Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of:
Nizhoni Smiles, Inc.,
Appellant,
- v. -
The Indian Health Services.
Appellee.
DATE: December 19, 1996
Docket No. C-96-029
Decision No. CR450
RECOMMENDED DECISION
I recommend that the Departmental Appeals Board sustain the
determination of the Indian Health Service (IHS) to decline
the contract proposal of Nizhoni Smiles, Inc. (Appellant),
which Appellant made to IHS on July 27, 1995 and resubmitted
on October 2, 1995, pursuant to the provisions of the Indian
Self-Determination Act (Act), 25 U.S.C. § 450, et seq. I
base this recommended decision on my conclusion that, as of
the date of the application for a contract, the program,
functions, services, or activities which Appellant intended
to conduct under the proposed contract could not be carried
out lawfully by Appellant.
I. Background
On October 25, 1995, IHS declined Appellant's proposal for a
contract. On November 1, 1995, Appellant filed an appeal
from the declination. The case was assigned to me for a
hearing and a recommended decision. I held a prehearing
conference at which the parties advised me that they wished
to defer a hearing in the case while they conducted and
completed discovery. After discovery was completed, the
parties advised me that they had agreed that the case could
be heard and decided on written submissions, including briefs
and exhibits.
The parties submitted briefs and reply briefs. Appellant
submitted 23 exhibits in support of its arguments (Appellant
Ex. 1 - 23). IHS objected to my receiving into evidence some
of Appellant's exhibits. Appellant responded to these
objections. In responding to the objections, Appellant
submitted an additional exhibit (Second Declaration of Julia
Freeland). I am identifying this additional exhibit as
Appellant Ex. 24.
I receive into evidence Appellant Ex. 1 - 24, notwithstanding
the objections that IHS made to my receiving some of these
exhibits into evidence. Although some of these exhibits are
of questionable relevance, I do not find that admitting them
into evidence would prejudice IHS.
I base my recommended decision in this case on the law, on
the undisputed material facts, and on the parties' arguments.
II. Issues, recommended findings of fact and conclusions of
law
In its original posture, this case had two issues. These
were whether IHS could decline Appellant's contract proposal
on the grounds that: (1) Appellant did not qualify as a
"tribal organization" under the Act, because one of the
members of Appellant's Board of Directors was an individual
who was not an Indian; and (2) IHS could not contract with
Appellant lawfully, because Appellant intended to charge
patients who were eligible for contract services for some of
the services that it proposed to provide.
The first of these issues is now moot. Appellant has agreed
to remove the non-Indian member from its Board of Directors.
Appellant Ex. 6 at 2; IHS Brief at 5. Therefore, the only
issue which remains to be decided is the second of the two
issues: whether IHS properly declined Appellant's contract
proposal on the ground that IHS could not contract with
Appellant lawfully.
I make the following recommended findings of fact and
conclusions of law (Findings) to support my recommended
decision that IHS properly declined to contract with
Appellant. I discuss each of these Findings at Part III. of
this recommended decision.
1. The Act requires the Secretary of the United
States Department of Health and Human Services (the
Secretary) and her delegate, IHS, to contract with
Indian tribes or tribal organizations to provide
services to eligible Indians which the Secretary and IHS
would otherwise be required to provide directly to
eligible Indians.
2. IHS may not contract lawfully for services to
eligible Indians which it may not provide directly to
Indians.
3. IHS may decline to enter into a contract with an
Indian tribe or tribal organization where the services
that are sought to be contracted for may not be provided
lawfully.
4. From 1984 until 1996, IHS was prohibited from
requiring eligible Indians to pay for services which IHS
was authorized to provide to those Indians directly.
5. From 1984 until 1996, IHS was prohibited from
entering into a contract with a tribe or tribal
organization pursuant to which the tribe or tribal
organization intended to charge a fee for the contracted
services which it would be providing.
6. IHS may not be required to enter into a contract
which is not lawful, on the ground that IHS may have
entered into other, similar contracts.
7. The Act requires the Secretary and IHS to offer
technical assistance to a tribe or tribal organization
that applies to IHS for a contract pursuant to the Act,
but which is unable to qualify for a contract.
8. IHS is not required to offer technical assistance
to a tribe or tribal organization, beyond advising the
tribe or tribal organization that the services that are
sought to be contracted for cannot be provided lawfully,
where IHS determines that the services that are sought
to be contracted for cannot be provided lawfully.
9. On July 27, 1995, Appellant submitted to IHS a
contract proposal to provide orthodontic and related
services to eligible Indians, that IHS had provided
directly.
