Citations
- 263 F. Supp. 3d 1083
Full opinion text
MEMORANDUM OPINION AND ORDER
JAMES O. BROWNING, UNITED STATES DISTRICT JUDGE
THIS MATTER comes before the Court on: .(i) the Plaintiff’s Motion for Partial Summary Judgment on the Issues of Allocation, filed August 1, 2016 (Doc. 199)(“Al-location MSJ”); and (ii) the Plaintiffs Motion for Partial Summary Judgment on the Issue of Duplication, filed August 1, 2016 (Doc. 200)(“Duplication MSJ”). The Court held a hearing on September 16, 2016. The primary issues are: (i) whether funding that third parties provide is considered part of federal programming for the purposes of reimbursement under the Indian Self-Determination and Education Assistance Act, 25 U.S.C. § 450 et seq. (“IS-DEAA”); (ii) whether the Indian Health Service (“IHS”) only is responsible for that portion of Sage Hospital’s PFSAs funded with appropriated dollars; and (iii) whether the ISDEAA duplication provision prohibits IHS from providing any CSC funding for activities funded in the Secretarial amount.
FACTUAL BACKGROUND
“Sage is a Navajo tribal organizational for purposes of contracting with the Indian Health Service under the ISDEAA that operates a health care facility in Ganado, Arizona, within the exterior boundaries of the Navajo Reservation.” MSJ ¶ 1, at 8 (stating this fact). See Combined Response to Plaintiffs Motions for Summary Judgment ,on the Issues of Duplication and Allocation ¶ 1, at 5, filed August 25, 20.16 (Doc. 222)(“Response”)(not disputing this fact). “IHS is an agency within the United States Department of Health and Human Services (HHS) and is responsible for providing federal health services to American Indians and Alaska Natives.” MSJ ¶ 2, at 3 (stating this fact). See Response ¶ 2, at 5 (not disputing this fact). “Since fiscal year 2005, Sage [Hospital] has contracted with IHS under the ISDEAA to provide health services to a largely Navajo patient population.” MSJ ¶3, at 3 (stating this fact)(bracketed material added). See Response ¶3, at 5 (not disputing this fact). “Defendant Burwell is the HHS Secretary and has responsibility for carrying out all the functions, authorities, ■ and duties of HHS including contracting on behalf of the United States with Indian tribal organizations under the ISDEAA to provide health care to Native Americans.” Allocation MSJ ¶ 4, at 3 (stating this fact). See Response ¶ 4, at 5 (not disputing this fact).
“Defendant Smith is the Principal Deputy Director of the IHS and had the overall responsibility for carrying out all the functions, authorities, and duties of the IHS within HHS regarding contracting with Indian tribal organizations under the IS-DEAA to provide health care to Native Americans.” MSJ ¶ 6, at 3-4 (stating this fact). See Response ¶ 5, at 5 (not disputing this fact). “Defendant Shirléy-Damon is the Contracting Officer for the Navajo Area IHS and is responsible for ISDEAA contracts and funding agreements for IHS programs, functions, services, and activities (PFSAs) undertaken by ISDEAA contractors within the Navajo Area IHS, including Sage.” MSJ ¶ 6, at 4 (stating this fact). See Response ¶ 6, at 5 (not disputing this fact). “Shirley-Damon has the authority to sign ISDEAA contracts and funding agreements with Sage for such IHS programs and to award funds pursuant to those agreements.” MSJ ¶ 6, at 4 (stating this fact). See Response ¶ 6, • at 5 (not disputing this fact).
“In 2009 Sage contracted with IHS under the ISDEAA. Sage and IHS were parties to successive ISDEAA contracts and AFAs [Annual Funding Agreements] for FY 2009 through FY 2013, without interruption.” MSJ ¶ 7, at 4 (stating this faet)(bracketed material added). See Response ¶7, at 5 (not disputing this fact).
The 2009 contract included the following PFSAs: Inpatient Services, General Ambulatory and Specialty Care- Services, Emergency Department, Emergency Medical - Transport, Optometry Clinic, Behavioral Health Services, Radiology, Pharmacy, Laboratory, Physical Therapy, Public Health Nursing, Employee Health Services, -Health Education, Transportation Services, School Based Services, Diabetes Program, Traditional Medicine, Dental Clinic, and Podiatry Clinic.
MSJ ¶ 8, at 4 (stating this fact). See Response ¶ 8, at 5 (not disputing this fact). The 2009 through 2013 contracts also state:
In addition to general descriptions of services provided above, NHF/Sage [Sage Hospital or Sage] will provide the following services, among other related services, in operating and administering the PFSAs under the ISDEAA Contract and. providing health care services for eligible beneficiaries ....
5. Business Functions: Including, but not limited to, billing and collecting third party reimbursements, conducting utilization review, compliance activities, insurance verification, and collection activities.
MSJ ¶ 9, at 5 (stating this fact)(bracketed material added in the MSJ). See Response ¶ 9, at 5 (not. disputing this fact).
The IHS Contracts stated “[e]ach provision .of the [ISDEAA] and each provision of this Contract shall 'be liberally construed for the benefit of Sage to transfer certain programs, functions, services, and activities (hereinafter ‘PFSAs’), or portions thereof, and associated resources, that are otherwise contractible under section 102(a) of the [ISDEAA] (25 U.S.C. §'4S0(f)(a)), including all related administrative functions, from the Secretary to Sage.”
MSJ ¶ 11, at 5-6 (stating this fact)(bracketed material and single quotation marks around PFSAs in the MSJ). See Response ¶ 11, at 5 (not disputing this fact).
The IHS Contracts provided that “[a]ll program income collected by Sage shall be treated as additional supplemental funding to that negotiated in the AFA and Sage may retain all such income pursuant to section 106(m) of the [IS-DEAA] (25 U.S.C. § 450j-l(m)) to be used to further the general purposes of the Contract. Such program income shall not result in any off-set or reduction in the negotiated amount of the current or successor AFAs.
MSJ ¶ 12, at 6 (stating this fact)(bracketed material in the original). See Response ¶ 12, at 6 (not disputing this fact).
Sage’s Annual Funding Agreements (AFAs) for each year provided that, “Cf]or PFSAs provided under this AFA, Sage shall exercise its right pursuant to Section 405 of the Indian Health Care Improvement Act, as amended by P.L. 106-417, to submit claims directly to and recover directly from Medicare and Medicaid. All funds recovered from Medicare and Medicaid shall be used as allowed by law.”
MSJ ¶ 13, at 6 (stating this fact)(bracketed material in the original). See Response ¶ 13, at 6 (not disputing this fact).
The AFAs also stated that “[a]ny funds recovered by Sage through filing, litigating, or settling a claim against a third party to pay for services previously provided to IHS-eligible beneficiaries by Sage, or for such services previously provided by the IHS through PFSA now operated by Sage, shall be considered program income to be utilized by Sage in support of the PFSAs contracted herein.”
