Tribal Health-Indian Health Service Ruling Reveals Serious Problems in Tribal Medicine

A major contract dispute between Indian Health Service (IHS) and Scottsdale, Arizona-based Tribal Health, decided by the U.S. Civilian Board of Contract Appeals (CBCA), has revealed a troubling lapse in the Agency’s contracting practices and a possible attempt to “create perverse incentives” for contracting officers. The measure has cost taxpayers millions of dollars and placed healthcare for tribal communities at risk. Tribal Health was left “holding the bag” after incurring costs of over $9.4 million providing care without in turn being paid by the Agency, forcing it to secure a significant line of credit and absorb additional financing costs.

On July 25, 2024, the CBCA issued a ruling that highlighted a significant deviation by IHS from standard federal contracting practices. The deviation endangered patient care at the Pine Ridge Service Unit in South Dakota. According to sources familiar with the matter, the same contracting officer was also involved in mishandling separate contracts related to radiology, SANE exams, ambulance services, and tele-behavioral health.

Writing for the Board, Judge Harold D. Lester, Jr. explained:

“In July 2024, Tribal Health executed a bridge contract with the Indian Health Service (IHS) to provide hospital emergency room health care services for three months at a rural hospital under a bridge contract, which, through an option exercise, IHS extended through the end of December 2024. 

On the day that the contract was set to conclude, the IHS contracting officer sent Tribal Health an email directing it to continue with the work covered by the bridge contract, which Tribal Health interpreted to be the exercise of a second option in the bridge contract. IHS, however, did not view the contracting officer’s email as an option exercise. IHS says that, by sending the email, the contracting officer was directing Tribal Health to continue work that would be covered by a new contract that the parties would negotiate at a later date, which would include lower hourly rates than those authorized by the bridge contract.

 IHS later sent what it calls a ‘letter contract’ to Tribal Health for signature, but Tribal Health disputed IHS’s right to require it to pay its hospital workers less than that to which IHS had agreed in the bridge contract. Because Tribal Health has not signed the letter contract, IHS has paid Tribal Health nothing for more than $8 million in hospital health care services that Tribal Health has provided (and continues to provide) since January 2025, even though IHS does not dispute that Tribal Health should eventually be paid.”

In the text of the ruling, the board of Judges found that IHS failed to extend Tribal Health’s bridge contract properly and that the so-called “letter contract” IHS attempted to enforce has no legal standing. The board also found that the IHS contracting officer failed to execute a valid contract extension despite possessing the authority to do so. With only hours remaining on the contract, the contracting officer sent an ambiguous “Notice to Proceed” email that met neither legal nor regulatory standards. Finally, the contracting officer tried to unilaterally impose a contract on Tribal Health that drastically cut its rates for medical staffing services, rates that Tribal Health never accepted.

During the proceedings, IHS argued that “quantum meruit recovery,” or a recovery based on a reasonable sum of money to be paid for services rendered or work already done where no contract is in place, “can never be higher than the costs that the contractor incurs.” The board cautioned that this position could “create perverse incentives for contracting officers to avoid exercising options to extend contracts if they do not like the existing pricing.”

This would essentially allow IHS and other government agencies to ‘game the system,’ effectively rewriting contracts at a whim. Judge Lester notes that, “Instead of exercising options, contracting officers could, at the last minute, simply direct contractors to keep performing, then require the contractors to submit certified cost or pricing data if they wanted to be paid, and then force the contractors to accept payment of lesser amounts if they could not establish, to the contracting officer’s satisfaction, that their incurred costs were reasonable.”

The board found in favor of Tribal Health. It ruled that the company is entitled to be paid at the original contract rates, plus interest under the Prompt Payment Act. To date, IHS has not made a single payment, and the debt has grown to nearly $10 million.

In a statement emailed to the Globe, Tribal Health wrote, “We value our longstanding relationship with IHS and are pleased that the CBCA’s ruling affirms the work we’ve done to support patient care during a challenging period. Although the decision is a meaningful step forward, we are still awaiting payment. We’re confident IHS will take the necessary steps to fulfill the Board’s order, and we look forward to continuing our shared mission of serving communities in the Great Plains.”

Over the past two decades, Pine Ridge IHS Hospital has been the subject of ongoing controversy due to its prominent role in providing healthcare services to the Oglala Sioux reservation. 

• In 2021, KOTA reported that the Oglala Sioux Tribe Ambulance Service (OSTAS) crew of EMTs was dismissed from their role without notice by IHS after staff members spoke to tribal leaders about concerns over working conditions, staffing issues, and low wages. The Indian Health Service “partially re-assumed the Pine Ridge Service Unit Ambulance Program,” according to a later statement 
• In 2020, the Pine Ridge Indian Health Services hospital regained accreditation status, allowing it to bill Medicare for services after the Centers for Medicare and Medicaid Services ended its provider agreement with the Pine Ridge IHS facility in 2017, citing the facility’s failure to meet care standards, according to South Dakota Public Broadcasting.
• In a lengthy 2018 exposé, The Argus Leader revealed a pattern of severe problems at both the Rosebud and Pine Ridge IHS hospitals, with Donald Warne, chair of the Department of Public Health at North Dakota State University, telling the outlet that “Congress has been in breach of contract for decades,” with the tribe. “They have not fully funded IHS, and they know it.”

The latest developments may suggest that, in addition to challenges related to congressional funding, some of the difficulties faced by Pine Ridge IHS Hospital and the broader tribal medical system may be linked to internal factors within the Agency itself.