By Emma Whitford

Law360 (December 2, 2020, 7:10 PM EST ) The Indian Health Service told a New Mexico federal judge Tuesday that it should not be forced to immediately renew its contract with Sage Memorial Hospital on the Navajo Nation, saying the hospital's case doesn't meet requirements for emergency relief.

Sage has not demonstrated that it is likely to succeed in proving that IHS violated federal law when it declined to renew the hospital's contract for funding and access to federal programs and supplies this year, IHS claimed in opposition papers.

Rather, the agency argued, the court will see that Sage failed to submit a valid renewal proposal to administer tribal health care services under the Indian Self-Determination and Education Assistance Act.

"The ISDEAA requires that a tribal organization have a tribal resolution authorizing it to contract with the IHS ... in place before it is able to contract with the IHS," the agency wrote. "Here, Sage did not have a tribal authorization in place at the time its previous authorization expired."

"As such," it continued, "the IHS did what is required by the law — it did not enter into an Indian Self-Determination contract with Sage."

Sage filed suit on Nov. 13, saying that the agency's failure to renew its ISDEAA contract was compromising crucial health care services during the coronavirus pandemic. The court must act quickly so the hospital can provide urgently needed care to the Navajo Nation without further cutting into its reserves, Sage claimed.

But IHS countered Tuesday that it paid Sage $122.5 million in a 2017 settlement and that this casts doubt on the hospital's claim that it is in dire financial straits and at risk of the requisite "irreparable harm" for a preliminary injunction.

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

Subsequently, Sage claimed, 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.

The Navajo Nation Council eventually issued a resolution Oct. 20 reauthorizing Sage after a September veto by Navajo Nation President Jonathan Nez, but IHS declined to recognize the hospital's subsequent renewal proposal, saying too much time had elapsed and it would now be treated as a new contractor.

IHS on Tuesday pointed to another contract proposal that Sage submitted on Oct. 21 and claimed that the agency has 90 days to review it. Therefore, "any decision by this court would be premature."

"The 90-day review period is particularly important here because it will allow the IHS to provide technical assistance to Sage to address serious financial management issues," the agency added.

For example, IHS said, the hospital is currently in court with its former management company, Razaghi Healthcare, where it "essentially admits" that "several million dollars in federal funding were fraudulently misspent."

Two former Razaghi staffers are also currently Sage's CEO and chief operating officer, according to IHS.

Addressing the Razaghi litigation in court papers earlier this month, Sage argued that suing its former management company over funds the company allegedly stole is the "epitome of responsible accountability, not financial mismanagement."

Counsel for Sage declined to comment Wednesday. Representatives of IHS, the U.S. Department of Health and Human Services and the Navajo Nation did not immediately respond to comment requests.

A virtual hearing on Sage's motion for an immediate injunction is scheduled for Thursday afternoon, court records show. 

Sage Memorial Hospital is represented by Lloyd B. Miller and Rebecca A. Patterson of Sonosky Chambers Sachse Miller & Monkman LLP.

The federal government is represented by Paula R. Lee of the U.S. Department of Health and Human Services.

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.

--Editing by Jay Jackson Jr.

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