Case 1:20-cv-01185 Document 1 Filed 11/13/20 Page 1 of 24
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF NEW MEXICO
`
`
`Plaintiff,
`
`
`
`v.
`
`Navajo Health Foundation-Sage Memorial
`Hospital, Inc.,
`
`
`
`
`
`Alex Azar, Secretary, U.S. Department of
`Health and Human Services; Michael
`Weahkee, Principal Deputy Director,
`Indian Health Service; Roselyn Tso, Area
`Director, Navajo Area Indian Health
`Service; Marquis Yazzie, Agency Lead
`Negotiator/Director, Office of Indian Self-
`Determination, Navajo Area Indian Health
`Service,
`
`and
`
`United States of America,
`
`
`
`
`
`
`Defendants.
`
`
`
`
`
`
`Civil Action No.
`
`COMPLAINT
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`I. INTRODUCTION
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`1.
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`This action is brought in the middle of a pandemic to secure immediate injunctive
`
`relief compelling the Indian Health Service (“IHS”) to award and fund the renewal contract of the
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`Navajo Health Foundation-Sage Memorial Hospital (“Sage”) under the Indian Self-Determination
`
`and Education Assistance Act (“ISDEAA”), 25 U.S.C. §§ 5301-5423. As this Court held in
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`Navajo Health Found.-Sage Mem’l Hosp., Inc. v. Burwell, 100 F. Supp. 3d 1122, 1173, 1192
`
`(D.N.M. 2015) (“Sage I”) and Navajo Health Found.-Sage Mem’l Hosp., Inc. v. Burwell, 256 F.
`
`Supp. 3d 1186, 1234, 1247 (D.N.M. 2015) ) (“Sage II”), IHS is required by law to award a renewal
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`contract that does not propose a “material and substantial change” from the preceding contract, 25
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`Case 1:20-cv-01185 Document 1 Filed 11/13/20 Page 2 of 24
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`C.F.R § 900.33. Yet, once again IHS has refused to do so.
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`2.
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`Immediate injunctive relief is required so that Sage can continue operating as a
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`tribal self-determination contractor providing health care to 25,000 Navajo people in the middle
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`of the COVID-19 pandemic; to protect Sage from the loss of $1.8 million per month in operating
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`revenue; to protect Sage’s access to federal sources of supply (including pharmaceuticals); to
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`protect Sage’s ability to recruit additional providers by providing benefits like the IHS loan
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`repayment program; to protect Sage’s ability to provide comprehensive diabetes case management
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`under related grants; to protect Sage’s right to liability protection under the Federal Tort Claims
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`Act; and to prevent Sage’s patient population from being required to obtain inferior health care at
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`distant locations. Congress gave the District Courts the power to impose strong and immediate
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`remedies where, as here, IHS’s refusal to award a renewal contract is contrary to the ISDEAA and
`
`its implementing regulations. 25 U.S.C. § 533l(a).
`
`II. JURISDICTION
`
`3.
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`This Court has jurisdiction over this action pursuant to 28 U.S.C. §§ 1331, 1362
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`and 25 U.S.C. § 5331(a).
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`4.
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`Venue is proper pursuant to 28 U.S.C. § 1391(e)(1)(A) because some of the
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`Defendants reside in New Mexico.
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`III. PARTIES
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`5.
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`Plaintiff Sage is a private not-for-profit corporation that owns and operates a health
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`care facility in Ganado, Arizona, serving approximately 25,000 Navajo people within the exterior
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`boundaries of the Navajo Reservation. The Navajo Nation is a federally recognized Indian Tribe
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`and has designated Sage as a “tribal organization,” 25 U.S.C. § 5304(l), for purposes of contracting
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`Case 1:20-cv-01185 Document 1 Filed 11/13/20 Page 3 of 24
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`with IHS under the ISDEAA. Since 2009, Sage has provided health care services to members of
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`the Navajo Nation pursuant to a contract with IHS under Title I of the ISDEAA, 25 U.S.C.
`
`§§ 5301-5332.
`
`6.