MSJ ¶ 14, at 7 (stating this fact)(bracketed material in the original). See Response ¶ 14, at 6 (not disputing this fact). “The funding tables in each AFA noted ‘third party resources’ as part of the Area Office direct operations budget.” MSJ ¶ 15, at 7 (stating this fact). See Response ¶ 15. at 6 (not disputing this fact). “By letter dated August 25, 2014 to then-Contracting Officer Dayish, Sage submitted to IHS a CSC claim for FY 2009 through 2013 for a total of $62,569,681.” MSJ ¶ 16, at 7 (stating this fact). See Response ¶ 16, at 6 (not disputing this fact).
By letter dated July 16, 2015, IHS asserted a counterclaim against Plaintiff for FY 2009 through 2013 in the amount of $4,218,357.... This counterclaim was based on IHS’s assertions that “Plaintiff did not expend the indirect CSC funding on activities that the parties agreed were eligible for indirect CSC funding (i.e., reasonable, necessary, non-duplica-tive costs incurred for activities carried on to operate the Federal program.... This counterclaim was later dismissed.”
MPSJ ¶ 17, at 7-8 (stating this fact). See Response ¶ 17, at 6 (not disputing this fact). “Despite the fact that Defendants dismissed their counterclaim, their expert continues to reduce her calculations of Sage’s damages because ‘Sage claimed all actual costs without applying a funding ratio to prorate the indirect costs between IHS and third-party funding.’ ” MSJ ¶ 18, at 8 (stating this fact). See Response ¶ 18, at 6 (not disputing this fact).
IHS asserts that “CSC ... is only generated by the Secretarial amount, not additional amounts a tribal contractor may choose to contribute to its ISDEAA programs from other sources.... [T]he purpose of CSC funding is to ensure that tribal contractors are not required to reduce the program, as operated by the Secretary, to cover their additional costs necessary for contract compliance when the program is transferred from federal to tribal operation.”
MSJ ¶ 19, at 8 (stating this fact). See Response ¶ 19, at 6 (not disputing this fact).
IHS also maintains that “CSC funding is authorized only for support of the federal program, and not for expanded programs funded with other resources. See 25 U.S.C. § 450j-l(a)(2)-(3). Accordingly, the determination of CSC funding must ensure that it is limited only to those activities that support the federal program. IHS accomplishes this through application of a ratio, based on either revenues or expenditures that demonstrates which costs are related to the federal program as compared to expanded programs, etc. In years when there were shortfalls due to Congressionally-capped appropriations for CSC (up to and including fiscal year 2013), IHS divides the contract amount, plus an amount that recognizes a potential shortfall, by the actual revenues/expenditures .... The use of the ratio ensures that CSC funding is not being awarded for non-federal programs.”
MSJ ¶ 20, at 8-9 (stating this fact). See Response ¶ 20, 6 (not disputing this fact).
The United States’ expert asserts that
Sage based its claim for indirect CSC for FYs 2009 through 2013 on actual, historical cost data; however it ... [i]s requesting that IHS pay 100 percent of Sage’s claimed indirect CSC, rather than the reasonable estimate of IHS’[ ] prorated share of the eligible indirect CSC that Sage calculated during the original contract negotiation.
MSJ ¶ 21, at 9 (stating this fact). See Response ¶ 21, at 6 (not disputing this fact).
As part of her analysis, Defendants’ expert subtracted costs' in Sage’s claim that IHS “considered to be duplicative,” explaining:
IHS determined that some claimed amounts- or activities are duplicative of activities funded in the' Secretarial amount.... Those activities that are already funded in the' Secretarial amount cannot also be funded as CSC, For example, Sage is claiming costs associated with linens and cleaning supplies as indirect costs. Linens and hospital housekeeping would be part of direct hospital operations (i.e., direct program funds) and would be funded in the secretarial amount. Other examples of specific cost areas that appear duplicative include activities related to “Dietary,” '“Wellness,” “Med Rec,” “Utilities,” and “Grounds.” As these are direct functions of hospital operations that were funded within -the core Secretarial funding.-
MSJ ¶22, at 9 (stating this fact). See Response ¶22, at 6 (not disputing this fact).
As part of her analysis, Defendants’ expert made an adjustment to [CSC] because Sage [Hospital] had not “allocate[ed] [sic] indirect costs to the significant amount of third-party revenue received annually and used to fund hospital operations.” According to the Defendants’ expert:
Due to its obligation not to fund CSC related to third-party funding, IHS has consistently negotiated with tribes and tribal organizations by allocating the program’s indirect costs to their various funding sources. The manner in which IHS allocates CSC can vary depending on the documentation available. With Sage [Hospital], IHS calculated revenues related to the IHS-funded portion of the program as a percentage of Sage [Hospital]’s overall revenues..
MSJ ¶ 23, at 9-10 (stating this fact). See Response ¶23, at 6 '(not disputing this fact).
“Plaintiff itself repeatedly proposed that its CSC be calculated 'using ratios to allocate its administrative costs, consistent with Office of Amendment and Budget (OMB) cost principles.” Response at 7 (stating this fact). See Plaintiffs Reply Memorandum in Support of Motion for Partial Summary Judgment on the Issue of Allocation -1, filed September 12, 2016 (Doc. 235)(“Allocation ,Reply”)(not disputing this fact). “On average, IHS funding accounts for approximately 55% of Sage’s health revenue each year.” Reply at 1 (stating this fact).
The ISDEAA contracts include the following provision:
SECTION 5 — LIMITATION OF COSTS. Sage shall not be obligated to continue performance that requires an expenditure of funds in excess of the amount of funds awarded under the Contract. If, at any time, Sage has reason to believe that the total amount required for performance of this Contract would be greater than the amount of funds awarded under this Contract, Sage shall provide reasonable notice to the Secretary of HHS. If. the Secretary does not take such action, as may be necessary to increase the amount of funds awarded under the Contract, Sage may suspend performance of the Contract until such time as additional funds are awarded.
Response at 7 (stating this fact).
PROCEDURAL BACKGROUND
Sage Hospital made' two motions for summary judgment. Sage Hospital’s first motion for summary judgment, the Allocation MSJ, asks the Court to grant it partiál summary judgment that expenditures made with third-party revenues in support of the programs únder contract with the IHS are spent on the federal program and are therefore eligible to be reimbursed as CSC. See Alocation MSJ at 3. Sage Hospital’s second motion for summary judgment/the Duplication MSJ, asks the Court to grant it partial summary judgment that the ISDEAA requires a duplication offset in CSC only for the dollars that IHS actually pays to Sage Hospital as part of the Secretarial amount for a given type of cost. See Duplication MSJ at 2.
