Health Care Providers Should Get Prepared: ALJ Finds Participation in TRICARE Subjects Florida Hospital to OFCCP Jurisdiction

The Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) has won another major battle in its war to establish jurisdiction over hospitals and other health care providers. On October 18, an administrative law judge (ALJ) decided, without a hearing, that the Florida Hospital of Orlando (FHO) is subject to federal affirmative action laws by virtue of its agreement to provide health care services to eligible TRICARE beneficiaries. OFCCP v. Fla. Hosp. of Orlando, DOL OALJ No. 2009-OFC-00002 (October, 18, 2010).

This ruling is significant because many hospitals and health care providers have been operating under the assumption that they are not covered by the federal affirmative action laws and, therefore, have not been complying with federal contractor requirements. Consequently, such hospitals are generally unprepared should the OFCCP select them for an affirmative action compliance evaluation.

The relevant facts of this recent decision are as follows: TRICARE is the U.S. Department of Defense’s (DOD) worldwide health care program for active duty and retired military and their families.  TRICARE contracted with Humana Military Healthcare Services, Inc. (HMHS) to, among other things, establish networks of health care providers to provide health care services to eligible TRICARE beneficiaries. HMHS then contracted with FHO for the hospital to become a participating hospital in HMHS’ network under HMHS’ agreement with TRICARE, and the hospital did subsequently provide health care services to TRICARE beneficiaries. Because the DOD had designated TRICARE as a federal financial assistance program (which is not subject to federal affirmative action law requirements), and stated in its contract with HMHS that health care service providers are not considered covered subcontractors under the federal affirmative action laws, TRICARE did not require HMHS to insert the equal opportunity “flow down” clauses into its contracts with participating health care providers to notify them of potential affirmative action obligations.

In August 2007, OFCCP notified FHO that OFCCP intended to audit FHO’s compliance with the federal affirmative action laws. The hospital objected, arguing that it is not a covered subcontractor under the federal affirmative action statutes because the contract it entered with HMHS did not contain a written provision requiring it to comply with the federal affirmative action laws’ equal opportunity clauses. In addition, the DOD had designated TRICARE a federal financial assistance program, and the OFCCP does not have jurisdiction over businesses that are recipients of federal financial assistance. Moreover, TRICARE’s contract with HMHS specified that TRICARE does not consider health care providers under network agreements with the HMHS to be covered federal subcontractors. The hospital also asserted that this case was governed by the Administrative Review Board’s 2003 decision in OFCCP v. Bridgeport Hospital, ARB No. 00-034, 2003 W.L. 244810 (Jan. 31, 2003), wherein the ARB found that Bridgeport Hospital was not a covered subcontractor by virtue of its agreement with Blue Cross to provide health care services to federal employee policy holders.

Relying, instead, upon a 2009 decision of the Administrative Review Board (OFCCP v. UPMC Braddock, ARB Case No. 08-048, May 29, 2009), the ALJ disagreed with the hospital’s arguments and granted the OFCCP summary judgment for the following reasons:

• FHO meets the statutes’ definition of a covered subcontractor in that it contracted with HMHS to assume part of HMHS’ contractual obligations with TRICARE (i.e., to provide health care services to eligible TRICARE beneficiaries).
• The fact that the DOD designated TRICARE as a federal financial assistance program and that TRICARE’s contract with HMHS stated network health care providers were not federal government subcontractors was irrelevant because the Executive Order and its implementing regulations take precedence over contrary regulations and contractual provisions of other federal agencies.
• The equal opportunity clauses missing from HMHS’ contract with the hospital are incorporated by “operation of law” into every relevant subcontract.

The UPMC Braddock case is currently on appeal, and this Florida Hospital case also will most likely be appealed. Nonetheless, we recommend that health care entities closely analyze their relationships with federal government agencies through HMOs, provider networks, and the like, and to consult with counsel to determine whether they must comply with federal contractors’ affirmative action obligations, including:

• Developing written affirmative action plans (AAPs) for minorities and women, and for covered veterans and the disabled;
• Preparing adverse impact analyses of hires, promotions, and terminations;
• Analyzing compensation practices for discrimination;
• Filing EEO-1 and Vets 100(A) Reports;
• Posting required notices and invitations to self identify;
• Notifying state employment service delivery system agencies of job openings; and
• Complying with detailed recordkeeping requirements.