`
`Alex Azar is the Secretary of the U.S. Department of Health and Human Services
`
`(“HHS”). Secretary Azar exercises limited responsibilities designated to him by Congress
`
`pursuant to the ISDEAA and other applicable law.
`
`7.
`
`Michael Weahkee is the Director of the Indian Health Service (“IHS”). Director
`
`Weahkee exercises authority delegated to him by the Secretary to carry out the Secretary’s
`
`responsibilities under the ISDEAA and other applicable law. As used throughout this Complaint
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`(and unless context commands otherwise), the terms “Secretary,” “HHS,” “Director,” and “IHS”
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`are used interchangeably.
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`8.
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`Roselyn Tso is the Area Director of the Navajo Area Indian Health Service
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`(“NAIHS”). Director Tso carries out the functions, authorities, and duties of the IHS within the
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`Navajo Nation service area, including contracting with Indian tribal organizations under the
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`ISDEAA. Director Tso resides in Albuquerque, New Mexico.
`
`9.
`
`Marquis Yazzie is the Agency Lead Negotiator and Director of the Office of Indian
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`Self-Determination within the NAIHS. Mr. Yazzie is the main agency contact for the negotiation
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`of contracts under Title I of the ISDEAA and has communicated with Sage on behalf of the agency
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`regarding the fiscal year 2021 contract renewal. Mr. Yazzie resides in Gallup, New Mexico.
`
`IV. BACKGROUND
`
`A.
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`Brief Overview of the ISDEAA
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`10.
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`The purpose of the ISDEAA is to ensure “maximum Indian participation” in the
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`provision of services to Indian communities. 25 U.S.C. § 5302(a). The Act seeks to achieve this
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`purpose through the “establishment of a meaningful Indian self-determination policy,” which
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`provides for the transition of federal programs serving Indian Tribes from IHS operation to tribal
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`operation. Id. § 5302(b).
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`11.
`
`The ISDEAA authorizes tribes and tribal organizations to contract with IHS to
`
`provide federally funded healthcare services that IHS would otherwise provide directly. A Tribe
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`may designate a tribal organization, id. § 5304(l), to contract with IHS on the Tribe’s behalf.
`
`12.
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`A tribal organization may choose to contract for any portion of a health care
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`program, function, service, and activity (“PFSA”), including administrative activities, that IHS
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`carried out in its operation of the federal healthcare program. Id. § 5321(a).
`
`13.
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`Contracts under Title I of the ISDEAA generally must be renewed every three
`
`years. 25 U.S.C. § 5324(c)(1)(A). The contracting tribal organization and IHS must also negotiate
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`annual funding agreements (“AFAs”) that are incorporated into each contract and may be amended
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`throughout the year to add funds the agency makes available. See 25 U.S.C. § 5329(c) (model
`
`agreement).
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`14.
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`The proposal content requirements for a renewal contract and successor AFA are
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`not the same as for an initial contract proposal. Compare 25 C.F.R. § 900.12 (renewal contract
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`and successor annual funding agreement), with id. § 900.8 (initial contract proposal). A renewal
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`proposal need only provide funding information and identify any proposed changes. Id. § 900.12.
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`15.
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`If a tribal organization submits a proposal to renew a term contract “where no
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`material and substantial change to the scope or funding of a [PFSA] has been proposed,” then IHS
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`may not review the renewal proposal for declination issues. Id. § 900.33; cf. id. § 900.22
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`(describing declination criteria that are only applicable to initial contracts). Instead, such renewal
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`contracts must be automatically approved.
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`16.
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`Similarly, if a tribal organization submits a successor AFA that “is substantially the
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`same as the prior [AFA] . . . the Secretary shall approve and add to the contract the full amount of
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`funds to which the contractor is entitled, and may not decline, any portion of a successor [AFA].”
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`Id. § 900.32.
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`17.
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`The ISDEAA provides a comprehensive range of remedies when IHS violates the
`
`Act, including the right to obtain immediate injunctive relief and money damages. 25 U.S.C.
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`§ 5331(a).
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`18.