10. Appellant's July 27, 1995 contract proposal would
have required that an eligible Indian patient pay a
portion of the cost of orthodontic services to be
provided by Appellant to that patient. Appellant
described this cost recoupment mechanism as a "shared
responsibility model" for providing services.
11. On October 2, 1995, Appellant submitted a to IHS
a revised contract proposal. In its revised proposal,
Appellant stated that it would not charge patients for
any services that are provided directly by IHS, and not
by Appellant. However, the proposal continued to
contemplate a "shared responsibility model" for charging
patients fees for services provided by Appellant.
12. Under Appellant's revised contract proposal,
Appellant would charge patients some portion of the
costs for orthodontic services that Appellant intended
to provide.
13. Under Appellant's original contract proposal of
July 27, 1995, and under Appellant's revised contract
proposal of October 2, 1995, Appellant proposed to
contract to provide orthodontic services that IHS had
provided directly, and it proposed to charge eligible
Indian patients fees for orthodontic services that IHS
had provided to patients without charge.
14. IHS did not provide Appellant with the
information or assistance that Appellant requested from
IHS.
15. As of July 27, 1995 and October 2, 1995, IHS was
prohibited by law from providing orthodontic services to
eligible Indians and charging eligible Indians fees for
those services.
16. IHS properly declined to enter into a contract
with Appellant, because IHS could not lawfully provide
orthodontic services to eligible Indians in the manner
in which Appellant proposed to provide such services.
17. It is not relevant that IHS may have entered into
contracts with other tribes or tribal organizations
which arguably contain features that are similar to
those in Appellant's proposals and which IHS found to be
unlawful.
18. IHS is not required to provide technical
assistance to Appellant, beyond advising Appellant that
the contract could not be carried out lawfully.
III. Discussion
A. Governing law (Findings 1 - 8)
The Act requires the Secretaries of the Departments of
Interior and Health and Human Services, upon the request of
any Indian tribe, to enter into a self-determination contract
or contracts with a tribal organization to plan, conduct, and
administer certain enumerated federal programs or portions of
federal programs. Act, 25 U.S.C. § 450f(a)(1)(A) - (E).
Essentially, the Act requires IHS to enter into a self-
determination contract with an Indian tribe or tribal
organization to provide any service that IHS is authorized to
provide directly to eligible Indians, and for which the tribe
or tribal organization proposes to contract. Id.
The Act limits the circumstances under which IHS may decline
to enter into a self-determination contract with a tribe or a
tribal organization. One of the statutory grounds for
declination ¾ which is relied on by IHS in this case to
justify its determination to decline Appellant's contract
proposals ¾ is where the program, function, service, or
activity, or a portion thereof, that is the subject of a
contract proposal, is beyond the scope of programs,
functions, services, or activities which may be contracted
for under the Act, because the proposed activities cannot be
carried out lawfully by the contractor. Act, 25 U.S.C. §
450f(a)(2)(E).
The Act defines a "self-determination contract" to be a
contract:
between a tribal organization and the appropriate
Secretary for the planning, conduct and
administration of programs or services which are
otherwise provided to Indian tribes and their
members pursuant to Federal law . . . .
Act, 25 U.S.C. § 450b(j).
IHS relies on the phrase "pursuant to Federal law" in the
Act's definition of a self-determination contract to assert
that it may not contract with a tribe or a tribal
organization to provide services that IHS is not authorized
to provide directly. IHS argues that, if it is prohibited by
law from providing directly a particular service to Indians,
then it may not contract with a tribe or a tribal
organization to provide that service. Therefore, IHS argues
that it should decline a proposal to contract, pursuant to
the authority contained in 25 U.S.C. § 450(f)(2)(E), where
the proposal is for services that IHS is prohibited from
providing directly.
Appellant argues that the Act's definition of a self-
determination contract does not function as a substantive
requirement that contractors comply with all laws governing
IHS. According to Appellant, the phrase "pursuant to Federal
law" means only that self-determination contracts will be
limited to services provided under federal law, such as
direct health care. Appellant's Brief at 12 - 14.
I am persuaded that IHS is correct in asserting that the Act
prohibits it from contracting to provide services that it may
not provide directly, including those services which IHS is
prohibited by law from providing directly. The definition of
a self-determination contract contained at 25 U.S.C. §
450b(j) plainly limits the permissible scope of such a
contract to those services which IHS may provide directly,
pursuant to federal law. If IHS is prohibited by federal law
from providing a service, then it may not contract for such
service. The limitation applies not only to the type of
service that may be contracted for (i.e., health care), but
to the manner in which the service is provided. As I read
the definition, IHS is prohibited from contracting to provide
a service in a particular manner, if federal law prohibits
IHS from providing the same service in the manner in which it
is proposed to be contracted.
