California Rural Indian Health Board, Inc., and the Blue Lake Rancheria, CR No. 273 (1993)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: California Rural Indian Health Board, Inc., and the Blue Lake Rancheria, Appellants,
- v. -
Indian Health Service, Appellee.
DATE: June 23, 1993 Docket No. C-93-013Decision No. CR273

RECOMMENDED DECISION

By letters dated August 20, 1992 and September 17, 1992, the California Area Office of Appellee, Indian
Health Service (IHS), declined a proposal for a contract submitted by Appellants, the Blue Lake Rancheria
(Blue Lake) and California Rural Indian Health Board, Inc. (CRIHB), to provide health care services to
members of Blue Lake. Blue Lake and CRIHB requested a hearing, and the case was assigned to me for a
hearing and a recommended decision. I conducted a hearing in Sacramento, California, on February 17
and 18, 1993. 1/ The parties submitted posthearing briefs and reply briefs.

I have carefully considered the evidence of record, the parties' arguments, and the applicable law. I
conclude that the contract declination was lawful. Therefore, I recommend that the declination be
sustained.


ISSUE

The issue in this case is whether IHS lawfully declined Blue Lake and CRIHB's contract proposal.


FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. Blue Lake is a federally-recognized Indian tribe. Tr. at 290. 2/

2. Blue Lake has 34 members. Tr. at 235.

3. CRIHB is a tribal organization whose mission is to assist California Indian tribes in obtaining health
care. Tr. at 556 - 57.

4. Trinity Rural Indian Health Project, Inc. (TRIHP), operates a federally-funded medical and dental clinic
that provides health care to Indians. Stipulation at paragraphs 3 - 6, 7, 10; see Tribe Ex. 3.

5. The TRIHP clinic is located in Weaverville, California. Tribe Ex. 3, p. 1.

6. Weaverville, California, is approximately 90 miles from Blue Lake. Tr. at 207.

7. On June 19, 1992, Blue Lake and CRIHB submitted a proposal to IHS to contract for the provision of
health services to the members of Blue Lake. IHS Ex. 1.

8. Under the proposal, health services would be provided by TRIHP (designated in the proposal as "Trinity
Rural Indian Health Services, Weaverville, California," or "TRIHS"). IHS Ex. 1, p. 5.

9. As of June 19, 1992, IHS and CRIHB had a contract to administer a comprehensive health care program
for eligible Indians, which included members of Blue Lake. IHS Ex. 2, p. 1.

10. Pursuant to the contract in effect on June 19, 1992, CRIHB provided comprehensive health care
services to the members of Blue Lake through a subcontract with United Indian Health Service Inc.
(UIHS). IHS Ex. 2, p. 1.

11. The clinics operated by UIHS are located approximately 15 - 20 miles from Blue Lake. IHS Ex. 2, p.
1; Tr. at 207.

12. Both TRIHP and UIHS have been approved by IHS to provide health services to Indians. See
Findings 4, 10.

13. The health services which UIHS provides at its clinics include physicians' services provided by three
board-certified family practitioners. Tr. at 453; see IHS Ex. 10, p. 1.

14. The health services which UIHS provides at its clinics include a full-time dental clinic which offers a
full service dental program, including basic care, orthodontia, oral surgery, and endodontics. IHS Ex. 10,
p.2; Tr. at 454 - 455.

15. The health services which UIHS provides at its clinics include mental health services staffed by five
providers of care. Tr. at 455; see IHS Ex. 10, p. 2.

16. UIHS operates a separate substance abuse program, United Indian Lodge, for the treatment of alcohol
and other substance abuse. IHS Ex. 10, p.3; Tr. at 455.

17. UIHS' staff includes two public health nurses who, among other things, operate a diabetes program.
Tr. at 456.

18. UIHS operates specialty clinics, including an allergy clinic and a podiatry clinic. Tr. at 456 - 457.

19. UIHS provides vision services at its clinics, which include the services of an ophthalmologist, two
optometrists, and an optician. IHS Ex. 10, p. 2.

20. The TRIHP clinic's primary full-time health care provider is a physician's assistant. Tr. at 503; IHS
Ex. 2, p. 1.

21. In California, a physician's assistant is a health care provider who is licensed to provide health care
under the supervision of a physician. Tr. at 504.

22. Patients who visit the TRIHP clinic, and who, in the judgment of the staff physician assistant, need to
see a physician are referred to physicians who practice in the vicinity of the TRIHP clinic. Tr. at 518 - 519.

23. TRIHP facilitates visits to specialists for its patients by assisting patients with their transportation to
the specialists' offices. Tr. at 520.

24. TRIHP does not provide its patients with an alcohol abuse treatment program. Tr. at 522.

25. TRIHP sometimes refers its patients who are in need of alcohol abuse treatment to UIHS. Tr. at 522.

26. Although the health care services provided by TRIHP meet IHS' criteria for contracting entities who
provide health care, they are less comprehensive than are those that are provided by UIHS. Tr. at 512;
Findings 13 - 25; see Finding 12.

27. Blue Lake and CRIHB submitted their contract proposal to IHS pursuant to the Indian Self-
Determination Act (Act). 25 U.S.C. 450 et seq.

28. Under the Act, the Secretary of the Department of Health and Human Services (Secretary) is directed
to enter into contracts ("self-determination contracts") with Indian tribes, pursuant to tribal resolutions, to
provide health care services to eligible Indians. 25 U.S.C. 450f(a)(1).

29. Under the Act, the Secretary must approve a self-determination contract with an Indian tribe to provide
health care unless she finds specifically that:

a. the service to be rendered to the Indian beneficiaries of the particular program or function to be
contracted will not be satisfactory;

b. adequate protection of trust resources is not assured; or

c. the proposed project or function to be contracted for cannot be properly completed or maintained by
the proposed contract.

25 U.S.C. 450f(a)(2).

30. By letters dated August 20, 1992 and September 17, 1992, IHS declined the contract proposal of Blue
Lake and CRIHB. IHS Ex. 2 - 3.