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`The ISDEAA and its regulations must “be liberally construed for the benefit of the
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`Indian Tribe participating in self-determination, and any ambiguity shall be resolved in favor of
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`the Indian Tribe.” 25 U.S.C. § 5321(g); Salazar v. Ramah Navajo Chapter, 567 U.S. 182, 194
`
`(2012); see also 25 C.F.R. § 900.3(b)(11) (“The Secretary’s commitment to Indian self-
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`determination requires that these regulations be liberally construed for the benefit of Indian tribes
`
`and tribal organizations . . . .”).
`
`B.
`
`Prior Litigation History
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`19.
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`On June 3, 2005, the Navajo Nation Council enacted Resolution No. CJN-35-05,
`
`which named Sage as a “tribal organization” for purposes of contracting with IHS for the provision
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`of healthcare services to Navajo people within Sage’s service area. The resolution authorized Sage
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`to manage and operate contracts with IHS under the ISDEAA from October 1, 2005 through
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`September 30, 2020. Under that authority, Sage entered into an ISDEAA contract with IHS
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`beginning in 2009 (“2009 Contract”).
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`20.
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`Sage and IHS extended the 2009 Contract without interruption for successive years,
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`through FY 2013. In August 2013, Sage proposed a renewal contract for a three-year term, FY
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`2014 through FY 2016, together with a successor AFA for FY 2014. Sage proposed no material
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`changes in the budget or the PFSAs.
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`21.
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`IHS never acted to approve or disapprove Sage’s proposed contract for FY 2014-
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`2016. Instead, IHS opted to extend Sage’s contract and to provide Sage with funding on a monthly
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`basis while IHS launched a review and audit.
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`22.
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`The month-to-month contract extension continued for most of FY 2014. As the
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`end of FY 2014 loomed, Sage submitted to IHS another proposed three-year renewal contract for
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`FY 2015-2017 and a successor AFA for FY 2015.
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`23.
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`On September 29, 2014, IHS purported to decline the renewal contract and
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`successor AFA referred to in paragraph 22. As a result, Sage immediately lost access to Federal
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`Tort Claims Act (“FTCA”) coverage for malpractice claims (as provided in 25 U.S.C. § 5321(d))
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`and access to low-cost pharmaceutical supplies from IHS suppliers (as provided in 25 U.S.C.
`
`§ 5324(k).
`
`24.
`
`On October 23, 2014, Sage filed a complaint in this Court seeking immediate
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`injunctive relief to reverse IHS’s declination decision, compel IHS to award and fund Sage’s
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`renewal contract and successor AFA, provide FTCA coverage for Sage and its employees, and
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`restore Sage’s ability to purchase pharmaceuticals from IHS suppliers.
`
`25.
`
`On April 9, 2015, this Court issued a preliminary injunction in which it ordered
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`IHS to fund Sage at pre-declination levels and ordered the parties to comply with the terms and
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`conditions of the last AFA and Contract that were in effect, including reinstating Sage’s FTCA
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`coverage. Sage I, 100 F. Supp. 3d at 1190-91. The Court determined that Sage had demonstrated
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`irreparable harm based on its loss of funding, id. at 1171, that Sage had demonstrated a likelihood
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`of success on the merits because 25 C.F.R §§ 900.32 and 900.33 likely prohibited NAIHS from
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`declining Sage’s renewal contract and successor AFAs, id. at 1173, that the balance of harms
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`weighed in favor of Sage because it was “unlikely that the NAIHS will suffer greatly, if at all, if
`
`its decades-long relationship with Sage Hospital is continued for a short while until trial,” id. at
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`1189, and that “forc[ing] [Sage’s] patients to go to other facilities at much greater distances is not
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`in the public interest,” id. at 1190.
`
`26.
