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The Indian Health Service: One Area of American Indian Law

American Indian Law is one of our areas of specialty at Lear and Lear. But, since it is a very broad topic we wanted to focus on one area: the Indian Health Service.

The Indian Health Service (IHS) is the health care system for federally recognized American Indian and Alaska Natives in the United States. IHS provides healthcare to “only eligible Alaska Native and American Indians at its federal hospitals and clinics”, but it is not a health insurance provider.[1] The IHS website identifies 149 IHS facilities, including hospitals, health centers, dental clinics, and behavioral health facilities. Pursuant to the Indian Self-Determination and Education Assistance Act, tribes maintain an additional 631 facilities, which receive funding or reimbursement from IHS for providing comparable services under the Indian Health Care Improvement Act.

Tribes are entitled to three basic types of reimbursement for supplementing these IHS services within tribal facilities: (1) Direct Program Costs, which effectively ensure that the tribes “receive funding equal to what the government would have spent if it provided the services at issue itself.”[2]; (2) Contract Support Costs, which comprise reasonable administrative costs for operating a certain federal program[3]; and (3) Section 105(l) Lease Costs, wherein IHS pays an effective lease for the federal program to occupy the tribe’s medical facility.[4]

Calculating the reasonable compensation for services rendered by a tribe can be difficult, as one can foresee the potential for accounting line items to fall under more than one of the above three categories. Additionally, these tribal facilities often offer healthcare services to the general public, so long as doing so “will not result in a denial or diminution of health services to eligible Indians.”[5] As such, there can be a manner of negotiations between the tribe and IHS, before both parties can agree on the reimbursement amount to which the tribe is entitled. Despite the surprising finding in Fort Defiance Indian Hosp. Bd., Inc., all the recent cases demonstrate the Three recent cases (addressed below) discuss the importance of delineating covered costs as compared to other costs incurred within a tribal health facility.

Jamestown S'Klallam Tribe v. Azar

In a recent case presented before the United States District Court in the District of Columbia, IHS challenged the demand of a tribal facility for Section 105(l) lease costs for the entire facility. The tribal facility, located in the State of Washington, substantially provided services to those in the general public, who were ineligible for IHS-provided care. In Jamestown S'Klallam Tribe, IHS proposed a lease cost reimbursement for 20% of the entire facility, which it deemed the size of a facility needed to serve the 460 Indian patients (which represented only 3% of the total 17,000 patients treated at the facility). The Jamestown court favored IHS’ 20% lease cost calculation, as “the Tribe's proposal… based on the costs of the entire Health Center ‘exceed[ed] the applicable funding level to which the Indian tribe is entitled,’ because the Tribe is not entitled to an unreasonable amount of lease compensation.”[6]

N. Arapaho Tribe v. Cochran

In 2021, the Northern Arapaho Tribe challenged IHS's refusal to pay contract support costs associated with that portion of the Tribe's health care program, funded by payments from Medicare, Medicaid, private insurers, and others.[7] There, the United States District Court for the District of Wyoming sided with the government’s interpretation of the aforesaid governing acts, stating that administrative and indirect costs associated with spending the Tribe's earned program income does not fall within the definition of contract support costs, as the earned program income is pursued at the Tribe’s discretion, whereas contract support costs are incurred to ensure compliance with the terms of the tribe’s contract with IHS.[8]

Fort Defiance Indian Hosp. Bd., Inc. v. Becerra

This year, the United States District Court for the District of New Mexico, has initially found in favor of the Fort Defiance Indian Hospital Board in a rather unique case, wherein the tribal organization challenged IHS' partial declination of its renewal contract with IHS. There, the government argued that funding received in prior years included duplicative funding amounts, due to a flawed calculation methodology.[9] However, the District Court observed that the proposed IHS contract contained no substantial changes from the prior contracts, with the exception of a new term of 15 years, instead of 3 years. Particularly, the court observed that the challenged methodology was previously IHS-approved. As a result, absent a material change in the terms of the proposed contract, the tribe was grandfathered into its prior methodology of calculating funding amounts, even if that methodology was later discovered as flawed; and IHS was precluded from unilaterally declining terms of a contract it previously deemed acceptable. This court left open the possibility to prospectively modify the calculation methodology, but it failed to articulate how IHS could achieve such modification. It merely stated that the government must pay the tribe all prior declined reimbursements in order to enable the hospital to continue providing critical healthcare.[10]

[1]'s%20important%20to%20clarify%20that,its%20federal%20hospitals%20and%20clinics. [2] Jamestown S'Klallam Tribe v. Azar, 486 F. Supp. 3d 83, 84–85 (D.D.C. 2020) (citing: Seminole Tribe of Fla. v. Azar, 376 F. Supp. 3d 100, 104 (D.D.C. 2019)). [3] Id. (citing: 25 U.S.C. §§ 5325(a)(2)–(3), 5388(c)). [4] Id. (citing: 25 U.S.C. § 5324(l)). [5] 25 U.S.C.A. § 1680c [6] Jamestown S'Klallam Tribe v. Azar, 486 F. Supp. 3d 83, 93 (D.D.C. 2020) (citing: 25 U.S.C. § 5387(c)(1)(A)(i)). [7] N. Arapaho Tribe v. Cochran, 548 F. Supp. 3d 1134 (D. Wyo. 2021). [8] N. Arapaho Tribe v. Cochran, 548 F. Supp. 3d 1134, 1142 (D. Wyo. 2021) (citing: 25 U.S.C.A. § 5325(a)(2)). See also: San Carlos Apache Tribe v. Azar, 482 F. Supp. 3d 932, 938 (D. Ariz. 2020) (“Contract support costs associated with third-party revenue do not derive from IHS contracts ’[i]n a straight line or course’ because third-party revenue does not emanate from IHS ‘without interruption or diversion’.”) [9] Fort Defiance Indian Hosp. Bd., Inc. v. Becerra, No. CIV 22-0098 JB/CG, 2022 WL 1690040, at 7 (D.N.M. May 26, 2022). [10] Id., at 60.

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