31. IHS advised Blue Lake and CRIHB that it was declining the proposal because the distance of travel for
Blue Lake members to the TRIHP clinic, as compared to the distance of travel for Blue Lake members to
the UIHS clinics, the difficult accessibility of the TRIHP clinic, and the less comprehensive health care
services provided by the TRIHP clinic as opposed to those provided by the UIHS clinics, would cause the
services provided by TRIHP to be unsatisfactory to Blue Lake members. IHS Ex. 2, p. 1 - 2; IHS Ex. 3, p.
2 - 3.

32. In any case where the Secretary declines to enter into a self-determination contract, the Secretary must
provide the tribal organization which proposed to enter into the contract with:

a. a written statement, setting forth her objections to the proposed self-determination contract;

b. assistance to overcome the objections to the proposed self-determination contract; and

c. a hearing on the record, and an opportunity to appeal the Secretary's objections to the proposed self-
determination contract, under such rules and regulations as the Secretary may promulgate.

25 U.S.C. 450f(b).

33. In this case, IHS (as the Secretary's delegate) has the burden of proving, by a preponderance of the
evidence, that the decision to decline the Blue Lake and CRIHB contract proposal satisfies one of the
statutory grounds for declining a self-determination contract proposal. 5 U.S.C. 554(a), 556; see 25
U.S.C. 450f(a)(2), (b); 42 C.F.R. 36.208(a)(3).

34. As used in the Act, the term "the service to be rendered to the Indian beneficiaries of the particular
program or function to be contracted will not be satisfactory" means that the services which are proposed
to be contracted for cannot be provided in a practicable manner consistent with the objectives of the
proposed self-determination contract, or with the Secretary's obligation to provide health care to eligible
Indians. 25 U.S.C. 450f(a)(2).

35. The services which Blue Lake and CRIHB proposed to contract for included providing, via a
subcontract with TRIHP, direct patient care for the treatment and prevention of acute and chronic illness
and/or injuries. IHS Ex. 1, p. 12.

36. The services which Blue Lake and CRIHB proposed to contract for included providing, via a
subcontract with TRIHP, preventive care and care for acute and chronic conditions. The elements of the
proposal included providing services for prenatal care, child and adult immunizations, health promotion,
disease prevention, and supervision of chronic diseases such as diabetes, hypertension, and arthritis. IHS
Ex. 1, p. 12.

37. Frequent monitoring of a patient's condition by trained medical personnel may be an important
element of the treatment of chronic illnesses such as diabetes and hypertension, and in the early detection
and treatment of diseases such as cancer. Tr. at 360 - 369; see IHS Ex. 28.

38. Patients who live substantial distances from their health care providers are less likely to seek routine or
regular treatment from those providers than are patients who live close to their providers, due to the
inconvenience created by the need for lengthy travel to obtain health care. Tr. at 340 - 342.

39. In this case, the substantial distance (approximately 90 miles) that Blue Lake members would have to
travel in order to obtain care at the TRIHP clinic could serve as a barrier to their seeking routine or regular
treatment for chronic illnesses such as diabetes and hypertension, and early detection and treatment of
diseases such as cancer. Tr. at 375 - 376, Findings 37, 38.

40. Patients who must seek care from more than one provider in different locations in order to receive
treatment for medical conditions are less likely to seek routine or regular treatment for their conditions, and
to comply with prescribed treatment, than are patients who obtain care from one provider at a single
location. Tr. at 348.

41. In this case, TRIHP's practice of referring patients to specialists at locations other than the TRIHP
clinic could serve as a barrier to Blue Lake members seeking care for their medical conditions and
complying with prescribed treatment. Tr. at 376 - 377, 401 - 402; Finding 40.

42. Other clinics (UIHS) located in closer proximity to Blue Lake than TRIHP provide more
comprehensive health care than does TRIHP. Findings 5, 6, 11, 26.

43. It would not be practicable or consistent with the Secretary's obligation to provide health care to
eligible Indians to provide health care to Blue Lake members at the TRIHP clinic, given the barriers to
treatment which would result from having TRIHP as the subcontractor, and given further that UIHS can
provide care without such barriers. Tr. at 401 - 402; Findings 37 - 42.

44. IHS proved by a preponderance of the evidence that the services to be provided pursuant to the Blue
Lake and CRIHB contract proposal would not be satisfactory. Findings 34 - 43.

45. The deficiencies in the Blue Lake and CRIHB contract proposal which were identified by IHS could
not be rectified with technical assistance.

46. IHS did not contravene its duty to provide Blue Lake and CRIHB with technical assistance to rectify
the deficiencies in the Blue Lake and CRIHB contract proposal. See Finding 32.

47. IHS lawfully declined the Blue Lake and CRIHB contract proposal.

ANALYSIS

The parties do not dispute the central facts of this case. Blue Lake is a federally-recognized Indian tribe of
34 members. CRIHB is a tribal organization which assists California Indians in obtaining health care. On
June 19, 1992, Blue Lake and CRIHB applied to IHS for a contract to provide health care to Blue Lake
members. The elements of the proposal included treatment for both acute and chronic medical conditions.
They included preventive and ongoing treatment for conditions such as diabetes, hypertension, and
arthritis. Blue Lake and CRIHB proposed that the health services to be delivered under the contract would
be provided by a subcontract with TRIHP, which operates a clinic in Weaverville, California,
approximately 90 miles from Blue Lake. TRIHP had previously subcontracted under IHS contracts to
provide health services for California Indians, although not for Blue Lake's members. There is no
allegation that TRIHP has been deficient in providing such services.