1. Allocation MSJ.
Sage Hospital filed the Alocation MSJ on August 1, 2016. See Allocation MSJ. According to Sage Hospital, IHS funds only a proportion of Sage Hospital’s CSC equal to the proportion of Sage Hospital’s total programmatic funding that IHS provides. See Alocation MSJ at 18-20. Sage Hospital alleges that the ISDEAA obligates IHS to fund Sage Hospital’s entire CSC, even though Sage Hospital derives a portion of its programmatic revenues from third parties. See Allocation MSJ at 20-24. Sage Hospital therefore moves the Court to judge as a matter of law that third-party revenues Sage Hospital spends on the ISDEAA “federal program” are eligible for CSC. See Allocation MSJ at 17.
According to Sage Hospital, the IS-DEAA requires IHS to pay any Tribe that enters into a self-determination contract with it both program funds and CSC. See Allocation MSJ at 15-17. Program funds, Sage Hospital says, consist of the amount of money that IHS would have spent running the contracted program itself. See Allocation MSJ at 15-17. CSC, Sage Hospital says, consists of reasonable costs for activities necessary to ensure contract compliance and prudent management— such as payroll, legal expenses, audits, insurance, and general overhead. See Allocation MSJ at 15-17. Sage Hospital asserts that IHS failed to pay the full amount of its CSC claim for each fiscal year 2009-2013 on the grounds that a portion of the CSC covered services that were funded by third-party revenues and that IHS would not have provided had it been running the program. See Allocation MSJ at 18-19.
'Sage Hospital argues that IHS’ failure to pay the entirety of its CSC claim conflicts with the ISDEAA, which states that “program income earned by a tribal organization in the course of carrying out a self-determination contract ... shall not be a basis for reducing the amount of funds otherwise obligated to the contract.” Allocation MSJ at 20 (quoting 25 U.S.C. § 450j-l(m)). IHS’ allocation ratio, Sage Hospital maintains, de facto reduces the amount of funds otherwise obligated in the contract and therefore ipso facto violates the ISDEAA. See Allocation MSJ at 20-21.
Unpacking this argument further lest it appear pat, Sage Hospital contends that IHS’ allocation ratio ignores the IS-DEAA’s definition of the programmatic (a.k.a. “Secretarial”) amount. See Allocation MSJ at 20-21. This ISDEAA, according to Sage Hospital, does not cleave self-determination programs into separate portions, one funded with appropriated funds and another funded by third-party revenues. See Allocation MSJ at 20-21. Rather, Sage Hospital notes, the ISDEAA defines the programmatic amount broadly and simply as
the amount that the HHS Secretary otherwise would have provided for the operation of the programs or portions thereof for the period covered by the contract, without regard to any organizational level within the Department of the Interior or the Department of Health and Human Services, as appropriate, at which the program, function, service, or activity or portion thereof, including supportive administrative functions that are otherwise contractable, is operated.
Allocation MSJ at 21 (quoting 25 U.S.C. § 450j-l(a)(l)). Sage Hospital reads this definition to include third-party revenues in the Secretarial amount, provided that these revenues fund the federal program. See Allocation MSJ at 21. According to Sage Hospital, the subsequent ISDEAA subsection then mandates IHS to add CSC to the Secretarial amount as defined in 25 U.S.C. § 450j — 1(a)(1)—not just to the part of the federal program funded with appropriated funds. See Allocation MSJ at 21 (citing 25 U.S.C. § 450j-l(a)(2)).
Sage Hospital points to IHS’ own internal practices to demonstrate the accuracy and reasonableness of its own ISDEAA interpretation, observing that IHS regularly supplements its own programmatic appropriations with third-party revenues, supporting these programs with a single administrative structure that does not distinguish between portions of programs it funds with appropriations and those portions of programs that it funds with third-party revenues. See Allocation MSJ at 22. Sage Hospital believes that IHS acts rightly in taking this approach, as it conforms to statutory directives. See Allocation MSJ at 22 (citing the Indian Health Care Improvement Act and 25 U.S.C. § 1641(c)(1)(A) to -(B)).
. Sage Hospital then reasons that every program that it operates- can retrocede to IHS, in which case IHS would receive all appropriated funds and all third-party revenues that those programs generate. See Allocation MSJ 22-23. Following its standard procedures, Sage Hospital argues, IHS then would provide the same administrative support services to all parts of the retroceded programs, regardless of their original funding source. See Allocation-MSJ at 22-23. Since CSC is just such administrative support services when a Tribe provides them, Sage Hospital says, then consistency demands that programs that are not retroceded be able to apply CSC to all parts of those programs as well, regardless of their original funding source. See Allocation MSJ at 22-23.
Sage Hospital concludes its motion by cataloguing a menagerie of assorted allegations. See Allocation MSJ at 23-24. According to Sage Hospital, IHS’ exclusion of program activities funded with third-party revenues from CSC funding conflicts with the. ISDEAA’s contracting mandate. See Allocation MSJ- at 23. Sage Hospital alleges that its contracts with IHS acknowledge that Sage Hospital will collect third-party revenues, and that IHS agrees that the federal program includes billing and collection expenses. See Allocation MSJ at 23. Closing with an a fortiori argument, Sage Hospital says that required spending on health programs must qualify as federal programs' if billing and collection expenses do. See Allocation MSJ at'23-24.
2. Duplication MSJ.
Sage Hospital filed the Duplication MSJ on August 1, 2016. See Duplication MSJ. According to Sage Hospital, Congress added an amendment to the ISDEAA in 1994 that prohibits Tribes that operate programs under a self-determination contract from being paid twice for the same costs. See Duplication MSJ at 14 (citing 25 U.S.C. § 450j-l(a)(3)(A)). Sage Hospital characterizes the amendment as striking a moderate position, mandating a dollar-for-dollar funding offset to avoid such duplicated costs but ensuring that IHS pay contractors the full amount which they need for activities to prudently manage the contract. See Duplication MSJ at 14-15.
.Sage Hospital says that IHS distances itself from Congress’ moderate position by seeking a CSC duplication offset for the full amount which Sage Hospital incurred on any activity that the IHS theoretically would have funded under the Secretarial amount, even if Sage Hospital never received any Secretarial funding for that activity, See Duplication MSJ at 15-17. Sage Hospital asserts that IHS’ position défíes legislative intent behind the ISDEAA, which Sage Hospital-says was to use CSC to cover administrative costs so that Tribes could maximize healthcare availability for their members. See Duplication MSJ at 17. Sage Hospital argues that IHS seeks 'to turn this legislative intent on. its head — -forcing the hospital to gut its programs to cover overhead costs. See Duplication MSJ at 20, According to Sage Hospital, IHS’ interpretation of the ISDEAA duplication provision is so “extreme” and “absurd” that.it brazenly even contradicts IHS’ own CSC Manual. Duplication MSJ at 17-21. The CSC Manual, Sage Hospital asserts, repeatedly states that certain costs are eligible for CSC funding even though the related activity may have received some funding in the Secretarial amount. See Duplication MSJ at 21.
