § 5325(a)(3)(A). These two expense categories are known as "direct CSC" and "indirect CSC," respectively. Compl. ¶ 16. Direct CSC covers costs incurred to operate a specific program, such as workers' compensation, while indirect CSC covers overhead that benefits more than one program, such as information technology systems. Id. ; see also Defs.' Cross-Mot. at 5 n.8, Dkt. 28. Indirect CSC is calculated by "multiplying a negotiated indirect cost rate by the amount of the direct cost base." Compl. ¶ 24. In turn, the direct cost base is defined as "[t]otal direct costs, less capital expenditures and passthrough funds." Id. The ISDEAA further provides that both types of CSC "shall not duplicate any funding provided under" the Secretarial amount in subsection (a)(1). 25 U.S.C. § 5325(a)(3)(A)(ii).

When the IHS provides direct services to beneficiaries, the Indian Health Care Improvement Act (IHCIA) authorizes it to bill and collect reimbursements from Medicare, Medicaid, the Children's Health Insurance Program, and private insurers (third parties) for services it provided to eligible individuals. Compl. ¶ 18. These collections, called program income or third-party revenue,² are placed in a "special fund" that is passed through "100 percent" to the IHS service unit entitled to the reimbursement. 25 U.S.C. § 1641(c)(1)(A). Alternatively, tribes may opt to bill and receive payments from third parties directly. Id. § 1641(d)(1). The IHS and the tribes both must use any third-party revenue they collect to make improvements in facilities necessary to comply with the Social Security Act, to provide additional health care services, or for another health care-related purpose consistent with the IHCIA and the ISDEAA.

Id. §§ 1641(c)(1)(B), (d)(2)(A). Additionally, Title V of the ISDEAA addresses third-party revenue in the following provision:

All Medicare, Medicaid, or other program income earned by an Indian tribe shall be treated as supplemental funding to that negotiated in the funding agreement. The Indian tribe may retain all such income and expend such funds in the current year or in future years except to the extent that the Indian Health Care Improvement Act ( 25 U.S.C. 1601 et seq. ) provides otherwise for Medicare and Medicaid receipts. Such funds shall not result in any offset or reduction in the amount of funds the Indian tribe is authorized to receive under its funding agreement in the year the program income is received or for any subsequent fiscal year.

25 U.S.C. § 5388(j).

The question in this case is whether, when a tribe collects its own third-party revenue pursuant to 25 U.S.C. § 1641(d)(1), its expenditures of those funds on health care services are eligible for CSC funding from the IHS under the ISDEAA, id. §§ 5325, 5388.

B. Factual Background

The Swinomish Indian Tribal Community is a federally recognized Indian tribe whose reservation is in Skagit County, Washington. Compl. ¶ 10.³ In 1997, the it entered into a Compact of Self Governance Between the Swinomish Indian Tribal Community and the United States of America (Compact), Pl.'s Mot. Ex. A, Dkt. 21-3, under Title V of the ISDEAA. Since then, the Tribe has been carrying out "a range of health care programs, functions, services, and activities at its medical and dental clinics on the Swinomish Reservation." Compl. ¶ 10. Like ISDEAA Title V, the Tribe's Compact addresses third-party revenue with the following provision:

All Medicare, Medicaid and other program income earned by the Tribe shall be treated as additional supplemental funding to that negotiated in the [funding agreement]. The Tribe may retain all such income and expend such funds in the current year or in future years except to the extent that the Indian Health Care Improvement Act ( 25 U.S.C. 1601 et seq. ) provides otherwise for Medicare and Medicaid receipts. Such funds shall not result in any offset or reduction in the amount of funds the Tribe is authorized to receive under its [funding agreement] in the year the program income is received or for any subsequent fiscal year.

Compact, Art. III, § 5.

On November 2, 2009, the parties entered into a Funding Agreement for Calendar Year (CY) 2010–2014 (Funding Agreement), Pl.'s Mot. Ex. B, Dkt. 21-4. In accordance with Title V, the Funding Agreement included both the Secretarial amount for direct program costs and CSC funding for direct and indirect administrative costs. See id. § 4. For CY 2010, the Tribe's negotiated indirect cost rate was 31.91%. Compl. ¶ 24; see also Indirect Cost Negotiation Agreement, Pl.'s Mot. Ex. C at 4, Dkt. 21-5. Thus, under the Agreement, the amount of indirect CSC funds that the Tribe received was calculated by multiplying the indirect cost rate by the direct cost base. See Funding Agreement § 6. The CY 2010 award totaled over $3,000,000, including $755,965 for indirect CSC and $153,374 for direct CSC. Defs.' Am. Answer ¶ 27, Dkt. 26-1.⁴

In CY 2010, the Tribe collected $636,421 in "program income" from third parties including Medicare, Medicaid, and private insurers and $27,730 in "other income" for a total of $664,151. Id. ¶ 23 (citing CY 2010 Audit at 14). Of that amount, the Tribe states that $553,888 was earned from clinic revenues, $79,991 from contract reimbursement from the Upper Skagit Tribe, $2,542 from the Tribe's book sales, and $27,730 from interest. Pl.'s Opp'n at 21–22, Dkt. 29. That year, the Tribe spent this revenue and the lump-sum direct program appropriation provided by the IHS under its Funding Agreement on "social and health services" and "capital outlay." Defs.' Am. Answer ¶ 23 (citing CY 2010 Audit at 14). The IHS did not pay an additional amount of CSC for the expenditures of third-party revenue. Compl. ¶ 23. Instead, these expenditures were excluded from the direct cost base and thus did not factor into IHS's basis for...