Prior to June 19, 1992, Blue Lake's members were provided health care through an IHS contract with
CRIHB and a subcontract with UIHS, which operates clinics about 15 - 20 miles from Blue Lake. UIHS
offers a broader and more comprehensive range of health services than does TRIHP. UIHS offers
comprehensive medical care at its clinics, including the services of three board-certified family
practitioners. It also operates a full-time dental clinic which provides basic and specialized dental care
including oral surgery, an ophthalmology program, a mental health program, and a substance abuse
treatment facility. By contrast, TRIHP is staffed principally by a physician's assistant who is licensed in
California to provide medical care under the supervision of a physician. TRIHP refers its patients to
physicians, including specialists, when the physician's assistant determines that a higher level of care is
required than that which he can provide.

IHS declined the June 19, 1992 Blue Lake and CRIHB contract proposal. It concluded that the services
proposed to be rendered to Blue Lake members would not be satisfactory. IHS based its determination on
the finding that the distance between Blue Lake and the TRIHP clinic would discourage Blue Lake
members from seeking treatment there. IHS found also that the relatively fragmented care provided to
patients by TRIHP -- consisting of referral of patients to outside medical practitioners when such care is
indicated -- might create an additional barrier to Blue Lake members obtaining treatment at TRIHP. In
declining the proposal, IHS contrasted these findings with its conclusion that UIHS offered Blue Lake
members treatment without the barriers to treatment which it found would exist if TRIHP were the
subcontracting entity.

Blue Lake and CRIHB made their contract proposal pursuant to the Act, 25 U.S.C. 450 et seq. Section
450f of the Act directs the Secretary to enter into a contract, upon the request of an Indian tribe or tribal
organization, to conduct and administer programs, including programs designed to provide health care to
eligible Indians. 3/ The Secretary may decline to enter into a proposed contract only upon grounds
enumerated in the Act. 25 U.S.C. 450f(a)(2). Among those enumerated grounds, and the statutory basis
for declination relied upon by IHS which is at issue in this case, is that provided by section 450f(a)(2)(A)
of the Act:

[T]he service to be rendered to the Indian beneficiaries of the particular program or function to be
contracted will not be satisfactory; . . . .

The issue in this case, therefore, is whether IHS' declination of the Blue Lake and CRIHB contract proposal
comports with the statutory basis for declination relied on by IHS.

1. IHS has the burden of proving by a preponderance of the evidence that the declination was
lawful.

The Act requires, at 25 U.S.C. 450f(b)(3), that in the case of a contract proposal declination, the Secretary
must offer the affected tribal organization a hearing on the record at which the tribal organization may
appeal the grounds for declination. The Act is silent as to the parties' respective burdens of proof in such a
hearing. I conclude that IHS has the burden of proving that its contract declination is justified and that it
satisfies its burden of proof by showing that its declination is supported by a preponderance of the
evidence.

The parties agree that IHS bears the burden of proof in a contract declination hearing. IHS' regulations
repose the burden of proof on IHS in declination cases. 42 C.F.R. 36.208(a)(3). IHS asserts that its
burden in a declination case is to prove by a preponderance of the evidence that the declination comports
with a statutory criterion for declination. Blue Lake and CRIHB argue that IHS' burden is greater than a
preponderance of the evidence. They assert that IHS' burden in a declination case is to prove by clear and
convincing evidence that the declination is justified. Appellants' Posthearing Reply Brief at 14.

This case involves a hearing on the record, which is governed by section 5 of the Administrative Procedure
Act (APA). It states that:

This section applies . . . in every case of adjudication required by statute to be determined on the record
after opportunity for an agency hearing . . . .

5 U.S.C. 554(a); see 25 U.S.C. 450f(b)(3).

The standard of proof in APA-governed proceedings is preponderance of the evidence, absent a
congressional declaration to the contrary. Steadman v. SEC, 101 S. Ct. 999, 1005 (1981). Thus, where a
statute does not enunciate a standard of proof, as is the case here, and where hearings held pursuant to that
statute are APA-governed hearings, the party which is the proponent of a rule or order (here, IHS) must
prove its case by a preponderance of the evidence.

Blue Lake and CRIHB, citing the Act's legislative history, asserts that the Act enunciates a higher standard
of proof than preponderance of the evidence. The history cited by Blue Lake and CRIHB consists of
language in the report of the Senate Indian Affairs Committee, which was issued in conjunction with 1988
amendments to the Act. The committee stated that, in declination proceedings:

The burden of proof for declination is on the Secretary to clearly demonstrate that a tribe is unable to
operate the proposed program or function.

S. Rep. No. 274, 100th Cong., 1st Sess. 24, reprinted in 1987 U.S.C.C.A.N. 2620, 2643.

I do not find the Act, when read with the APA, to be ambiguous as to the parties' respective burdens of
proof. Therefore, it is unnecessary to consult the Act's legislative history in order to decide how it is to be
applied. Johnson v. Carter, 983 F.2d 1316 (4th Cir. 1993). Furthermore, I do not agree with Blue Lake
and CRIHB's suggestion that this excerpt from the Act's legislative history signals congressional intent to
impose on IHS in declination proceedings a higher standard of proof than the APA standard of
preponderance of the evidence.

The excerpt from the Act's legislative history relied on by Blue Lake and CRIHB does not state or imply
that the standard of proof in hearings held pursuant to the Act is higher than preponderance of the
evidence. A requirement that a fact be demonstrated clearly is not at all inconsistent with the requirement
that a fact be proven by a preponderance of the evidence.

Furthermore, the legislative history makes it clear that Congress intended that proceedings conducted
pursuant to the Act be conducted under standards embodied in the APA, including the APA standard of
proof. The Senate Indian Affairs Committee report states, on the same page as that which is relied on by
Blue Lake and CRIHB:

The intent of the Indian Self-Determination Act is to assure that a tribal organization receives a hearing
`on the record' in accordance with the requirements of the Administrative Procedures Act.