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`On August 31, 2015, this Court granted summary judgment in favor of Sage. Sage
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`II, 256 F. Supp. 3d at 1192 (amended opinion issued October 26, 2015). The Court concluded that
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`25 C.F.R. § 900.32 prohibits IHS “from declining a successor AFA proposal that is ‘substantially
`
`the same’ as its predecessor,” the “2014 AFA’s contents [we]re substantially the same as the 2013
`
`AFA’s contents,” and therefore IHS had “no discretion” to decline such a proposal. Id. at 1224-
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`25. With respect to Sage’s renewal contract, the Court concluded that 25 C.F.R. § 900.33 prohibits
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`IHS “from declining the 2013 Renewal, because the 2013 Renewal did not contain a ‘material and
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`substantial change to the scope or funding’ of Sage Hospital’s PFSAs,” and therefore IHS
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`“unlawfully declined the 2013 Renewal.” Id. at 1234-36. This Court therefore “deem[ed] the
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`2013 Renewal and the 2014 AFA approved.” Id. at 1236. The Court also “deem[ed] both the
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`2014 Renewal and the 2015 AFA approved.” Id. at 1237.
`
`27.
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`After this Court granted summary judgment to Sage and injunctive relief to force
`
`the agency to award the FY 2014 and FY 2015 renewal contracts, IHS nonetheless declined Sage’s
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`proposed FY 2016 AFA. IHS did so even though the successor 2016 AFA proposed the same
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`Case 1:20-cv-01185 Document 1 Filed 11/13/20 Page 8 of 24
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`amount of funding and the same PFSAs as the 2015 AFA.
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`28.
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`On November 23, 2016, this Court granted Sage summary judgment reversing
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`IHS’s unlawful declination of Sage’s FY 2016 successor AFA. Navajo Health Found.-Sage Mem’l
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`Hosp., Inc v. Burwell, 220 F. Supp. 3d 1190, 1255 (D.N.M. 2016) (“Sage III”). Because the 2015
`
`AFA and 2016 AFA were “substantially similar,” and the “FY 2016 AFA [was] a successor
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`funding agreement under 25 C.F.R. § 900.33,” this Court “deem[ed] the FY 2016 AFA approved.”
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`Id. The Court again concluded that IHS had “no authority to decline a substantially similar
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`successor funding agreement,” id. at 1264, and awarded Sage damages, id. at 1266.
`
`29.
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`Following these and other rulings adverse to IHS (see, e.g., Navajo Health Found.-
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`Sage Mem’l Hosp., Inc v. Burwell, 263 F. Supp. 3d 1083 (D.N.M. 2016) (“Sage IV”), on October
`
`2, 2017, Sage and IHS entered into a settlement agreement under which IHS agreed to pay Sage
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`$122.5 million and to enter into a three-year renewal contract for FY 2018-2020. The settlement
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`also required that Sage provide IHS quarterly financial reports.
`
`30.
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`Since that time, Sage has continued to provide quality services to its beneficiaries
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`and to comply with all the terms and conditions of its contracts and settlement agreement with
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`IHS.
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`C.
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`Sage’s FY 2021-2023 Renewal Contract
`
`31.
`
`On May 29, 2020, Sage submitted a renewal contract proposal to IHS that included
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`a draft FY 2021-2023 contract, a draft FY 2021 AFA, and a draft FY 2021 scope of work. The
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`renewal contract included the same PFSAs and the same annual funding as its FY 2018-2020
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`contract and FY 2020 AFA. Sage specifically noted in its submission that “the only changes from
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`last year’s documents are to update the dates and to correct typos or formatting,” and it invoked
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`Case 1:20-cv-01185 Document 1 Filed 11/13/20 Page 9 of 24
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`the successor funding agreement provisions in the ISDEAA and its implementing regulations.
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`Sage also indicated that “[t]he Navajo Nation resolution number is highlighted in the draft contract
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`since that may need to be updated based on the actual number given to the extension resolution.”
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`Id. (As noted in paragraph 19, the 15-year old Navajo Nation authorizing Resolution No. CJN-35-
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`05 was set to expire at the end of the fiscal year, September 30, 2020.).
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`32. Meanwhile, the COVID-19 pandemic devastated the Navajo Nation. According to
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`a New York Times analysis, “the coronavirus positivity rate for Indian Health Service patients in
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`Navajo Nation and the Phoenix area was nearly 20 percent from the start of the pandemic through
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`July, compared with 7 percent nationally during the same period.” Mark Walker, Pandemic
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`Highlights Deep-Rooted Problems in Indian Health Service, N.Y. Times, Sept. 29, 2020,
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`https://www.nytimes.com/2020/09/29/us/politics/coronavirus-indian-health-service.html.