3. Response.
Because both of Sage. Hospital’s motions ■ concern a claim for increased CSC, the United States submits a combined response. See Combined Response to Plaintiffs Motions for Summary Judgment on the Issues of Duplication and Allocation 1, filed August 25, 2016 (Doc. 222)(“Re-sponse”). The United States quickly dismisses the arguments in Sage Hospital’s motions as a baleful assembly of straw men, and argue that their reading of the ISDEAA is correct. See Response at 2. They invoke prior proceedings in this case, indicating that those proceedings already establish that IHS must pay Sage Hospital two categories of funding — a Secretarial amount and CSC — which are distinct forms' of compensation and perfectly distinguishable by the categories of activities that they are intended to cover. See Response at 2. According to the .United States, Sage Hospital erroneously seeks to erase this distinction despite the IS-DEAA’s language and structure. See Response at 2-3.
Once IHS enters into a self-determination contract' with a Tribe, the United States reiterates,'IHS must pay the Tribe a Secretarial amount and CSC under 25 U.S.C.- § 450j-l(a) so that the scope of services does not diminish after the transfer. See Response at 8. The United States draws the Court’s attention to the United States Code for a definition of “Secretarial amount,” noting: ‘
The amount of fdnds provided under the terms of self-determination contracts entered into ... [that] shall not be less than the appropriate Secretary would have otherwise provided for the operation of programs or portions thereof for the period covered by thé contract, without' regard to any organizational level within the Department of the Interior or the Department of Health and Human Services, as appropriate, at which the program, function, service, or activity or portion thereof, including supportive administrative functions that are otherwise contractable, is' operated.
Response at 9 (quoting 25 U.S.C, § 45Ój-l(a)(l))(internal quotation marks removed). The way that the United States sees it, this definition tightly circumscribes' IHS’ payment obligation; unless IHS otherwise would have used appropriated funds for the operation of the PFSAs, IHS incurs no obligation to pay for them under the Secretarial amount. See Response' at 9-10. The' United States admits that this 'does not'fully limit their repayment obligations towards Sage Hospital. See Response at 10. Under a 1988 amendment to the IS-DEAA, the United States posits, IHS also must add to the Secretarial amount
contract support costs which shall consist of the reasonable costs for activities which must be carried on by a tribal organization as a contractor to ensure compliance' with the ■ terms of the contract and prudent management, but which normally are not carried on by the respective Secretary in his direct operation of the program; or (B) are provided by the Secretary in support of the contracted program from resources other than those under contract.
Response at 10-11 (quoting 25- U.S.C. § 450j — 1 (a)(2)). Under a separate 1994 amendment to the ISDEAA, IHS also must add to the Secretarial amount funding for-, administrative functions — such as mail, telephone, and printing costs — rendered in support of transferred PFSAs. See Response at 12 (citing 108 Stat. 4257-59).
According to the United States, Congress left 25 U.S.C. § 450j-l(a)(2)(B) largely intact under the 1994 amendment, with the notable exception of a new subsection that read as follows:
(3)(A) The contract support costs that are eligible for the purposes of receiving funding under this subchapter shall include the costs of reimbursing each tribal contractor for reasonable and allowable costs of—
(i) direct program expenses for the operation of the Federal program thát is the subject of the contract, and
(ii) any additional administrative or other expense related to the overhead incurred by the tribal contractor in connection with the operation of the Federal program, function, service, or activity pursuant to the contract,
Except that such funding'shall not duplicate any funding provided under subsection (a)(1) of this section.
Response at 12-13 (25. U.S.C. § 450j-1(a)(3)). The United States maintains that this new subsection, alongside an ISDEAA “model contract” that Congress included in the amendment, clarifies that CSC can include both direct and indirect costs, but that these still are distinct expense categories. Response at 12-13 (referencing model contract-at Pub. L. No. 103-413, tit. I, §. 103, 108 Stat. at 4262, codified at 25 U.S.C. § 4501(c)).
Completing its cavalcade of code provisions, the United States mentions that Congress amended the IDSDEAA one final time in 1997, which resulted in' the addition of § 450j-2, which provides:
Before, on, and after October 21, 1998, and notwithstanding any other provision of law, funds available to the Indian Health Service in this Act or any other Act for'Indian self-determination or self-governance contract or grant support costs may be expended only for costs directly attributable to contracts, grants, and compacts pursuant to the. Indian Self-Determination Act [25 U.S.C.A. § 450f et seq.] and no funds appropriated by this or any other Act shall be available for any contract support costs or indirect costs associated, with any contract, grant, cooperative agreement, self-governance compact, or funding agreement entered into between an Indian tribe or tribal organization and any entity other than the Indian Health Service.
Response at 14 (25 U.S.C. § 450j-2)(brack-eted material in the Response). The United States reads this statutory provision to indicate thdt IHS’ CSC obligation extends only to the eligible costs for programs that IHS previously transferred to Sage Hospital, and not to PFSAs “for any entity other than the [IHS].” Response at 14 (bracketed material in the original)(quóting H.R. Rep. No. 105-609, at 110 (1998)).
Aware that its argument’s main thrust may have been lost amid the flurry of statutory provisions, the United States then summarizes it. See Response at 15. Under the ISDEAA’s plain language, the United States asserts, Sage Hospital is entitled to two forms of payment — (i) a Secretarial amount, which IHS must pay from the IHS appropriation and which covers the amount that IHS would have used to operate the transferred programs; and (ii) CSC, which covers both direct, and indirect costs. See Response at 15. To facilitate these payments and conform to the ISDEAA, the United States maintains, Sage Hospital must de-duplicate its claimed CSC to eliminate all of the activities funded with the Secretarial amount and properly allocate cost responsibility among all sources of revenue so that IHS does not support administrative costs for programs that vastly exceed the federal PFSAs. See Response at 15.
a. Duplication.
.Building off of the foregoing statutory framework, the United States reverses the order of filings in the case to first address Sage Hospital’s Duplication MSJ. See Response at 15-26. The United States reminds the Court that the ISDEAA authorizes CSC funding to cover only the reasonable costs of activities that both (i) “must be carried on ... to ensure compliance with the terms of the contract and prudent management” of the federal PFSAs; and (ii) must be activities that IHS does not normally operate using the Secretarial amount. See Response at 15-16 (quoting 25 U.S.C. § 450j-1(a)(2)(A)-(B)). Fixating on the statute’s repeated use of the word “must” and what they call “the fact that level of effort required to perform ... Federal PFSAs is coterminous with the Secretarial amount,” the United States argues that any expenditures which Sage Hospital incurred above the Secretarial amount are discretionary and not eligible for CSC. Response at 17. The United States insists that, read together with the subsection that follows it, 25 U.S.C. § 450J — 1(a)(2) also reinforces yet again the distinction between the Secretarial amount. and CSC, and forbids funding duplication. See Response at 18.