S. Rep. No. 274, 100th Cong., 1st Sess. 24, reprinted in 1987 U.S.C.C.A.N. 2620, 2643.

Blue Lake and CRIHB suggest also that a higher standard of proof than preponderance of the evidence is
implicit in the Act itself, which articulates a congressional policy favoring contracts with tribes. According
to Blue Lake and CRIHB, the Act creates a strong presumption in favor of self-determination proposals.
Therefore, declinations of such proposals ought to be justified by a higher level of proof than
preponderance of the evidence.
At the center of Blue Lake and CRIHB's argument is their contention that Congress intended that the
Secretary pay great deference to Indian tribes' decisions in selecting health care providers with whom to
contract. Therefore, according to Blue Lake and CRIHB, the Act should be read in a way which makes it
very difficult for the Secretary to justify declining a contract proposal. Blue Lake and CRIHB argue that:

[I]n this case [Appellants] have the right to make their own health care decisions and choose where to
receive their health care, . . . and that IHS acts in a `colonialistic' way by telling Indians what they are
supposed to do, rather than working in partnership.

Appellants' Posthearing Brief at 18 (citations to the record omitted).

I agree with CRIHB and Blue Lake that the Act directs the Secretary to contract with tribes in all but
enumerated circumstances. However, the preferences stated in the Act do not rise to an entitlement in the
face of circumstances where facts justifying declination exist. Rather than creating an absolute right of
tribes to contract, the Act balances a congressional policy in favor of self-determination contracts against
the Secretary's continuing duty to provide health care to Indians and to assure that their welfare is
protected. A preponderance of the evidence standard of proof in declination cases is consistent with a
policy favoring self-determination contracts which requires the Secretary to justify declinations of contract
proposals.

The Act does not require the Secretary to enter into contracts which are not in the best interest of Indians.
What the Act does require is that contracts be approved unless they fall within the statutory grounds for
declination. In other words, Congress has defined those circumstances in which contracts may not be in
the best interest of Indians and has instructed the Secretary to approve proposals unless they fall within the
defined circumstances. However, Congress has not expressed a policy that it should be difficult for the
Secretary to justify declining to enter into contracts where facts exist which show that proposals fall within
one of the statutory grounds for contract declination.

2. The reasons which IHS stated for declining the Blue Lake and CRIHB contract proposal are
consistent with the Act and with implementing regulations.

a. The Act

Blue Lake and CRIHB observe that the statutory term "[T]he service to be rendered to the Indian
beneficiaries of the particular program or function to be contracted will not be satisfactory" was not defined
by Congress. Therefore, according to Blue Lake and CRIHB, the Secretary is obliged to adopt regulations
defining the term before it can be relied on as justification for declining a contract proposal. Blue Lake and
CRIHB argue further that the Secretary has not defined the term, either in regulations or in published
policy statements. It follows, they assert, that IHS could not decline the June 19, 1992 contract proposal
based on the language of the Act. Blue Lake and CRIHB recognize that there is a correlation between
distance and utilization of health care. They recognize also the "obvious medical importance" of
comprehensive care. Appellants' Posthearing Reply Brief at 17. Nevertheless, they argue that IHS could
not rely on these specific reasons to find the proposal to be unsatisfactory, because these factors are not
established as a basis for declination in the Act, in regulations, or in policy statements.

IHS responds to this argument by asserting that Congress intended contract declination disputes to be
resolved on a case-by-case basis, through administrative hearings. Therefore, according to IHS, the
hearing process substitutes for regulations and formal policy declarations.

Formal rulemaking is not a prerequisite to action by an administrative agency, so long as that agency
proceeds in accordance with ascertainable standards and explains its reasoning for applying those
standards. Patchogue Nursing Center v. Bowen, 797 F.2d 1137, 1143 (2d Cir. 1986); Holmes v. New York
City Housing Authority, 398 F.2d 262, 265 (2d Cir. 1968). Agency action in conformity with ascertainable
standards does not constitute unlawful uncontrolled exercise of discretion by that agency. Id. 4/

I do not agree with Blue Lake and CRIHB's contention that IHS cannot apply the statutory standard for
declination to this case, absent regulations or policies which refine the meaning of the Act. The Act
contains ascertainable standards by which contract proposals can be evaluated. The objective and neutral
criterion for declination contained in 25 U.S.C. 450f(a)(2)(A) does not require further definition by the
Secretary in the form of regulations or policies, because it is in and of itself an ascertainable standard for
declination which permits declination determinations to be made and appealed.

Congress did not define what it meant when it permitted the Secretary to decline a contract proposal on the
ground that "[T]he service to be rendered to the Indian beneficiaries of the particular program or function
to be contracted will not be satisfactory." 25 U.S.C. 450f(a)(2)(A). However, the meaning of this part of
the Act is apparent, both from the language itself, and from its context within the Act. This section directs
IHS to decline a contract proposal where IHS can demonstrate that the services which are proposed to be
contracted for cannot be provided in a practicable manner consistent with the objectives of the proposed
self-determination contract, or with the Secretary's obligation to provide health care to eligible Indians.

A purpose of the Act is to enable Indian tribes and tribal organizations to provide to their members services
which Congress had previously instructed the Secretary to provide to Indians. The Act requires the
Secretary to execute contracts for such services where tribal organizations make proposals that serve to
carry out functions and activities previously vested in the Secretary. Those functions and activities have
always imposed a duty on the Secretary to dispense resources in a practicable manner, consistent with the
best interests of the Indian beneficiaries of those resources. In contracting for services, Indian tribes and
tribal organizations must be held to the same standards of accountability for resources that the Secretary
would be held to had she dispensed those resources directly. The Act does not give tribes carte blanche to
contract for services where they cannot provide those services in a practicable manner, or where those
services will not be provided in a way which is consistent with those duties and obligations vested
previously in the Secretary. In deciding whether to accept or decline a contract proposal, the Secretary (or
her delegate, IHS) must balance the statutory right of Indian tribes to contract for services against her
continuing duty to protect Indians' welfare by assuring that those services are provided practicably and
effectively.