`
` The
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`Navajo Nation had the highest per capita infection rate in the United States at times. See Hollie
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`Silverman et al., Navajo Nation surpasses New York state for the highest Covid-19 infection rate
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`in the US, CNN, May 18, 2020, https://www.cnn.com/2020/05/18/us/navajo-nation-infection-rate-
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`trnd/index.html.
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`33.
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`In New Mexico, for example, despite Native Americans representing only 11
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`percent of the total population, Native Americans represented nearly 30 percent of all infections.
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`Walker, supra.
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`34.
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`IHS healthcare facilities within the Nation were particularly overwhelmed, ill-
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`equipped, and ill-prepared to respond to the pandemic. The ratio of hospital beds to population on
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`the Navajo Nation is only about a third of the number for the rest of the United States. Hospitals
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`within the Nation are also critically understaffed, and medical workers have faced severe shortages
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`of personal protective equipment. Id.; see also Kenzi Abou-Sabe et al., ‘Hit us at our core’:
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`Vulnerable Navajo Nation
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`fears a
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`second COVID-19 wave, Aug. 3, 2020,
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`https://www.nbcnews.com/specials/navajo-nation-fears-second-covid-19-wave/index.html.
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`35.
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`Throughout the pandemic, the Navajo Nation has faced a consistent shortage of
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`hospital beds and limited access to healthcare facilities for its citizens. Walker, supra. IHS’s
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`refusal to award Sage’s renewal contract removes 25 hospital beds from the already limited system.
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`36.
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`To date, the virus has killed nearly 600 people in the Navajo Nation. See Navajo
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`Nation COVID-19 Dashboard, https://www.ndoh.navajo-nsn.gov/COVID-19/Data (last updated
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`Nov. 12, 2020).
`
`37.
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`The virus’s spread and the insufficiency of the IHS health care system to adequately
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`respond to COVID-19 significantly impacted the Navajo Nation. The Nation shut down its
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`government for a period of time from March 16, 2020 until August 16, 2020, many Chapters
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`similarly stopped meeting, stringent curfews were imposed, and the Navajo Nation President
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`issued several emergency orders in an attempt to mitigate the spread of the virus. See Navajo
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`Nation Executive Order No. 001-20
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`(March 13, 2020), https://www.ndoh.navajo-
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`nsn.gov/Portals/0/COVID-19/News/NNExecutiveOrderNo001-20.Updated.pdf?ver=CxXC5Fto
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`UxYcaF9gVLPRjw%3d%3d; Navajo Nation Executive Order No. 008-20 (July 22, 2020),
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`https://www.ndoh.navajo-nsn.gov/Portals/0/PDF/Executive%20Order%20008-20.pdf?ver=qmG
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`__qxIPjf5vp_f0DWPig%3d%3d. For Sage, the COVID-19 pandemic brought about drastic
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`changes to its service delivery model. Further, the government shutdowns within the Navajo
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`Nation impacted Sage’s ability to obtain an extension of its authorizing resolution from the Navajo
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`Nation Legislative Council.
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`38.
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`On June 9, 2020, IHS wrote to Sage to request that Sage provide a resolution from
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`the Navajo Nation authorizing Sage to contract during the proposed contract term.
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`39.
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`On July 11, 2020, counsel for Sage informed IHS by email that “[d]ue to the
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`COVID pandemic, submission of [the authorizing] resolution has been delayed, but Sage will have
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`the resolution in place before the start of the proposed contract term on October 1, 2020.”
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`40.
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`Throughout June, July, and August 2020, as local Chapters began to meet again,
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`Sage obtained resolutions in support from all the local Navajo Chapters it serves.
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`41.
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`On August 17, 2020, Sage met with the Navajo Nation Health, Education, and
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`Human Services Committee (“HEHSC”) to discuss reauthorizing Sage as a tribal organization by
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`tribal resolution.
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`42.