Seemingly still smarting at the harsh language in Sage Hospital’s MSJ, see Duplication MSJ at 17-21, the United States turns the tables and attacks Sage Hospital’s approach to duplication as unreasonable and implausible. See Response at 18-19. It accuses Sage Hospital of “selectively quoting” and ignoring “large swaths of the relevant statutory text” to arrive at its contorted interpretation that “duplication” is avoided when the agency is given full credit for the amount of dollars it provided in the Secretarial amount for any particular function. Response at 18-19 (referring to Duplication MSJ at 17). The United States argues that Sage Hospital seeks to expand the Secretarial amount by craftily classifying all of its incremental expenditures on Secretarial-amount activities as CSC. See Response at 20. Had Sage Hospital found IHS funding insufficient to cover the PFSAs under the Secretarial amount, the United States asserts, Sage Hospital had statutory authority to discontinue services once the Secretarial amount had been exhausted. See Response at 21. Instead, the United States maintains, Sage Hospital continued to provide services after the Secretarial amount had been depleted and now seeks to befog the crystal clear text of 25 U.S.C. § 450j-l(a)(l) to suggest that IHS should use CSC to fill the gap. See Response at 22.
According to .the United States, neither snippets of legislative history nor the canon of Indian deference can rescue Sage Hospital’s interpretation when it so manifestly defies the statutory text’s plain meaning. See Response at 22. The United States contends that this general principle of interpretation especially is true with respect to the MSJ, as the legislative history upon which Sage Hospital relies is unrepresentative and unattached to the version of the ISDEAA that eventually passed Congress. See Response at 23-24 (indicating that Sage Hospital cites to S. Rep. No. 103-374 but that Congress passed the House version of the bill). The United States contends that a fuller legislative history shows that Congress expressly contemplated the types of activities that CSC should cover and expressed concern that the Secretarial amount and not CSC should fund PFSAs which IHS does. See Response at 24-25.
The United States finally shifts topic, if not tone, insisting that all of Sage Hospital’s assertions that IHS took actions inconsistent with the language of the IS-DEAA are off base. See Response at 25. IHS CSC Policy, according to the United States, is replete with guidance consistent with the plain language of the statute, whether the guidance covers evaluation of direct costs for duplication or identification of activities that are funded in the Secretarial amount and therefore are not eligible for CSC funding. See Response at 25,
b. Allocation.
Because the ISDEAA, according to the United States, authorizes CSC funding only to cover the reasonable costs of unique activities that the Secretarial amount does not cover, and that must be done for contract compliance and prudent management of the Federal PFSAs, this distinction means that costs must be allocated proportionally among the various revenue streams that supply a tribe or tribal organization’s operating budget so that IHS is not saddled with all the overhead costs attached to the ISDEAA contract while third parties free ride. See Response at 27. The United States avers that this cost allocation inheres to the statutory definition of CSC, see Response at 27, and that the United States District Court for the District of Columbia confirmed this inherency when it decided Tunica-Biloxi Tribe of La. v. United States, 577 F.Supp.2d 382 (D.D.C. 2008)(Walton, J.), in which it held that the ISDEAA “prevents the IHS from paying more than its pro rata share of the indirect- costs incurred by contracting tribes and tribal organizations,” Response at 28 (quoting Tunica-Biloxi Tribe of La. v. United States, 577 F.Supp.2d at 418).
The United States argues that the court’s reasoning in Tunica-Biloxi Tribe of La. v. United States applies to this case even though the fact pattern is slightly different, and that the Court also should come to the same conclusion that 25 U.S.C. § 450j-2 “requires- an equitable distribution of a contractor’s administrative costs and bars shifting costs to IHS that are hot allocable to the Federal PFSAs funded by the Secretarial amount.” Response at 28. The United' States recounts how Sage Hospital repeatedly in the past proposed that IHS calculate Sage Hospital’s CSC using ratios to allocate its administrative costs, consistent with OMB cost principles. See Response at 29 (referencing OMB Circular A-87, which the United States appends to the Response at A48-49).
According to the United States, Sage Hospital’s change of heart on the issue is inconsistent with the ISDEAA definition of “Secretarial amount” in three ways. Re-' sponse at 31-36. First, according to Sage Hospital, 26 U.S.C. § 450j-l(a)(l)’s plain language limits the Secretarial amount to appropriated funds; that is to say, according to Sage Hospital, the- ISDEAA does not require that the funding which Sage Hospital receives will' fund the level of services that the Tribe wishes to provide. See Response at 33. Second, according to Sage Hospital, Sage Hospital’s contract with IHS nowhere contains a provision compelling IHS to pay for third-party collections as part of the Secretarial amount’. See Response at 34. Third, according to Sage Hospital,.IHS’ practice of sometimes supplementing CSC based on third-party revenues is because of .its obligations un-, der, the ‘ IHCIA, 90 Stat. 1400, and the Social Security Act, 49 Stat. 620, not under the ISDEAA, See Response at 36.
The United States concludes its Response with an assertion that Pyramid Lake Paiute Tribe v. Burwell, 70 F.Supp.3d 634 (D.D.C.)(“Pyramid Lake”) — which Sage.Hospital says rejected IHS’ position concerning whether the ISDEAA’s reach extends, to programs that third-party revenues- support — is not dis-positive. See. Response at 36. According to the United States, Pyramid Lake was distinguishable from the present case in many ways. See Response at 37-38. Pyramid Lake involved the transfer of a program to a Tribe that, the United States says, “in its operation of the program, IHS partially funded with third-party revenues IHS collected from the operation of a separate program' that was not the subject of the transfer.” Response at 37. Pyramid Lake, the United- States asserts,- also centered on resources available to IHS, whereas this case revolves around funds that Sage Hospital generated from its own efforts to collect from third-party payers. See Response at 37. Last, the United States gingerly insists that the District Court for the District of Columbia confused the issues in the case before it, conflating two separate assertions the United States had made and then compounding this error by focusing on the less-developed one. See Response at 37.
4. Reply on the Issue of Allocation.
Sage'Hospital indicates that'it wishes to “return to basics" in its Reply to the Allocation MSJ. Plaintiffs Reply Memorandum in Support of Motion for Partial Summary Judgment on the Issue of Allocation at 1, filed September 12, .2016 (Doc. 235)(“Allocation Reply”). Sage Hospital first insists that all IHS programs are contractible under the ISDEAA, because they benefit American Indians qua American Indians. See Allocation Reply at 2 (citing 26 U.S.C. § 450f(a)(1)(E)), Whenever a Tribe contracts with IHS, Sage Hospital maintains, the ISDEAA obliges it to transfer to the Tribe the Secretarial amount, he., “an amount of funds that is ‘not .,, less, than [the amount] the appropriate Secretary would have ' otherwise provided for the operation of the programs or portions thereof being contracted.” Allocation Reply at 2 (quoting 25 U.S.C. § 450j-1(a)(1) and adding the bracketed material). On the ISDEAA’s face, Sage Hospital insists, the source of funding that IHS uses to operate its programs — or oth-erwisé would have used to provide them— is irrelevant. See Allocation Reply at 2.