The declination standard embodied in 25 U.S.C. 450f(a)(2)(A) is an objective and neutral standard. See
Environmental Defense Fund v. Ruckelshaus, 439 F.2d 584, 597 - 98 (D.C. Cir. 1971). It imposes on the
Secretary the duty to evaluate contract proposals by deciding whether the proposals will accomplish
practicably the objectives of the proposed contracts in a manner consistent with the Secretary's obligation
to provide health care to Indians. That is not uncontrolled discretion to decline contract proposals. The
section cannot be read to permit IHS to second-guess tribal organizations in order to decide whether their
members would be "satisfied" by the services proposed to be contracted for. Nor can this section be read to
permit IHS officials to decide subjectively whether they personally like or dislike the services which are
proposed to be contracted for. Either interpretation would give IHS uncontrolled discretion to decline
contract proposals.

The reasons that IHS articulated for declining Blue Lake and CRIHB's June 19, 1992 proposal are
consistent with the declination criteria contained in 25 U.S.C. 450f(a)(2)(A) and with the requirement that
IHS explain why the proposal did not conform to the standards contained in the Act. IHS concluded that
the services proposed to be contracted for would not be satisfactory because of problems related to the
distance Blue Lake members would have to travel to TRIHP to receive health care, the accessibility of the
TRIHP clinic to Blue Lake members, and the relatively less comprehensive services offered by TRIHP,
when compared with those offered by UIHS. IHS Ex. 2, p. 1 - 2; IHS Ex. 3, p. 2 - 3. These reasons relate
directly to the practicability of the Blue Lake and CRIHB contract proposal. IHS explained adequately its
reasons for applying the standards contained in the Act in declining the Blue Lake and CRIHB contract
proposal. Patchogue Nursing Center, 797 F. 2d at 1143. The reasons given by IHS for declining the
proposal explain why IHS concluded that the services which were within the proposal's scope -- including
treatment for acute and chronic conditions, and preventive care -- could not be provided in a practicable
manner pursuant to the proposal.


b. Regulations

Blue Lake and CRIHB argue that the contract declination failed to comply with regulations governing IHS
contract declinations and is therefore defective. They contend that the regulations spell out limited grounds
for declining contracts. According to Blue Lake and CRIHB, accessibility of services and lack of
comprehensiveness of services are not among the bases for declination identified by the regulations and
cannot be relied on by IHS, even if they conform to a statutory ground for declination. Blue Lake and
CRIHB base their argument on their interpretation of 42 C.F.R. 36.208, which establishes criteria for IHS
evaluations of contract proposals. They contend that the regulation specifically states the grounds IHS may
use to justify a declination and precludes IHS from relying on any grounds not specifically stated.

Subpart (a)(1) of this regulation provides that IHS will evaluate a contract proposal to determine if the
services proposed to be rendered will be satisfactory. This language essentially tracks the language of 25
U.S.C. 450f(a)(2)(A). Subpart (b) of the regulation lists the factors which IHS will consider in
determining whether a proposal is deficient under subpart (a). These factors are: (1) equipment, buildings
and facilities; (2) bookkeeping and accounting procedures; (3) substantive knowledge of the program to be
contracted; (4) community support; (5) adequacy of trained personnel; and (6) other necessary components
of contract performance.

Factor (6) is the factor cited by IHS as the supporting factor under the regulation for its determination to
decline the Blue Lake and CRIHB proposal, and none of the other factors are at issue here. Blue Lake and
CRIHB observe that this factor itself contains four subdivisions. These are:

(i) The contractor's proposal must demonstrate the capacity to meet minimum health program and
professional standards established by IHS . . .

(ii) The contractor's proposal will be evaluated to determine the contractor's ability to meet the Uniform
Administrative Standards . . .

(iii) The ability of the contractor to carry out the contract in accordance with IHS policy, the applicable
regulations of this part, and the Act.

(iv) No other components shall be prescribed as a basis for declination unless such components are
added to the regulations in this subpart by revision or amendment of regulations.

Blue Lake and CRIHB assert that accessibility and lack of comprehensiveness of services are not recited as
permissible grounds to decline a contract anywhere in subdivisions (i) through (iii). They assert
furthermore, that subdivision (iv) precludes using any finding as a basis for declination unless that finding
is stated specifically in the regulations. Therefore, according to Blue Lake and CRIHB, the grounds relied
on by IHS for declining the contract proposal are invalid whatever their merits, and cannot be relied on by
IHS.

Blue Lake and CRIHB read 42 C.F.R. 36.208 too narrowly. The regulation is broadly worded to permit
IHS to decline a contract proposal for any reason which complies with standards ascertainable in the Act.
It provides expressly that IHS may decline a contract proposal based on the conclusion that the contractor
is unable to comply with the requirements of the Act. 42 C.F.R. 36.208(b)(6)(iii). When that subsection
is read with 42 C.F.R. 36.208(a)(1), it is plain that the regulations contemplate denials of proposals based
on IHS' conclusion that the proposals would not provide services which will be satisfactory, in accordance
with 25 U.S.C. 450f(a)(2)(A).

It is true that the regulation does not spell out all of the reasons which IHS might adduce for finding a
proposal to be deficient under the Act. The regulation does not recite as grounds for declination of contract
proposals problems created by accessibility of health clinics or the comprehensiveness of their services.
But that is not a bar to IHS citing reasons for declining a proposal which conform to the standards
contained in the Act. As I find above, the Act itself contains ascertainable standards by which contracts
may be evaluated, and there is no statutory requirement that the Secretary spell out in regulations the
grounds for declination with any greater specificity than is provided by the neutral principles for
declination stated in the Act. The regulation refers parties to the standards contained in the Act and advises
them that their ability to comply with those standards will be evaluated in determining whether to approve
or decline contract proposals.

The recitation in 42 C.F.R. 36.208(b)(6)(iv) that no other components shall be prescribed as a basis for
declination unless such components are added to the regulation does not preclude IHS from using the
rationale it relied on as a basis for declining Blue Lake and CRIHB's contract proposal. As I hold above,
the regulation subsumes as declination standards the criteria contained in the Act itself. Inasmuch as the
rationale relied on by IHS for declining the proposal comports with the criteria contained in the Act, it does
not constitute an "other component" outside of the present regulation.

