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OFCCP Continues its Fight for Jurisdiction Over TRICARE Health Care Provider

December 21, 2012

On October 19th, 2012, the Administrative Review Board (ARB) determined that the Department of Labor’s (DOL) Office of Federal Contract Compliance Programs (OFCCP) did not have jurisdiction over Florida Hospital of Orlando (hereinafter  “Florida Hospital”), a health care provider under the TRICARE program. OFCCP v. Florida Hospital of Orlando, ARB No. 11-011 (Dep’t of Labor, Oct. 19, 2012).

TRICARE, the Department of Defense’s (DOD) health insurance program for military personnel and their families, contracted with Humana Military Healthcare Services (HMHS) for health care provider networks, among other services.  Florida Hospital, a nonprofit institution under the Adventist Health System, entered into a contract with HMHS to be part of the TRICARE network of providers.  

In August 2007, OFCCP, which has authority to ensure the compliance of federal contractors and subcontractors with federal non-discrimination and equal opportunity laws, selected Florida Hospital for a compliance review that would require it to provide information regarding its affirmative action measures.  Florida Hospital refused, asserting that OFCCP had no jurisdiction because it was not a federal contractor or subcontractor, and OFCCP filed an administrative complaint against Florida Hospital on December 18, 2008. 

Following cross-motions for summary judgment, the Administrative Law Judge (ALJ) found on October 18, 2010 that Florida Hospital was a federal subcontractor, granted OFCCP’s motion, and ordered Florida Hospital to comply with the compliance review request.  Florida Hospital subsequently filed exceptions to the ALJ decision on November 1, 2010. 

While the case was pending before the ARB, on January 9, 2012, Florida Hospital moved to dismiss the case as moot after the National Defense Authorization Act for Fiscal Year 2012 (NDAA) came into effect in December 2011.  Florida Hospital argued that it was not a subcontractor under Section 715 of the NDAA, which states that “a TRICARE managed care support contract that includes the requirement to establish, manage, or maintain a network of providers may not be considered to be a contract for the performance of health care services or supplies on the basis of such requirement.”

OFCCP had issued Directive 293 in December of 2010 to explain when health care providers and insurers are considered federal contractors or subcontractors subject to OFCCP jurisdiction.  Under the Directive, OFCCP claimed jurisdiction over direct contracts and any subcontracts that a direct contractor enters into in order to meet its direct contract obligations.  As Wiley Rein previously reported, after Section 715 came into effect, OFCCP rescinded Directive 293 on April 25, 2012. 

Despite this rescission, OFCCP maintained that it had jurisdiction over Florida Hospital, arguing that Section 715 did not apply retroactively.  In Florida Hospital, the ARB found that Section 715 did not specify any congressional intent regarding its retroactive application.  However, the ARB also found that none of the reasons against retroactive application of a law applied:  Section 715 did not create any new liabilities, impair any rights, especially private rights (OFCCP, a federal agency, was seeking a prospective injunction, not monetary damages), nor did it impose any new duties.  Therefore, the ARB found that Section 715 applied retroactively and determined that Florida Hospital was not a subcontractor subject to OFCCP jurisdiction.

Although the ARB did not remove all ambiguity regarding the jurisdiction of OFCCP over federal contractors and subcontractors in the health care field, the Florida Hospital decision is very favorable toward the health care industry because of its exclusion of certain kinds of TRICARE contracts from OFCCP jurisdiction.   

Notwithstanding the ARB decision, OFCCP gave the ARB notice that it would continue to try to review hospitals as network providers in a brief filed on November 13, 2012.  The brief was filed with and in support of OFCCP’s motion asking the ARB to reconsider its decision.  OFCCP’s refusal to cede jurisdiction over the health care providers may signal OFCCP’s intent to use other hospitals as litigation test cases if the ARB does not grant the motion.  This latest development highlights the importance of carefully monitoring OFCCP’s enforcement efforts and the importance of conferring with counsel about whether the OFCCP affirmative action requirements are applicable to your organization.