According to Sage Hospital, the United States’ entire opposition in its Response boils.down to an assertion that the “only monies the Secretary ‘otherwise provide[s]’ to operate the agency’s programs, and thus the only monies she must therefore transfer to a contracting Tribe, are ‘appropriated’ funds.” Allocation Reply at 2-3 (quoting 25 U.S.C. § 450j-1(a)(1)). Sage Hospital argues that this assertion flies in the face of both HHS practice and the ISDEAA. See Allocation Reply at 2-3. For one thing, Sage Hospital maintains, the HHS Secretary routinely, collects and spends third-party revenues to operate IHS programs. See Allocation Reply at 3. For another thing, Sage Hospital contends, 25 U.S.C. § 450j-l(a)(l) says that IHS funding “shall not be less than the appropriate Secretary would have otherwise provided for the operation of the program....” See Allocation Reply at 3 (quoting 25 U.S.C. § 450j — 1(a)(1)). Sage Hospital notes that the statute does not say that IHS funding “shall not be less than the appropriate Secretary would have otherwise provided from appropriated funds for the operation of the programs .... ’■’• See Allocation Reply at 3 (emphasis in original). Nor/ Sage Hospital maintains, does the ISDEAA’s contracting section refer to the Secretary contracting “programs or portions thereof funded with appropriated dollars.” See Allocation Reply at 3 (citing 25 U.S.C. § 450f(a)(1))(emphasis in original). Sage Hospital argues that nothing whatsoever in the ISDEAA support’s the government’s assertions that (i) it does not cover programs funded with both appropriated, and non-appropriated dollars; or that (ii) it is not required to pay CSC for the portion of a contractor’s program that is funded with third-party revenues. See Allocation Reply at 3-4.
Sage Hospital says that the United States scours case law in a vain attempt.to buttress- their feeble statutory arguments. See Allocation Reply at 4-6. According to Sage Hospital, the court in Ramah Navajo Sch. Bd., Inc. v. Babbitt, 50 F.Supp.2d 1091 (D.N.M. 1999)(Hansen, J.) never even addressed the statutory status of appropriated dollars'vs. non-appropriated dollars. See Allocation Reply at 4. The court in Ramah Navajo Chapter v. Lujan, 112 F.3d 1455 (10th Cir. 1997), Sage Hospital asserts, the United States Court of Appeals for the Tenth Circuit dealt with whether IHS could, be compelled to fund indirect cost associated with a separate agency’s operations, he., costs not associated, with IHS programs. See Allocation Reply at 5. The court in Tunica-Biloxi Tribe of La. v. United States, 577 F.Supp.2d 382 (D.D.C. 2008), Sage Hospital maintains, concluded that the Tunica rate adjustment claim against IHS was barred because 25 U.S.C. § 450j-2 “explicitly prohibits the funding of indirect costs ‘associated -with’ non-IHS entities.” Allocation Reply at 5-6 (quoting Tunica-Biloxi Tribe of La. v. United States at 418).
Sage Hospital finds it baffling that the United States. even would marshal such cases to support its argument. See Allocation Reply at 5-7. Even cast into their most positive light, Sage Hospital insists that the cases are irrelevant. See Allocation Reply at 6. Looked at more critically, Sage Hospital contends that Ramah Navajo Chapter v. Lujan sabotages the United States’ own argument. After all, Sage Hospital notes, in that case the Tenth Circuit did spare HHS from any responsibility to pay for indirect costs associated with another agency’s operations, but it also dis-serted on the HHS Secretary’s responsibility to pay the full indirect costs associated with operating her own agency’s contracts. See Allocation Reply at 5-7.
Nor can Sage Hospital comprehend how the United States believes that its other arguments hold water. See Allocation Reply at 7-8. Sage Hospital admits that it previously used IHS’ preferred allocation algorithm, but only on what it asserts was an erroneous instruction from IHS to use it. See Allocation Reply at 7. Sage Hospital does not have an indirect cost rate, so Sage Hospital maintains that the United States barks up the wrong tree when it insists that rules controlling the issuance of indirect costs rates require an allocation among funding sources’. See Allocation Reply at 8. Sage Hospital’s position might appear “not reasonable” to the United States, but Sage Hospital reiterates that it merely adheres to the ISDEAA’s plain language. See Allocation Reply at 8. Sage Hospital collected funding from third-party payers itself rather than routing the third-party funding through IHS, but that observation, Sage Hospital insists, misses the point, which is that CSC is due for the reasonable and necessary costs of carrying out Sage Hospital’s contract with IHS. See Allocation Reply at 9. Statutes other than the ISDEAA certainly address program income in the form of third-party revenue, Sage Hospital readily concedes, but the question before the Court is what the IS-DEAA — not sundry other laws — demands of IHS. See Allocation Reply at 10.
Last, Sage Hospital resists the United States’ attempts to marginalize Pyramid Lake. Sage Hospital is shocked at the alleged impudence the United States shows when it suggests that the lawyers in Pyramid Lake poorly briefed it and that the United States District Court for the District of Columbia poorly understood it. See Allocation Reply at 11. In reality, Sage Hospital argues, the United States is the one who misunderstands Pyramid Lake. See Allocation Reply at That case, as Sage Hospital sees it, clearly “concerned the contractibility of an IHS program funded with non-appropriated dollars.” Allocation Reply at 11. Similar to the situation in this case, Sage Hospital contends, IHS argues in Pyramid Lake that the funds’ status as non-appropriated funds placed these funds outside the ISDEAA’s scope. See Allocation Reply at 11. Judge Cooper, according to Sage Hospital, properly rejected that assertion, holding that:
the applicable funding level for a contract proposal under sections 450f(a)(2)(D) and 450j[-]l(a)(l) is determined based on what the Secretary otherwise would have spent, not on the source of the funds the Secretary uses. If the Secretary chooses to augment its spending on a program with other funds available to her, nothing in the Act permits her to deduct those amounts from the tribe’s funding under an otherwise acceptable ISDEAA contract.
Allocation Reply at 11-12 (quoting Pyramid Lake, 70 F.Supp.3d at 544)(bracketed material and emphasis added in the Allocation Reply). Far from some benighted ruling from the bench, Sage Hospital maintains, Judge Cooper’s opinion skillfully spotlights the very issues at question in this case! See Allocation MSJ at 11-12.
