MEMORANDUM OPINION
DABNEY
L. FRIEDRICH UNITED STATES DISTRICT JUDGE
The
plaintiff Swinomish Indian Tribal Community brings this
action under the Contract Disputes Act, 41 U.S.C. § 7101
et seq. and the Declaratory Judgment Act, 28 U.S.C. §
2201, as allowed by the Indian Self Determination and
Education Assistance Act, 25 U.S.C. § 5331(a), for an
alleged breach of contract and statutory violation by the
Indian Health Service (IHS). Before the Court are the
parties' cross-motions for summary judgment. Dkts. 21,
28. For the reasons that follow, the Court will grant the
defendants' motion and deny the plaintiff's motion.
I.
BACKGROUND
A.
Statutory Background The Indian Health Service (IHS), an
agency in the U.S. Department of Health and Human Services
(HHS), delivers health-related programs, services, and
activities to American Indians. See Compl. ¶ 11-12, Dkt.
1. When it delivers these services directly to tribal
beneficiaries, it operates its own service unit facilities.
See Id. ¶ 18; see also Pl.'s Mem. at 8,
Dkt. 21-2. Alternatively, the Indian Self Determination and
Education Assistance Act (ISDEAA), 25 U.S.C. § 5301 et
seq., authorizes federally recognized Indian tribes and
tribal organizations to assume responsibility for the health
care programs that the IHS would otherwise provide.
Title V
of the ISDEAA, Id. § 5381 et seq., establishes
the guidelines for Tribes who wish to enter into
self-governance contracts with the IHS. Such tribes do so by
negotiating multiyear funding agreements to carry out their
contracts. See Id. § 5388(a)-(b). Title V
entitles tribes with self-governance contracts to two types
of funding: “amounts for direct program costs specified
under section 5325(a)(1) . . . and amounts for contract
support costs specified under section 5325(a) (2), (3), (5),
and (6).” Id. § 5388(c). Title I, in
turn, defines those types of funding. See Id. §
5325(a).
The
first type of funding, an amount for “direct program
costs, ” Id. § 5388(c), includes an
“amount of funds” that “shall not be less
than the [IHS] Secretary would have otherwise provided for
the operation of the programs or portions thereof for the
period covered by the contract, ” Id. §
5325(a)(1). In other words, a tribe receives “the
amount the Secretary would have provided for the [programs,
functions, services, and activities] had the IHS retained
responsibility for them.” Compl. ¶ 15. Funding
provided for direct program costs under § 5325(a)(1) is
known as the “Secretarial amount.” Id.
The
second type of funding, an amount for contract support costs
(CSC), “shall be added” to the Secretarial amount
for:
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-
(A) 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.
Id. § 5325(a)(2). The CSC amount includes two
kinds[1] of “reasonable and allowable
costs”:
(i) direct program expenses for the operation of the Federal
program that 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[.]
Id. § 5325(a)(3)(A). These two expense
categories are known as “direct CSC” and
“indirect CSC, ” respectively. Compl. ¶ 16.
Direct CSC covers costs incurred to operate a specific
program, such as workers' compensation, while indirect
CSC covers overhead that benefits more than one program, such
as information technology systems. Id.; see also
Defs.' Cross-Mot. at 5 n.8, Dkt. 28. Indirect CSC is
calculated by “multiplying a negotiated indirect cost
rate by the amount of the direct cost base.” Compl.
¶ 24. In turn, the direct cost base is defined as
“[t]otal direct costs, less capital expenditures and
passthrough funds.” Id. The ISDEAA further
provides that both types of CSC “shall not duplicate
any funding provided under” the Secretarial amount in
subsection (a)(1). 25 U.S.C. § 5325(a)(3)(A)(ii).
When
the IHS provides direct services to beneficiaries, the Indian
Health Care Improvement Act (IHCIA) authorizes it to bill and
collect reimbursements from Medicare, Medicaid, the
Children's Health Insurance Program, and private insurers
(third parties) for services it provided to eligible
individuals. Compl. ¶ 18. These collections, called
program income or third-party revenue, [2] are placed in a
“special fund” that is passed through “100
percent” to the IHS service unit entitled to the
reimbursement. 25 U.S.C. § 1641(c)(1)(A). Alternatively,
tribes may opt to bill and receive payments from third
parties directly. Id. § 1641(d)(1). The IHS and
the tribes both must use any third-party revenue they collect
to make improvements in facilities necessary to comply with
the Social Security Act, to provide additional health care
services, or for another health care-related purpose
consistent with the IHCIA and the ISDEAA. Id.
