Hospitals that agree to provide services to the members of a health plan/HMO (“Plan”) also become government contractors, when the Plan covers federal government employees. Technically, the hospitals become “subcontractors,” but that does not help. If the service agreement has a high enough value, the hospitals are subject to various affirmative action laws and subject to compliance evaluations, on-site reviews and enforcement proceedings by the Office of Federal Contract Compliance Programs (“OFCCP”). Braddock v. Harris, Civil Action No. 09-1210 (PLF) (D.D.C. Mar. 30, 2013).

In this case, hospitals challenged the OFCCP’s efforts to exert its authority over them. The hospitals relied on a 2003 OFCCP Policy Directive that stated health care providers providing services to Federal Employees Health Benefits Program participants were “not covered under OFCCP’s programs based solely on that relationship.” That’s still true, if the benefits program is just insurance. If the benefits program is an HMO, then the health care provider is providing the service the HMO contracted to provide and the health care provider is, therefore, a government subcontractor, subject to affirmative action requirements and the OFCCP’s various enforcement programs.

This is the latest installment in a continuing legal saga, beginning in administrative proceedings and continuing now in the courts. Health care might become even more expensive for government employees. The case highlights for all of us how easily a company might turn out to be a government contractor. You might not know you are a government contractor until the OFCCP comes to call.