The definition of a self-determination contract is entirely
consistent with the purpose of the Act. The Act is intended
to require federal agencies to contract with Indian tribes to
provide those services which the agencies have been providing
directly. Act, 25 U.S.C. § 450f(a)(1)(A) - (E). The Act is
not intended to allow federal agencies to contract to provide
services which the agencies would not be permitted to provide
under federal law. That is a reason why the Act permits IHS
to decline a proposal to contract on the ground that the
contract may not be carried out lawfully. Act, 25 U.S.C. §
450f(a)(2)(E).
Appellant argues that the definition of a self-determination
contract contained in 25 U.S.C. § 450b(j) cannot mean,
literally, that IHS shall enter into no contract to provide
services which IHS is prohibited under federal law from
providing directly, because Congress felt it necessary in
other sections of the Act to emphasize that other provisions
of federal law govern self-determination contracts.
Appellant's Brief at 15 - 16. According to Appellant, it
would have been unnecessary for Congress to have included
these requirements in the Act, if it had intended the
definition of a self-determination contract to be read
literally. Id. As a specific example, Appellant cites the
Act's requirement that the provisions of the Office of
Federal Procurement Policy Act and associated regulations
apply to a construction project that might be contracted for.
Act, 25 U.S.C. § 450j(a)(3)(A).
I am not persuaded that the requirement that the Office of
Federal Procurement Policy Act and associated regulations
apply to a construction project suggests that Congress
intended the definition of a self-determination contract to
mean anything less than what it plainly says. Congress
emphasized the statutory directives it intended be followed
by inserting into the Act the specific requirement that the
provisions of the Office of Federal Procurement Policy Act
and associated regulations apply to a construction contract.
But the insertion of this specific requirement into the Act
does not vitiate the general requirement that a contract be
limited to those services which may be provided directly and
lawfully by IHS.
From 1984 until 1996, the following statutory prohibition
applied to IHS:
The Indian Health Service shall neither bill nor
charge those Indians who may have the economic
means to pay unless and until such time as Congress
has agreed upon a specific policy to do so and has
directed the Indian Health Service to implement
such a policy.
Act, 25 U.S.C. § 1681. 1/ This section of the Act
prohibits IHS from charging a fee to any Indian for services
provided directly by IHS. I conclude that the section, when
read with the statutory definition of a self-determination
contract, operates to prohibit IHS from contracting with an
Indian tribe or tribal organization where the tribe or tribal
organization intends to charge a fee for the services that it
will be providing pursuant to the proposed contract.
Appellant argues that 25 U.S.C. § 1681 was not intended by
Congress to prohibit IHS from entering into contracts with
Indian tribes or tribal organizations pursuant to which the
tribes or tribal organizations might charge fees for the
services they provide. Appellant's Brief at 12. According
to Appellant, the purpose of the statute was to assure that
IHS would not charge Indians who were not able to afford to
pay for health care services fees for the health care
services that IHS provided. Id.
I make no findings as to the underlying purpose of the
statute. The language of the statute is plain and
unambiguous. Given that, the unambiguous language of the
statute must govern.
Appellant asserts that IHS would be applying the Act in an
arbitrary and capricious way if it were to apply it to the
facts of this case in such a way as to preclude Appellant
from contracting to provide services for which Appellant
intended to charge fees. Appellant's Brief at 19 - 22. That
is so, according to Appellant, because, in other instances,
IHS either has provided services to Indians directly for
which it charges fees, or it has entered into contracts
pursuant to which tribes or tribal organizations provide
services for which they charge fees. Id.
I make no findings in this decision as to whether IHS is in
fact providing services for which it charges fees, or has
entered into contracts in which tribes or tribal
organizations provide services for which they charge fees.
It is unnecessary for me to address Appellant's assertions,
because, even if they are true, they are not relevant.
As I find above, the law in effect until 1996 prohibits IHS
from providing services directly for which it charges fees,
and it prohibits IHS from entering into contracts where the
contracting parties provide services for which they charge
fees. If IHS is in fact providing services for which it
charges fees, it may be doing so in violation of law. If it
has contracted for such services, it may have contracted in
violation of law. But, the fact that IHS arguably might have
violated the law in other instances does not mean that the
law is being applied incorrectly or improperly here. That
IHS may be acting appropriately in this case, and may not
have done so elsewhere, does not mean that in this case it is
acting arbitrarily or capriciously. Nor do I find that IHS
may be estopped from applying the law in this case on the
ground that it may not have done so elsewhere. I am not
persuaded that Congress intended that IHS be required to act
in violation of law in one instance, simply because it may
have done so in another instance.