§§ 1641(c)(1)(B), (d)(2)(A). Additionally, Title V
of the ISDEAA addresses third-party revenue in the following
provision:
All Medicare, Medicaid, or other program income earned by an
Indian tribe shall be treated as supplemental funding to that
negotiated in the funding agreement. The Indian tribe may
retain all such income and expend such funds in the current
year or in future years except to the extent that the Indian
Health Care Improvement Act (25 U.S.C. 1601 et seq.) provides
otherwise for Medicare and Medicaid receipts. Such funds
shall not result in any offset or reduction in the amount of
funds the Indian tribe is authorized to receive under its
funding agreement in the year the program income is received
or for any subsequent fiscal year.
25 U.S.C. § 5388(j).
The
question in this case is whether, when a tribe collects its
own third-party revenue pursuant to 25 U.S.C. §
1641(d)(1), its expenditures of those funds on health care
services are eligible for CSC funding from the IHS under the
ISDEAA, Id. §§ 5325, 5388.
B.
Factual Background
The
Swinomish Indian Tribal Community is a federally recognized
Indian tribe whose reservation is in Skagit County,
Washington. Compl. ¶ 10.[3] In 1997, the it entered into a
Compact of Self Governance Between the Swinomish Indian
Tribal Community and the United States of America (Compact),
Pl.'s Mot. Ex. A, Dkt. 21-3, under Title V of the ISDEAA.
Since then, the Tribe has been carrying out “a range of
health care programs, functions, services, and activities at
its medical and dental clinics on the Swinomish
Reservation.” Compl. ¶ 10. Like ISDEAA Title V,
the Tribe's Compact addresses third-party revenue with
the following provision:
All Medicare, Medicaid and other program income earned by the
Tribe shall be treated as additional supplemental funding to
that negotiated in the [funding agreement]. The Tribe may
retain all such income and expend such funds in the current
year or in future years except to the extent that the Indian
Health Care Improvement Act (25 U.S.C. 1601 et seq.) provides
otherwise for Medicare and Medicaid receipts. Such funds
shall not result in any offset or reduction in the amount of
funds the Tribe is authorized to receive under its [funding
agreement] in the year the program income is received or for
any subsequent fiscal year.
Compact, Art. III, § 5.
On
November 2, 2009, the parties entered into a Funding
Agreement for Calendar Year (CY) 2010-2014 (Funding
Agreement), Pl.'s Mot. Ex. B, Dkt. 21-4. In accordance
with Title V, the Funding Agreement included both the
Secretarial amount for direct program costs and CSC funding
for direct and indirect administrative costs. See
Id. § 4. For CY 2010, the Tribe's
negotiated indirect cost rate was 31.91%. Compl. ¶ 24;
see also Indirect Cost Negotiation Agreement, Pl.'s Mot.
Ex. C at 4, Dkt. 21-5. Thus, under the Agreement, the amount
of indirect CSC funds that the Tribe received was calculated
by multiplying the indirect cost rate by the direct cost
base. See Funding Agreement § 6. The CY 2010 award
totaled over $3, 000, 000, including $755, 965 for indirect
CSC and $153, 374 for direct CSC. Defs.' Am. Answer
¶ 27, Dkt. 26-1.[4]
In CY
2010, the Tribe collected $636, 421 in “program
income” from third parties including Medicare,
Medicaid, and private insurers and $27, 730 in “other
income” for a total of $664, 151. Id. ¶
23 (citing CY 2010 Audit at 14). Of that amount, the Tribe
states that $553, 888 was earned from clinic revenues, $79,
991 from contract reimbursement from the Upper Skagit Tribe,
$2, 542 from the Tribe's book sales, and $27, 730 from
interest. Pl.'s Opp'n at 21-22, Dkt. 29. That year,
the Tribe spent this revenue and the lump-sum direct program
appropriation provided by the IHS under its Funding Agreement
on “social and health services” and
“capital outlay.” Defs.' Am. Answer ¶ 23
(citing CY 2010 Audit at 14). The IHS did not pay an
additional amount of CSC for the expenditures of third-party
revenue. Compl. ¶ 23. Instead, these ...