Blue Lake and CRIHB argue also that the regulation, to the extent it enunciates a basis for declining their
proposal, may be ultra vires the Act. They observe that the contract review factors set forth in 42 C.F.R.
36.208(b)(6) are essentially identical to language originally in the Act, at 25 U.S.C. 450f, which was
deleted by Congress in 1988. They contend that this deletion mandated the Secretary and IHS to cease
using the factors in 42 C.F.R. 36.208(b)(6) as criteria for reviewing contract proposals.

It is unnecessary for me to decide Congress' intent in enacting the 1988 revisions to the Act. The provision
of the regulation which is at issue here, 42 C.F.R. 36.208(b)(6)(iii), refers parties to the criteria for
declination that are contained in the Act. Thus, it merely restates IHS' duty to evaluate proposals pursuant
to whatever declination criteria are contained in the Act as of the time the proposals are submitted to IHS.
Even if this section were null and void as Blue Lake and CRIHB contend, IHS' statutory duty to evaluate
proposals pursuant to the Act would be unaffected. Moreover, Congress did not delete from the Act the
subsection which directs the Secretary to decline contract proposals which are intended to provide services
which will not be satisfactory. 5/

3. The reasons which IHS stated for declining the Blue Lake and CRIHB contract proposal are
supported by the preponderance of the evidence.

IHS proved by a preponderance of the evidence that the distance between Blue Lake and TRIHP's clinic,
coupled with the relatively fragmented treatment offered by TRIHP, serve to create barriers to Blue Lake
members seeking treatment from TRIHP. These barriers to treatment are such as to make impracticable the
rendering of services contemplated by the proposal and would be inconsistent with the Secretary's duty to
assure that health care is provided to eligible Indians. IHS proved further that the impracticability of the
Blue Lake and CRIHB proposal is particularly evident when the services offered by TRIHP to Blue Lake
members are compared with the services offered by UIHS. The latter enterprise offers more
comprehensive services than those offered by TRIHP and at a much closer distance to Blue Lake's
members than the TRIHP clinic.

IHS offered the persuasive and essentially unrebutted testimony of a medical expert, John S. Yao, M.D., to
support its rationale for declining the proposal. Dr. Yao is a board-certified internist who currently serves
as the chief medical officer of IHS' California Area Office. Tr. at 336 - 38. Dr. Yao testified that, in this
case, the distance between Blue Lake and TRIHP, approximately 90 miles, creates a barrier to treatment.
This barrier is more evident in light of the fact that the distance between the Blue Lake and UIHS clinics is
only 15 - 20 miles. Dr. Yao testified that it is a well-established tenet of public health that the distance that
patients have to travel to receive medical care affects the frequency with which they utilize that care. 6/
The barriers to treatment caused by distances between patients and their providers may discourage patients
from seeking routine care for chronic conditions, or from seeking preventive care. The dangers associated
with failure to seek care may include exacerbation of relatively asymptomatic conditions, such as diabetes
and hypertension, or the untreated progression of conditions such as cancer, which are treatable in their
early stages but which become less treatable and more dangerous to the lives of patients as they progress.

Also, Dr. Yao testified persuasively that patients tend to be discouraged from seeking care when their
treatment for a particular condition is fragmented -- that is, apportioned among a number of providers -- as
opposed to being provided by a single provider who is qualified to treat all aspects of the patients' medical
conditions. Dr. Yao contrasted TRIHP's practice of assigning patients to physicians in the vicinity of
TRIHP, for aspects of their care which cannot be provided by TRIHP directly, with the centralized, and, in
his opinion, more comprehensive services that are provided by UIHS. In Dr. Yao's opinion, the relatively
fragmented care offered by TRIHP could pose barriers to Blue Lake members seeking treatment from
TRIHP, especially when compared with the more centralized and, hence, more comprehensive care offered
by UIHS. He summarized his concerns as follows:

My concern is very clear. There's two very compelling reasons why this is unsatisfactory in my opinion
because of the unsatisfactory medical services that will be rendered to Blue Lake Rancheria members,
relating to the access of care as a barrier . . . .

Like it or not, I think we have -- at least in my mind it's pretty clear that all things being equal, that is a
barrier . . . .

Then the second thing is the comprehensive nature of the services . . .

Tr. at 402.

Dr. Yao concluded that having TRIHP as a subcontractor for Blue Lake members seemed to be particularly
inappropriate in light of the proximity of UIHS' clinics to Blue Lake and the relatively more
comprehensive services which UIHS offered, as compared with those offered by TRIHP.

I find Dr. Yao's testimony provides ample justification for IHS' declination of the Blue Lake and CRIHB
contract proposal. The preponderance of the evidence is that the Blue Lake and CRIHB contract proposal
would not provide services in a satisfactory matter, because the services sought to be provided would not
be provided in a practicable manner. Using TRIHP as a subcontractor would frustrate the proposal's stated
objectives of providing care for acute and chronic conditions, in addition to providing preventive care.
Furthermore, the proposal is inconsistent with the Secretary's obligation to assure that Indians receive
health care, because it creates barriers to the delivery of health care services and it is at cross purposes with
the stated objectives of the proposal.

Blue Lake and CRIHB respond to this evidence with several arguments. They point to evidence showing
that IHS currently funds other self-determination contracts in California which involve treatment facilities
that are located substantial distances from the Indians who are served by these contracts. They point out
that, in some instances, these contracts establish service areas in which Indians travel right past other IHS
clinics to go to the clinic designated by the contract to serve them. From this evidence, they make two
contentions. First, they argue that the evidence vitiates Dr. Yao's concern about the distance which Blue
Lake members would have to travel to receive services under the Blue Lake and CRIHB proposal. Second,
they contend that IHS should not be permitted to decline a proposal if, in fact, it has approved other
proposals which embody similar barriers to treatment to those identified by IHS as existing in the Blue
Lake and CRIHB proposal.