The Act requires that IHS offer technical assistance to a
tribe or a tribal organization to develop modifications to
any proposal for a self-determination contract of which
approval has been declined. Act, 25 U.S.C. § 450(d)(3).
Appellant argues that this section requires IHS to offer a
tribe or a tribal organization technical assistance to
develop modifications to any proposal that is declined.
I do not find that the statutory requirement that IHS provide
technical assistance means that IHS is required to assist a
tribe or tribal organization to contract for something that
cannot be contracted for lawfully. Technical assistance will
not make a contract proposal acceptable if a central premise
of the contract proposal is to do something that is not
legally permissible. In that event, the only assistance that
IHS can supply to a tribe or a tribal organization is to
explain to the tribe or tribal organization why the law will
not permit IHS to enter into the proposed contract.
B. The relevant facts (Findings 9 - 14)
The relevant facts are not disputed by the parties. I base
my recommended Findings entirely on the exhibits that were
submitted by Appellant.
Appellant is a non-profit corporation that is organized to
provide orthodontic dentofacial orthopedic services to the
people of the Navajo Nation. Appellant Ex. 6 at 2. On July
27, 1995, Appellant submitted a self-determination contract
proposal to IHS. Appellant Ex. 2. Appellant submitted its
proposal pursuant to the authority of a resolution adopted by
the Health and Social Services Committee of the Navajo Nation
Council. Id. at 2 - 3.
Appellant proposed to contract to provide orthodontic
dentofacial orthopedic services which were being provided
directly to members of the Navajo Nation by the Navajo Area
Office of IHS. Appellant Ex. 2 at 6. These services
included services traditionally thought of as orthodontic
services (such as the use of braces to straighten teeth).
Id. at 10. But, they included additional services, including
providing treatment for skeletal imbalances or growth
problems of the jaws, joint problems of the jaws, clefting
disorders, or facial problems due to trauma. Id.
Appellant proposed that these services be provided to the
people of the Navajo Nation, using a "shared responsibility
model" mechanism for payment for the services. Appellant Ex.
2 at 15 - 16. The "shared responsibility model" would
require patients to pay a portion of the cost of the services
that Appellant would provide to them. Id. Essentially,
Appellant intended to use IHS contract monies plus whatever
fees it collected from patients, as a way of increasing the
number of patients who could be treated pursuant to the
contract. Appellant explained this approach as follows:
The perspective of an IHS beneficiary using the
shared responsibility model is a good news-bad news
scenario. The good news is the Nizhoni model
provides access to 1300 more patients over a two
year cycle than the traditional program. The bad
news is instead of being free, patients must pay
what most beneficiaries feel is an affordable fee.
Id.
On October 2, 1995, Appellant submitted a revised proposal to
IHS. Appellant Ex. 6. The revised proposal continued to
rely on the "shared responsibility model" as a mechanism for
obtaining revenues to defray the costs of providing services
to patients. Id. at 2. Appellant averred, however, that it
would not charge patients for any services that are provided
directly by IHS. Id.
It is unclear whether the revised proposal actually states a
change in the way in which Appellant intended to obtain
reimbursement for the services it provided. The July 27,
1995 proposal did not state, as did the October 2, 1995
revised proposal, that Appellant would not charge patients
for services that are provided directly by IHS. On the other
hand, that may have been an implicit fact in the July 27,
1995 proposal.
In any event, both the July 27, 1995 proposal and the October
2, 1995 proposal feature the "shared responsibility model" of
cost recoupment as the mechanism by which Appellant intended
to obtain reimbursement for the services it provided. Under
both proposals, Appellant intended to use IHS contract monies
as a partial payment for the total cost of the services it
provided, with the balance to be obtained from third-party
payments, or directly from patients. Under both proposals,
Appellant intended to charge patients for services which IHS
had provided directly and for which IHS had not charged
individual patients. Appellant intended to serve a larger
number of patients through its "shared responsibility model"
of cost recoupment than it would have been able to serve had
it relied only on IHS contract funds and whatever third-party
payments it received. And, it intended to serve a larger
number of patients than IHS would have been able to serve had
IHS provided the services directly to those patients.