5. Reply on the Issue of Duplication.
Sage Hospital sallies forth against the United States’ arguments without so much as an initial stutter-step in its Reply to the Duplication MSJ. See Plaintiffs Reply Memorandum in Support of Motion for Partial Summary Judgment, on the Issue of Duplication at • 1, filed September 12, 2016 (Doc. 236)(“Duplication Reply”). According to Sage Hospital, IHS’ litigating position can be distilled into an assertion that CSC funding and Secretarial amount funding are “primarily distinguishable by the types of activities that they are intended to cover,” and that the two categories of activities do not overlap at all. Duplication Reply at 1 (quoting Response at 2). The way that Sage Hospital sees it, three ex-ampies from IHS’ own CSC Manual lay waste to this assertion. See Duplication Reply at 1-2.
First, Sage Hospital maintains, IHS itself incurs retirement costs, health insurance costs, facility costs, and training costs when it operates a given healthcare program. See Duplication Reply at 2. Depending on the program being contracted, all of these costs, according to Sage Hospital, may be contained in the Secretarial amount when IHS transfers the program to a tribal contractor. See Duplication Reply at 2 .(citing Indian Health Manual (“I.H.M.”), Part 6, Ch. 3, at 6-6). Yet, according to the I.H.M., Sage Hospital says, each of these costs also is eligible to be funded as “direct” CSC to a tribal contractor so long as there is no double payment of costs that are already being paid to the contractor as part of the Secretarial amount. Duplication Reply at 2 (citing I.H.M. 3 — 4). Until this litigation, Sage Hospital asserts, IHS’ longstanding position clearly was that “[t]o the extent the budgeted Tribal costs are determined to be reasonable and necessary and these costs exceed the amounts .the Agency provides for these costs in the Section 106(a)(1) [Secretarial] amount, the differ-' ence is allowed as a DCSC [direct contract support cost] requirement for the [programs] transferred.” Duplication Reply at 2 (quoting I.H.M. 7)(bracketed material in Duplication Reply). Sage Hospital states that it is obvious that the CSC costs could not “exceed” the costs in the Secretarial amount if by law CSC is not available to pay for any category of cost contained in the- Secretarial amount or to supplement any category of Secretarial amount funding. See Duplication Reply at 2.
Second, Sage Hospital maintains, IHS incurs costs at the central, regional, and local levels for personnel, financial, records, and property management whenever it runs a health clinic. See Duplication. Reply at 3. Likewise, according to Sage Hospital, IHS also incurs costs for data processing, rent, utilities, housekeeping, repairs, maintenance, and equipment. See Duplication Reply at 3. Because these costs are ones which IHS incurs in operating a program, Sage Hospital contends, the Secretarial amount often contains all of these costs when IHS turns over its program to a tribal contractor, yet all of these cost categories are allowable under indirect CSC costs. See Duplication Reply at 3.
Third, Sage Hospital argues, the I.H.M. provides a convenient formula for calculating a credit adjustment to the CSC that IHS will pay for overhead costs associated with IHS Area and Headquarters funds that are part of the Secretarial amount. See Duplication Reply at 3. According to Sage Hospital, the formula states that when the Area and central Headquarters .overhead activities are transferred to a tribal contractor, twenty percent of the Area and Headquarters funding will be applied as a credit against the amount of indirect CSC funding the Tribe will re: ceive. See Duplication Reply at 3. Sage Hospital asserts that there would be no occasion for a credit adjustment from the Secretarial amount if the CSC funding were not covering some of the same cost categories that IHS funds with Secretarial amount dollars. See Duplication Reply at 4.
Were the foregoing examples insufficient to demonstrate how “extreme” IHS’ positions are, Sage Hospital contends, the ISDEAA would erase all doubt. Duplication Reply at 4. Even though the ISDEAA specifically commands that the Secretarial amount shall include “supportive administrative functions,” Sage Hospital insists that those very same categories of overhead also are identified in the ISDEAA’s CSC provisions. Duplication Reply at 4 (quoting 25 U.S.C. § 450j~l(a)). According to Sage Hospital, the two central, funding provisions of the ISDEAA, one for the Secretarial amount and one for CSC, largely describe the same cost categories, not different cost categories. See Duplication Reply at 4-5. Sage Hospital contends that the ISDEAA is particularly directive when it comes to indirect CSC, commanding that “[n]othing in this subsection shall be construed to. authorize the Secretary to fund less than the full amount of need for indirect costs associated with a self-determination contract.” Duplication Reply at 5 (quoting 25 U.S.C. § 450j~l(d)(2)), No additional ISDEAA language, Sage Hospital maintains, adds exceptions to the subsection’s commands. See Duplication Reply at 5. Indéed, as Sage Hospital sees it, it is precisely because the two types of funding overlap that the ISDEAA “no duplication” provision is even necessary, as it guards against any double payment by assuring that when computing the contractor’s'CSC requirement, the government receives a dollar-for-dollar credit for ámounts already being paid as part of the Secretarial amount. See Duplication Reply at 5.
Sage Hospital then again purports to summarize the United States’ argument, albeit in a way different than it did a few pages earlier. Compare Duplication Reply at 5, with Duplication Reply at L At this point in the Duplication Reply, Sage Hospital says that the United' States really cares about eligibility for CSC funding as opposed to duplication of costs. See Duplication Reply at 5. In other words, as Sage Hospital puts it, “if a type of cost is included .in the Secretarial amount, the government says, it is ‘no ■ longer eligible for CSC.’” Duplication Reply at 5 (quoting Response at 12). According to Sage Hospital, this cramped view of 25 U.S.C. § 450j-1(a)(2) largely ignores subsection (a)(3)(A) and the relevant legislative history behind it. See Duplication Reply at 5-6.
Sage Hospital insists that subsection (a)(3)(A) hamstrings the United States, because it is that provision, not subsection (a)(2), which actually defines eligible CSC. See Duplication Reply at 6. According to Sage Hospital, the United States “con-coet[s]” a.story that Congress enacted the 1994 ISDEAA amendments^ including subsection (a)(3)(A), simply to clarify that CSC can be accounted for as either direct or indirect costs, leaving subsection (a)(2) as the only relevant provision for determining the kinds of CSC' costs that are due. Duplication Reply at 6. The fuller history of the amendment, according to Sage Hospital, is "more complicated. See Duplication Reply at 6, After the 1988 ISDEAA amendments, as Sage Hospital recounts it, the only way. a Tribe could secure funding for administrative functions housed in regional Area or centralized Headquarters offices was through CSC. See Duplication Reply at 6. According to Sage Hospital, once' Congress in 1994 expanded the categories of costs that the HHS Secretary was required to turn over as a part of the Secretarial ■ program amount — by amending subsection (a)(1) to include supportive administrative functions — this automatically raised the question whether the expansion of the Secretarial- amount meant that administrative functions no longer would be eligible to be funded as CSC. See Duplication Reply at 7. Congress answered the question in the negative, according to Sage Hospital, adding subsection (a)(3)(A) precisely to make clear that administrative and other overhead would continue to be funded as eligible CSC even if the same category of costs was included in the Secretarial amount. See Duplication Reply at 7. Sage Hospital urges the Court not to let. the United States persuade it to ignore such legislative history. See Duplication Reply at 8-9,
Sage Hospital brings the Reply to a close by summarizing what it says is the ISDEAA’s plain meaning, viz. that “a given type of cost may be reimbursed by a combination of Secretarial funds and CSC funds, so long as no double payment occurs.” Duplication Reply at 9 (emphasis in original). If the Court doubts that this truly is the statute’s plain meaning, Sage Hospital argues, the ISDEAA’s legislative history ought to put such doubt to .flight See Duplication Reply at 9 — 10. If even an inkling of doubt yet remains, the Court, Sage Hospital argues, ought to turn to the canon of Indian deference as the Tenth Circuit recently phrased it in Ramah Navajo Chapter v. Salazar, 644 F.3d 1054 (10th Cir. 2011): “if the [Act] can reasonably be construed as the Tribe would have it construed, it must be construed that way.” 644 F.3d at 1062 (quoting Ramah Navajo Chapter v. Lujan, 112 F.3d at 1462).