I am not persuaded that evidence showing that IHS funds other contracts involving long travel distances for
treatment by eligible Indians (including contracts involving travel past other clinics) rebuts the conclusion
that the Blue Lake and CRIHB proposal would not provide services in a satisfactory manner. The issue in
this case is whether the Blue Lake and CRIHB proposal creates unacceptable barriers to treatment, not
whether IHS has approved other contracts which create unacceptable barriers to treatment. Therefore,
what IHS may have done or not done in other cases says nothing about the problems which have been
established to be inherent in this proposal. In evaluating a proposal pursuant to the Act, IHS must evaluate
that proposal on its own merits. If it declines a proposal, it must do so on the merits of that proposal.

Furthermore, analysis of other contracts previously approved by IHS officials may prove, at most, that IHS
officials may not always exercise perfect judgment in reviewing and approving contract proposals. But
any judgment errors that IHS officials may make in reviewing contract proposals do not derogate from
these officials' responsibility to review contract proposals pursuant to relevant statutory criteria.
Otherwise, IHS would be held hostage to its errors and would be forced to approve contracts which repeat
those errors. That would be inimical to the exercise of duties which the Act reposes in the Secretary.

Blue Lake and CRIHB argue that IHS' declination at bottom reflects only a preference for UIHS over
TRIHP. They assert that both entities' clinics have been approved as providers by IHS. They note that
there is no contention in this case that TRIHP's services are inadequate. According to Blue Lake and
CRIHB, IHS' stated reasons for declining the proposal are merely a rationalization for IHS' preference of
UIHS. Therefore, according to Blue Lake and CRIHB, the declination amounts to unsubstantiated second-
guessing of Blue Lake in violation of the Act.

I would agree with this argument if the evidence showed only that UIHS provides more comprehensive
care than does TRIHP, or if the evidence showed only that TRIHP's clinic is further away from Blue Lake
than are the UIHS clinics. If the evidence were limited to that, then IHS' declination could be characterized
as a subjective preference for "better" care. But, in fact, the evidence shows more than that. As is
established by Dr. Yao's testimony, the problems associated with TRIHP's selection as a subcontractor
amount to objective barriers to treatment which jeopardize the attainment of the health care goals stated in
the Blue Lake and CRIHB proposal. In this case, IHS' "preference" for UIHS simply reflects the fact that
the treatment barriers which are associated with TRIHP, due to the locations of Blue Lake and TRIHP, do
not exist with respect to UIHS.

Blue Lake and CRIHB contend additionally that Dr. Yao's testimony is flawed, because it rests on
generalizations about how patients respond to barriers to treatment. Blue Lake and CRIHB assert that IHS
made no effort to assess the individual needs and predilections of each of the 34 members of Blue Lake.

I do not find that IHS had a duty to survey the Blue Lake members in order to determine whether Blue
Lake and CRIHB's proposal was satisfactory. Such an obligation is not reasonable and is not implicit in
the declination criteria of the Act. IHS contracts with numerous tribes and tribal organizations, many of
which have thousands of members. To require IHS to evaluate the needs of tribes' members on an
individualized basis before deciding whether to approve or decline contract proposals would be to saddle it
with an obligation with which it could never hope to comply. 7/

Blue Lake and CRIHB argue also that while TRIHP may refer its patients to outside physicians for
treatment, when necessary, the working relationships which TRIHP has established with physicians are
excellent and pose no meaningful problems for TRIHP's patients. It is undisputed that TRIHP has
established excellent relations with local physicians and that IHS has not identified problems with its
referrals. On the other hand, this does not derogate from Dr. Yao's opinion that fragmented treatment
might discourage patients from seeking care or from continuing to obtain care on a regular basis. The issue
is not whether TRIHP provides adequate care, which it plainly does, but whether TRIHP's practice of
referring patients to outside providers might, when coupled with the long travel distance from Blue Lake to
TRIHP, tend to discourage Blue Lake members from seeking care at TRIHP. On this point, I find Dr.
Yao's testimony concerning the barriers created by TRIHP's choice as a subcontractor to be persuasive.

The evidence in this case proves that, given the barriers to treatment which would result from having
TRIHP as the subcontractor, and given further that UIHS can provide care without such barriers, there is no
legitimate purpose for a contract in which TRIHP is the subcontractor. Thus, IHS' declination is not based
simply on the barriers resulting from the proposed relationship with TRIHP, but on the relative inadequacy
of TRIHP's services when compared with those offered by UIHS.

Finally, Blue Lake and CRIHB assert that any barriers to treatment which may be created by TRIHP's
choice as a subcontractor to replace UIHS are essentially irrelevant, because IHS will continue to pay for
the medical care of those Blue Lake members who might elect to patronize UIHS rather than TRIHP.
Appellants' Posthearing Brief at 47 - 8. Thus, according to Blue Lake and CRIHB, the choice of TRIHP as
subcontractor creates no meaningful barriers to treatment of Blue Lake members, because those Blue Lake
members who are daunted by the distance to the TRIHP clinic or by the relatively less comprehensive
services offered by TRIHP will opt to patronize UIHS or some other IHS-funded clinic.

This argument does not derogate from IHS' conclusion that the services proposed to be provided by TRIHP
will not be satisfactory. Indeed, Blue Lake and CRIHB's admission that some Blue Lake members will
continue to patronize UIHS supports the conclusion that there may be barriers to treatment of Blue Lake
members at TRIHP's clinic.

Furthermore, if this assertion were accepted as a premise for requiring that the proposal be accepted, it
would serve to make meaningless the statutory criteria for IHS to decline contract proposals. Under Blue
Lake and CRIHB's theory, they could propose to subcontract with any IHS-approved clinic located
anywhere in the United States, and IHS would have no choice but to accept the proposal. The services of
any clinic with which Blue Lake and CRIHB proposed to subcontract could never be found to be
unsatisfactory by IHS, because UIHS would exist as an alternative to whatever clinic with which Blue Lake
and CRIHB chose to contract.

