Hospital On Navajo Nation Sues IHS To Keep Gov't Contract

By Emma Whitford
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Law360 (November 16, 2020, 3:41 PM EST) -- The Indian Health Service must immediately renew a tribal self-determination contract with the Navajo Health Foundation-Sage Memorial Hospital in northern Arizona or further compromise crucial health care services during a pandemic, the hospital has claimed.

In a complaint filed Friday in New Mexico federal court, Sage accused IHS and the U.S. Department of Health and Human Services of violating the Indian Self-Determination and Education Assistance Act, which allows tribes to enter federal contracts to administer programs the government would otherwise manage directly.

The court must act quickly so the hospital can provide urgently needed care to the Navajo Nation without further cutting into its reserves, Sage claims.

"Immediate injunctive relief is required so that Sage can continue operating as a tribal self-determination contractor providing health care to 25,000 Navajo people in the middle of the COVID-19 pandemic," the hospital wrote Friday.

At stake is $1.8 million per month in operating costs, which is needed for the planned construction of a new hospital, Sage claims, as well as personal protective equipment from federal suppliers and a federal loan repayment program to attract doctors.

IHS also issued a news release Oct. 2 urging Navajo patients to travel to other regional hospitals while Sage is lapsed, the hospital claims, prompting patients to "travel long distances" to Gallup, New Mexico, or Chinle or Fort Defiance in Arizona.

"Sage and the Navajo people who depend upon Sage's services are suffering irreparable harm due to the interruption in continuity of care and decreased access to vital health care services," the hospital said. 

Sage is a nonprofit corporation on the Navajo Nation near its southwest border, court records show. It has contracted with the federal government as one of several designated tribal organizations in the region since 2009.

Sage claims that it submitted a draft contract for 2021 through 2023 in May, citing an ISDEAA rule that the federal government must approve renewal contracts and funding agreements that are "substantially" similar to their predecessors.

As the pandemic worsened, the hospital says it was hit hard. A shutdown of the Navajo Nation government also meant the hospital was delayed in renewing its status as a Navajo Nation "tribal organization" for contracting purposes.

Subsequently, Sage claims, regional IHS leaders offered mixed messages to the hospital and Navajo Nation Council members about the deadline and process for Sage to be approved as an ISDEAA contractor.

IHS then allegedly denied Sage's proposed contract renewal and issued the Oct. 2 news release telling Navajo patients they were no longer covered at the hospital.

The Navajo Nation Council issued a resolution Oct. 20 reauthorizing Sage, according to the complaint, but IHS declined to recognize the hospital's subsequent renewal proposal, saying too much time had lapsed, and it would now be treated as a new contractor.

"The only reason the gap in Sage's resolution authority occurred is because IHS engaged in a concerted effort to undermine Sage's renewal contract," the hospital claimed, adding that "IHS's clear intent was to interfere in tribal politics and undermine Sage's relationship with the nation."

This is not the first time Sage has sued the government over the ISDEAA. According to Friday's complaint, the hospital filed suit in New Mexico federal court in October 2014, challenging IHS' decision to decline a contract renewal request and related funding agreement.

Similar disputes followed, and in October 2017 Sage and IHS reached a settlement. IHS paid Sage $122.5 million and approved a renewal contract through 2020, according to the hospital. Sage agreed to provide IHS with quarterly financial reports.

"The Navajo Nation is in the middle of a raging pandemic that is literally killing people," Lloyd Miller of Sonosky Chambers Sachse Miller & Monkman LLP, counsel for the hospital, told Law360 by email, calling it an "outrage" that "at a critical time like this … the agency would discontinue contracting with Sage and direct suffering patients to drive long distances to other IHS providers."

IHS spokesperson Joshua Barnett told Law360 by email that, "as a matter of policy, IHS does not comment on pending litigation." 

However, Barnett provided a copy of the October news release from the Navajo Area IHS, stating that Sage's tribal resolution had expired.

"Without a valid tribal resolution, the tribe cannot enter into a contract for these services," the release states, noting that "IHS is working with the Navajo Nation and health care partners to review and address the delivery of health care services for this service population." 

According to a news release from the Navajo Nation, the tribe reported 97 new COVID-19 cases Friday, and on Monday launched a three-week stay-at-home order, along with restrictions for government offices, schools and businesses.

"We are inching closer and closer to a major public health crisis in which we could potentially see our hospitals filling up with patients," Navajo Nation President Jonathan Nez said in a statement. "Our health care system on the Navajo Nation cannot sustain a long-term surge in COVID-19 cases."

The tribe did not immediately respond to a request for comment on Sage's complaint.

Navajo Health Foundation is represented by Lloyd B. Miller and Rebecca A. Patterson of Sonosky Chambers Sachse Miller & Monkman LLP.

Counsel information for the federal government was not immediately available.

The case is Navajo Health Foundation-Sage Memorial Hospital Inc. v. Azar et al., case number 1:20-cv-01185, in the U.S. District Court for the District of New Mexico.

--Additional reporting by Andrew Westney. Editing by Orlando Lorenzo.

Update: This story has been updated with IHS's response to a request for comment and more information about its October news release. 

For a reprint of this article, please contact reprints@law360.com.

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