Federal judge orders IHS to fund Sage, at least for now

ALBUQUERQUE

The Indian Health Service must fund Sage Memorial Hospital on a temporary basis until the case goes to trial about three months from now, a federal judge ruled last Friday.

Sage will receive about $6 million for that period. If the judge rules in favor of Sage at the trial, it will regain the $18-million-a-year contract the IHS pulled when an independent audit turned up evidence of mismanagement.

Sage sued IHS last fall for failing to renew its P.L. 93-638 contract.

“I’m awarding a preliminary injunction, (which translates into short-term funding) now only to preserve the status quo and to give defendants (IHS) the opportunity to further argue their case,” writes Judge James O. Browning of the 10th U.S. Circuit Court.

The defendants include Sylvia Burwell, Secretary of the United States Department of Health and Human Services; Yvette Roubideaux, former acting director of IHS; John Hubbard, Jr., director of the Navajo Area of Indian Health Services and Frank Dayish, contracting officer.

The defendants have maintained that Sage Memorial hospital, also known as Navajo Health Foundation, misused tribal self-determination act money.

Browning’s 116-page ruling runs through all the previous arguments on both sides. Sage attorney Paul Frye highlights how the hospital turned around financially after Ahmed Razaghi, an outside developer who has since been banned from the local community, came aboard as the CEO and management consultant. Frye also lists awards the hospital received as well as renewed state and federal certifications.

He further argues that if the funding is not reinstated, the hospital will close down, community people will lose exemplary medical care and 200 Navajo people will lose their jobs.

On the other hand, the order recaps the reasons why Indian Health Service pulled Sage’s contract – slack financial controls and management systems that led to at least a couple of million dollars of federal money used to pay Razaghi a bonus and a severance package (although he’s still on contract), along with excessive off-reservation travel for him and board members to stay at exclusive resorts, among other issues.

According to a Sage press release, Browning ruled that issues like these were merely allegations from disgruntled ex-employees and irrelevant in a legal case, although that was not apparent from reading the ruling.

During Friday’s hearing, Browning also declined IHS’s request that Sage put up a bond of about $6 million (the pro-rated amount) in the event Sage loses at trial. IHS’s attorneys asked for the bond “to ensure that these funds are preserved to provide health care services to Indian Health beneficiaries and not diverted for improper bonuses and excessive compensation.”

“Forcing Sage Hospital to post such a large bond risks defeating the preliminary injunction’s purpose of keeping Sage Hospital afloat until this case’s resolution. Sage already runs the risk of insolvency in months. The court sees no sound reason to add to its financial troubles,” writes Browning in his decision.

During the hearing, Frye also asked IHS to reinstate discount pharmaceuticals and student loan opportunities for staff. United States Attorney Karen Grohman, representing IHS, said that she would refer the request to her clients.

In response to the decision, Stenson Wauneka, the Chairman of Sage’s Board of Directors said in a press release, “Sage is extremely gratified that the federal court has devoted such energy and thought to this dispute. Sage looks forward to reestablishing a sound, productive relationship with IHS for the benefit of our Chapter client communities.”

Located in Ganado, Ariz., Sage serves approximately 23,000 community members from Ganado, Kinlichee, Klagetoh, Wide Ruins, Lower Greasewood Springs, Cornfields, Nazlini and Steamboat chapters.

Frye and Grohman will be back in Browning’s Albuquerque courtroom on April 22 at 2:30 p.m. with Paula Lee, also a U.S. attorney representing IHS, who will appear from San Francisco via teleconference. At that time, Browning will decide whether or not to order IHS to make a quicker decision on Sage’s claim of $62 million in back payments.
A request for comment from IHS wasn’t answered by deadline.

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