Congress would not have enacted declination criteria only to have them be read in a way which makes
those criteria meaningless. IHS' policy of providing health care for eligible Indians at any IHS-approved
facility they visit plainly inures to the benefit of individual Indians. But that does not derogate from IHS'
statutory obligation to assure that contract proposals are evaluated on their merits and that they make sense.
Here, the proposal of Blue Lake and CRIHB has been evaluated on its merits and has been found to be
deficient. The fact that Blue Lake members may resort to extracurricular treatment alternatives does not
remediate the proposal's deficiencies.

4. IHS did not breach its duty to provide Blue Lake and CRIHB with technical assistance to cure
deficiencies in their contract proposal.

Blue Lake and CRIHB contend that IHS was obligated to provide them with technical assistance to remedy
any deficiencies observed in their contract proposal, prior to declining the proposal. They assert that IHS
failed to offer or provide such assistance. They contend that, consequently, the declination is defective.

The Act provides that whenever the Secretary declines a proposal for a self-determination contract, she
shall provide assistance to the tribal organization that submitted the proposal in order to overcome her
stated objections. 25 U.S.C. 450f(b)(2). Implementing regulations impose on IHS the duty to offer
technical assistance to overcome deficiencies in contract proposals. 42 C.F.R. 36.212(f).

There is no question that IHS did not offer technical assistance to Blue Lake and CRIHB to resolve the
deficiencies in the proposal which IHS identified. However, I do not find that this is a failure which
invalidates IHS' declination of the proposal. There is no technical assistance which IHS could have offered
Blue Lake and CRIHB which would have overcome IHS' objections. The Act and regulations do not
impose on IHS the duty to engage in exercises of futility.

No amount of technical assistance could reduce the distance or travel time between Blue Lake and TRIHP.
Technical assistance would not overcome the fact that TRIHP is not organized to provide the
comprehensive care that UIHS provides. Blue Lake and CRIHB assert that IHS should have discussed
with them ways to facilitate transportation of Blue Lake members to TRIHP. But lack of transportation to
TRIHP never was asserted by IHS to be a deficiency in the proposal. The issue never has been the
availability of transportation to TRIHP, but rather, has always been the distance that Blue Lake members
would have to travel to get to the TRIHP clinic and the time involved in the trip. That problem would not
be overcome by increasing either the number of vehicles available to transport Blue Lake members, or the
number of individuals who are available to drive Blue Lake members to TRIHP.

5. Blue Lake and TRIHP are not entitled to attorney fees under the Equal Access to Justice Act.

Blue Lake and TRIHP contend that they should be awarded attorney fees under the Equal Access to Justice
Act (EAJA), 28 U.S.C. 2412. A necessary premise to an award of fees to a party under EAJA is that it
prevail in a civil action against the Secretary. 28 U.S.C. 2412(d)(1)(A). Blue Lake and CRIHB have not
prevailed in this case, inasmuch as I find IHS' declination of their proposal to be lawful. Therefore, they
have demonstrated no basis to be awarded attorney fees under EAJA.


CONCLUSION

I conclude that IHS has shown by a preponderance of the evidence that its declination of the June 19, 1992
contract proposal of Blue Lake and CRIHB was lawful under the Act. Therefore, I recommend that the
declination be sustained.

___________________________
Steven T. Kessel
Administrative Law Judge


1. While IHS exchanged IHS Proposed Exhibit 37 prior to the hearing, it did not offer this document
into evidence at the hearing. However, IHS did move to have this document admitted into evidence when
it submitted its April 26, 1993 posthearing reply brief. Appellee's Posthearing Reply Brief at 13. By letter
dated April 28, 1993, Blue Lake and CRIHB objected to IHS' belated motion to offer this document into
evidence. Blue Lake and CRIHB contended that it "would be a gross injustice to admit this document into
the record at this late date in the absence of any explanation by IHS for its tardiness and only after the
Appellants have lost any opportunity to challenge it." Appellants' April 28, 1993 Objection at 2. I deny as
untimely IHS' request to have IHS Proposed Exhibit 37 admitted into evidence.

2. I cite to the exhibits of Blue Lake and CRIHB as "Tribe Ex. (number), p. (page number)." I cite to
IHS' exhibits as "IHS Ex. (number), p. (page number)." I cite to the parties' Stipulation of Facts as
"Stipulation at paragraph (number)." I cite to the Transcript as "Tr. at (page)."

3. The Act applies specifically to the Secretaries of Health and Human Service and Interior. 25 U.S.C.
450b(i).

4. IHS' contention that rulemaking is unnecessary here because Congress intended disputes over
declination to be adjudicated on a case-by-case basis begs the question of whether ascertainable standards
exist to govern IHS' declination determinations. Uncontrolled exercise of discretion by an agency is
impermissible, whether it is exercised through administrative adjudication or via some other process. What
is significant here is not that declination disputes are adjudicated, but that they are adjudicated pursuant to
ascertainable standards existing in the Act.

5. Furthermore, it does not appear that I would have the authority to declare the regulation to be ultra
vires the Act, in any event. My authority to hear and decide cases is delegated by the Secretary. The
regulations which govern hearings under the Act do not confer authority on me to declare the regulations to
be ultra vires the Act. 42 C.F.R. 36.208.

6. IHS introduced into evidence, over the objections of Blue Lake and CRIHB, several medical journal
articles. See, e.g., IHS Ex. 19. I accepted these articles as evidence which tended to corroborate, and,
hence, make credible Dr. Yao's expert opinion that distance and fragmentation of care may pose barriers to
treatment. I did not accept the articles as direct evidence that the services which Blue Lake and CRIHB
proposed to provide via a subcontract with TRIHP were unsatisfactory.

7. IHS must approve or decline a contract proposal within 60 days after its receipt of the proposal. 42
C.F.R. 36.213. IHS hardly could be expected to perform the kind of individualized review of Indians'
needs and predilictions, suggested by Blue Lake and CRIHB, within 60 days.