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`In response to that meeting, on August 24, 2020, IHS sent a letter to Navajo Nation
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`leadership, purportedly to bring alleged “improper activity” to the Nation’s attention. IHS sent
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`that letter to the Navajo Nation President, the Navajo Nation Legislative Council Speaker, and the
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`HEHSC Committee Chair and Vice-Chair. Importantly, IHS did not provide a copy of that letter
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`to Sage.
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`43.
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`The “improper activity” that IHS referenced in its letter involved issues that were a
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`matter of public record and that occurred before IHS entered into its 2017 settlement with Sage
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`and at a time when the government had already investigated and dismissed any claims of
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`wrongdoing against Sage’s current leadership. Many of these issues were summarized by this
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`Court in the course of ruling against IHS. See Sage I, 100 F. Supp. 3d at 1139-40; Sage III, 220
`
`F. Supp. 3d at 1201-02. IHS’s letter omitted that since the 2017 settlement IHS has been receiving
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`quarterly reports on Sage’s finances, and it omitted that IHS has never raised any objections to
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`those quarterly reports.
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`44.
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`On information and belief, on September 25, 2020, Defendants Tso and Yazzie met
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`in Executive Session with the Navajo Nation HEHSC, and without any advance notice to Sage.
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`On information and belief, Defendants Tso and Yazzie informed the Council members that Sage’s
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`authorizing resolution did not need to be in place by October 1, 2020, because there was an
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`“alternative method” NAIHS could use to work with Sage while the resolution went through the
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`legislative process.
`
`45.
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`On September 30, 2020, after being informed of the conversation referred to in
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`paragraph 44, Sage contacted Defendants Tso and Yazzie and asked for a call to discuss the
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`“alternative method” these Defendants discussed with the Council. Defendant Yazzie and IHS
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`attorney Paula Lee participated in that call. Defendant Yazzie and IHS Attorney Lee stated there
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`was no “alternative method” they were aware of and that IHS would refuse to award a contract if
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`no resolution was in place on October 1, 2020.
`
`46.
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`IHS engaged in a series of actions deliberately designed to undermine Sage’s
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`relationship with the Navajo Nation. IHS’s action’s severely impacted Sage’s ability to secure an
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`authorizing resolution from the Navajo Nation in a timely manner. IHS improperly interfered in
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`Sage’s relationship with the Navajo Nation. IHS affirmatively hid from Sage the nature and extent
`
`of its communications with the Navajo Nation.
`
`47.
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`Nonetheless, on September 30, 2020, the Navajo Nation Council passed a
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`resolution approving and reauthorizing Sage as a tribal organization under ISDEAA for purposes
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`of contracting with IHS, beginning October 1, 2020 and ending September 30, 2040. (Resolution
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`CS-79-20, passed at 3:12 p.m. MST on Sept. 30, 2020). The resolution highlighted that if health
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`Case 1:20-cv-01185 Document 1 Filed 11/13/20 Page 13 of 24
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`and medical services provided by Sage were to end, “25,000 patients within the service area will
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`be impacted,” and that “especially during these unprecedented times with the Covid-19 virus
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`pandemic” it would be “in the best interest of the Navajo Nation to immediately approve the
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`reauthorization of such crucial services provided by the hospital.”
`
`48.
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`Counsel for Sage emailed IHS at 3:37 p.m. MST on September 30 to notify IHS
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`that the resolution had passed, that Sage would drop off a physical copy of the resolution at the
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`NAIHS office that afternoon, and that counsel would send an electronic copy by email as soon as
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`it was available.
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`49.
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`At 5:21 p.m. MST on September 30, after receiving notice from Sage that the
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`Navajo Nation had enacted its authorizing resolution, IHS issued a letter refusing to award Sage’s
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`proposed contract renewal. IHS first claimed that Sage’s May 29 submission did not qualify as a
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`proposal under the ISDEAA, despite IHS having treated it as a proposal for the preceding four
`
`months. In the alternative, IHS asserted it was declining the proposed renewal on the grounds that
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`Sage’s proposal did not satisfy 25 U.S.C. § 5321 because it lacked an authorizing resolution from
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`the Navajo Nation for the contract period, even though Sage had notified IHS less than two hours
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`earlier that a resolution had been enacted and a physical copy was forthcoming.