6. The Hearing.
The Court held a hearing on September 16,' 2016. See Transcript of Hearing (taken September 16, 2016)(“Tr.”). The parties discussed the two motions for partial summary judgment in the reverse order in which they were filed,, he. first discussing the Duplication MSJ and then the Allocation MSJ. The parties otherwise largely stuck to their briefing.
a. The Duplication MSJ.
After Sage Hospital and the United States had argued other motions, the ■ Court jumpstarted arguments over the Allocation MSJ and Duplication MSJ by asking Sage Hospital why it had split the issues into two separate motion's. See Tr. at 24:9-13 (Court). Sage Hospital contended that the two motions raise different issues, with the allocation motion concerning proration and the duplication motion concerning offsets. See Tr. at 24:14-25:1 (Miller). Sage Hospital' then walked through the fundamental differences between the two issues. See Tr. at 25:5-29:3 (Miller). Starting with the ISDEAA’s passage, Sage Hospital noted that the statute originally did not even speak about CSC. See Tr. at 25:8-13 :(Miller). According to Sage Hospital, Congress revisited the IS-DEAA in 1987, because the lack of CSC to pay overhead costs was . penalizing Tribes that undertook their own healthcare programs by taking a bite out of their programmatic budget. See Tr. at 25:13 — 26:17 (Miller). The ISDEAA amendments enacted the following year, Sage Hospital maintained, sought to lift the unintended penalty by adding CSC to the Secretarial amount. See Tr. at 26:17-24 (Miller).
For six “long” and “unfortunate” years of negotiated rulemaking following the 1988 ISDEAA amendments, according ito Sage Hospital, IHS failed to apprehend that Congress intended for it to interpret CSC liberally and pay full CSC. Tr. at 27:6-17 (Miller). Accordingly, in 1994, as Sage Hospital recounts it, Congress “c[a]me back with a vengeance,” issuing the HHS Secretary two instructions.. Tr. at 27:25 — 28:1 (Miller). First, according to Sage Hospital, Congress instructed HHS that the Secretarial amount should include everything that is not an inherently federal function, including all administrative functions that IHS handles at the regional or headquarters level See Tr. at 27:25-30:15 (Miller). The instruction ■ presented some •computational difficulties at the regional and headquarters levels, Sage Hospital said, because the same buckets of money at those levels funded multiple Tribes. See Tr. at 28:13-29.1 (Miller). Sage Hospital indicated, however, that “people of goodwill figure[d] it out,” and added those amounts to Tribes’ local operational and programmatic budgéts under the Secretarial amount. Tr. at 28:13-29.1 (Miller). Second, according to Sage Hospital, Congress instructed HHS that CSC should include “the cost of reimbursing each tribal contractor for reasonable and allowable costs, for direct program expenses for the operation of the federal program, and any additional administrative or other expense related” to it. Tr. at 31:25-32:16 (Miller).
Sage Hospital noted that the 1994 amendments created an apparent tension, expanding the CSC definition to cover administrative costs but simultaneously ordering that the HHS Secretary include administrative costs in the Secretarial amount. See Tr. at 32:17-33:4 (Miller). The superficial tension, Sage Hospital said, is resolved under the non-duplication provision in the amended ISDEAA. See Tr. at 33:4-7 (Miller). As an illustration of the non-duplication provision in action, Sage Hospital noted that most Tribes have administrative costs about a quarter as large as their programmatic costs. See Tr. at 33:13-15 (Miller). Sage Hospital explained that, if a given Tribe with this' ratio receives ten million dollars from IHS for administrative costs, but still chooses to rely on the IHS regional office or headquarters for all its administrative functions, IHS gets a $2.5 million credit against that Tribe’s funding. See Tr. at 33:16-34:12 (Miller).
Sage Hospital contrasted the foregoing illustration with how it purports that the United States read the ISDEAA. See Tr. at 34:13-35:4 (Miller). According to Sage Hospital, the ISDEAA says nothing about the category of costs involved. See Tr. at 34:13-16 (Miller). For instance, Sage Hospital offers, if (i) the regional IHS office supplements a contract for ten million dollars -in programmatic expenses with $500,000.00 in CSC for administrative expenses; (ii) but if both the Tribe and IHS later realize that $600,000.00 for administrative expenses is reasonable and prudent for management of the contract, the United States’ reading of the ISDEAA would prohibit IHS from disbursing the additional $100,000.00. See Tr. at 34:16-35:3 (Miller).
Sage Hospital maintained that this reading of the ISDEAA is new at IHS, invented whole cloth in the wake of the 2012 Supreme Court decision in Ramah Navajo Chapter v. Lujan. See Tr. at 35:4-11 (Miller). As proof of the recent change, Sage Hospital reached back into the version of the I.H.M. current before Ramah Navajo Chapter v. Lujan and noted that the I.H.M. said that Tribes were eligible to receive all management costs without categorical limitations. See Tr. at 35:7-19 (Miller). Sage Hospital drew two examples from the I.H.M. to support this point. See Tr. at 35:19-22 (Miller).
The first example is IHS’ 80/20 formula, which assumes that the IHS regional offices spend eighty percent of their budgets on program costs and twenty percent of their budgets on administrative costs. See Tr. at 35:22-36:24 (Miller). For instance, IHS assumes that a regional office with a million-dollar budget spends $200,000,00 on administrative expenses. See Tr. at 36:19-24 (Miller). According to Sage Hospital, any administrative costs that a contracting Tribe incurs are offset, dollar for dollar, off of the $200,000.00. See Tr. at 37:1-11 (Miller), When applying the offset, Sage Hospital implies, IHS does not ask the contracting Tri