On October 25, 1995, IHS advised Appellant that it was
declining Appellant's proposal. Appellant Ex. 7. In the
declination letter to Appellant, IHS explained that it had
determined that the prohibition against IHS charging patients
for services in 25 U.S.C. § 1681 meant that contractors could
not charge patients for services that IHS was authorized to
provide directly. Id. at 2.
On November 1, 1995, Appellant requested that IHS provide it
with technical assistance. Appellant Ex. 8. Appellant made
specific requests for the following information or
assistance:
1. IHS calculations on how many patients should
be served under the proposed 93-638 contract at no
cost to the patient.
2. Designing the orthodontic program to address
the IHS concerns, for example, using as a model,
the Alaska area tribal run orthodontic program that
charges all IHS beneficiaries for service.
3. In lieu of the contract, explore Cooperative
Agreement, section 9 of the Self Determination Act.
IHS acknowledged Appellant's request for technical
assistance. Appellant Ex. 9. However, it does not appear
that IHS ever specifically responded to the requests that
Appellant made. I conclude that IHS did not give Petitioner
the assistance that Petitioner requested.
C. Application of the law to the facts (Findings 15 -
18)
A central element of Appellant's proposal, in both the
original and the revised version, was that part of the costs
of providing orthodontic and related services would be
charged to patients, in order to maximize the number of
patients who would be able to avail themselves of those
services. This may be an ingenious and laudable way to
provide services to patients. However, the law forbade IHS
from providing such services directly to patients in the
manner contemplated by Petitioner. The provisions of the Act
in effect in 1995 at 25 U.S.C. § 1681 expressly prohibited
IHS from charging Indians for the services it provided.
IHS may not contract to provide a service that it may not
provide directly. As I hold above, at Part III.A., this
restriction is apparent, both in the definition of a self-
determination contract, and in the Act's general explanation
of what may be contracted for. Act, 25 U.S.C. §§ 450b(j),
450f(a)(1)(A) - (E). Therefore, IHS was prohibited from
accepting Appellant's proposal, because Appellant was
proposing to charge patients fees for services, something
which IHS could not do as an element of any service it
provided directly to patients. IHS properly declined
Appellant's proposal on the ground that Appellant's proposal
could not be lawfully carried out. Act, 25 U.S.C. §
450f(a)(2)(E).
Appellant asserts that, in fact, IHS has entered contracts
with other entities in which fees are paid for services by
the Indians who receive them. As I hold at Part III.A., it
is not necessary for me to decide whether this assertion is
correct, because it is not relevant. The fact that IHS might
possibly be doing elsewhere that which it is prohibited from
doing is not a basis for requiring IHS to accept Appellant's
proposal.
Appellant argues that declination of its proposal is
inconsistent with the specific authorization by Congress for
tribal organizations to design programs which best meet the
local needs of the Indian people and tribes who are served by
a contract. Act, 25 U.S.C. § 450j(j); Appellant's Brief at
18. Appellant notes that the purpose of the Act is to give
tribes greater flexibility over funds, resources, and
programs. According to Appellant, this objective is
precisely what it had in mind when it designed the "shared
responsibility model" for recouping the costs of orthodontic
services to the people of the Navajo Nation. Appellant
argues that, in declining its proposal, IHS is thwarting
Appellant's purpose and defeating the objectives of the Act.
I do not take issue with Appellant's assertion that its
proposal might maximize the availability of orthodontic and
related services to eligible Indians. Indeed, Appellant's
proposal may represent a better approach to providing
services than any alternative. But, nonetheless, up until
1996, the Act expressly prohibited IHS from providing or
contracting for the services contemplated by Appellant.
I am not persuaded that IHS failed to fulfill its obligation
to provide Appellant with technical assistance. The
assistance that Appellant sought would not have made a
contract possible, given that, as described above, the
charging of fees for service is not permissible. The
assistance sought by Appellant would not have affected the
"shared responsibility model" of cost recoupment, which was a
central element of Appellant's proposal. Given that, no
amount of technical assistance would have enabled IHS to
accept the proposal.
IV. Recommended conclusion
I recommend that the determination by IHS to decline
Appellant's proposal to contract be sustained, on the ground
that the proposal could not be carried out lawfully by
Appellant.
_______________________
Steven T. Kessel
Administrative Law
Judge
* * * Footnotes * * *
1. The parties have advised me that, in 1996,
Congress repealed this section. I invited the parties to
brief the issue of what impact, if any, the repeal might have
on this case. Neither party submitted a brief. In light of
that, I make no recommended findings of fact or conclusions
of law concerning any possible impact that the repeal might
have on the issues in this case.