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`D.
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`Post-Decision Actions
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`50.
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`Sage responded to IHS’s decision that same day and requested that IHS comply
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`with the ISDEAA and issue the contract as proposed because the May 29 submission was a valid
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`proposal for a renewal contract and successor AFA under the ISDEAA. Sage explained that IHS
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`had consistently treated Sage’s May 29 proposal as a valid contract renewal proposal in all prior
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`agency communications, and IHS thus had no basis to claim it did not qualify as a lawful renewal
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`Case 1:20-cv-01185 Document 1 Filed 11/13/20 Page 14 of 24
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`proposal. Sage also reiterated that the Navajo Nation Council had now adopted a resolution
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`extending Sage’s authorization to contract with IHS until September 30, 2040. Id. at 3. Sage
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`further explained that renewal contracts that propose no substantive changes are exempt from the
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`declination process, and therefore IHS was without authority to decline Sage’s renewal proposal
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`under 25 C.F.R. § 900.33.
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`51.
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`On information and belief, IHS representatives met with the Navajo Nation Office
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`of President and Vice President on September 30, 2020. At this meeting, IHS informed the
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`Nation’s leadership that Sage did not need to have an authorizing resolution in place by October
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`1, 2020 because IHS had already declined Sage’s renewal contract.
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`52.
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`Later in the evening of September 30, 2020, Navajo Nation President Jonathan Nez
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`and Vice-President Myron Lizer vetoed Resolution CS-79-20, citing the need for further time to
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`vet the proposal, based on many of the allegations IHS had raised in its August 24 letter to Navajo
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`Nation leadership.
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`53.
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`On October 20, 2020, the Navajo Nation Council again passed a resolution
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`reauthorizing Sage as a tribal organization under ISDEAA for purposes of contracting with IHS.
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`The authorization was made retroactive to October 1, 2020.
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`54.
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`On October 21, 2020, Sage resubmitted its renewal contract to IHS, together with
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`the new authorizing resolution.
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`55.
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`On November 5, 2020, IHS alleged that in issuing NABIO-44-20 the Navajo Nation
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`Council acted without the appropriate Navajo Nation authority. In effect, IHS asserted that the
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`resolution was unlawful under Navajo law.
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`56.
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`Also on November 5, 2020, IHS requested additional documentation from Sage
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`Case 1:20-cv-01185 Document 1 Filed 11/13/20 Page 15 of 24
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`relating to its October 21 submission, claiming that the submission constituted not a renewal
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`contract but an initial contract that is subject to the declination process and the requirements of 25
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`C.F.R. § 900.8. Sage had already provided all the requested section 900.8 information when it
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`first contracted with IHS in 2009, and Sage had provided all required renewal information in its
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`renewal contract proposal.
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`57.
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`In a call with Sage on November 6, 2020, IHS reiterated its position that Sage did
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`not qualify for a renewal contract, and would instead be treated as an initial contractor, because
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`there had been a 21-day lapse between the end of FY 2020 and Sage’s submission on October 21.
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`IHS also stated that the submission could not be treated as a renewal proposal because it was not
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`“substantially the same” as the prior contract. IHS’s only support for this assertion was that the
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`proposal references a different authorizing resolution number than Sage’s last contract. IHS
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`further stated that it would not review Sage’s proposal until Sage provided the requested
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`supporting documentation, even though the requested documentation included information that
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`Sage had previously submitted and that was already in IHS’s possession. IHS stated that once the
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`documentation was received and reviewed, it would agree that the parties could engage in a
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`dialogue on when to schedule negotiation dates. Sage reiterated its concerns regarding the impact
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`of a delayed process on Sage’s patients and requested a short-term contract extension while the
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`parties negotiated the contract renewal in order to ensure there would be no continuing lapse in
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`patient care. IHS declined to commit to any interim contract extension.
`
`58.
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`On November 9, 2020, Sage sent a letter to IHS reiterating that Sage was not
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`required to provide the information that IHS had requested on November 5 because under 25
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`C.F.R. § 900.33 renewal contracts do not go through the section 900.8 initial contract proposal
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`Case 1:20-cv-01185 Document 1 Filed 11/13/20 Page 16 of 24
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`process. Sage again requested that IHS immediately approve and award its renewal contract. But
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`to avoid further delays and interruptions in patient care, Sage also provided IHS all of the
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`documentation that IHS had requested.
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`59.
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`Also on November 9, 2020, IHS declined Sage’s request that IHS issue a short-
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`term contract extension to Sage. IHS stated that “IHS has been trying to resolve and ascertain with
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`the [Navajo Nation] HEHS Committee and the Navajo Nation Legislative Counsel the validity of
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`resolution NABIO-44-20.”
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`60.
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`On November 10, 2020, Sage sent a letter notifying IHS that unless IHS awards a
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`FY 2021 contract by close of business Thursday, November 12, 2020, Sage intends to initiate legal
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`action and to seek immediate injunctive relief against IHS under the ISDEAA, and referring IHS
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`to this Court’s prior decisions on this issue.
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`61.
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`IHS responded to that letter just before close of business on November 13, 2020.
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`In its response IHS admits that it received confirmation on November 10, 2020 that the Tribal
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`authorization was valid, and now three days later, it offers to “commence . . . good faith contract
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`negotiations” with Sage. IHS also explicitly reserves until January 19, 2021 to make a final
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`determination on whether it will contract with Sage, and offers no solution for continuation of care
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`in the interim. Moreover, IHS makes clear that if it does award a contract to Sage, it will not be a
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`renewal contract but an entirely new contract that will contain substantively different terms.
`
`E.
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`Impact of IHS’s Failure to Award the Renewal Contract
`
`62.
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`Despite IHS’s refusal to award Sage’s renewal contract, on October 2, 2020, IHS
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`asked Sage if it would continue to provide services to IHS beneficiaries. Sage agreed to do so.
`
`63.
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`However, on October 3, 2020—unbeknownst to Sage—IHS issued a press release
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`Case 1:20-cv-01185 Document 1 Filed 11/13/20 Page 17 of 24
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`notifying beneficiaries in the Ganado Service Area served by Sage that they could no longer access
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`covered health services at Sage.1 IHS did not provide Sage a copy of this notice until October 28,
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`2020.
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`64.
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`The more than 25,000 Navajo people in the Ganado Service Area who receive
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`health-care services at Sage are now forced to travel long distances to obtain their health care at
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`IHS facilities in either Chinle, AZ, Gallup, NM, or Fort Defiance, AZ. IHS has also asserted that
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`any patients that continue to receive health care at Sage are now “personally responsible” for the
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`costs of that care.
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`65.
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`IHS has refused to compensate Sage for healthcare services it continues to provide
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`to IHS beneficiaries since October 1, 2020.
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`66.
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`The loss of IHS funding represents a monthly loss of approximately $1.8 million,
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`or about half of Sage’s operating revenue. Without this revenue, Sage has been required to divert
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`reserve funding that was dedicated for the construction of a new 120,000-square-foot hospital to
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`instead cover its day-to-day operations.
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`67.
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`Construction of the new hospital was slated to begin on October 15, 2020, but
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`construction is now on hold indefinitely. Sage’s financing for the new hospital was contingent on
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`Sage’s revenue from its multi-year contract with IHS. Without that collateral to secure its
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`financing, the hospital project is at immediate risk of collapse.
`
`68.
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`Sage has already invested approximately $3.5 million into the development and
`
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`1 IHS has also removed Sage from the list of Navajo Area Health Facilities on its website. See
`IHS Navajo Area, Healthcare Facilities, https://www.ihs.gov/navajo/healthcarefacilities/ (last
`visited Nov. 8, 2020).
`
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`planning of the facility, with the design phase almost complete.
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`69.
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`Sage’s current facility is out of date and limits the services that Sage is able to
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`provide. The new hospital would enable Sage to add surgical services, including an intensive care
`