A long-awaited decision on the jurisdiction of Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) over health care providers was released this week.  The decision, UPMC Braddock v. Seth Harris(Acting Secretary of Labor), by Judge Paul Friedman of the U.S. District Court for the District of Columbia, upholds broad and deep OFCCP jurisdiction – meaning that hospitals and other health care providers will be required to write affirmative action plans, track and report the race and sex of applicants, and be subjected to OFCCP compliance reviews with regard to the three affirmative action laws it enforces: Executive Order 11246; Section 503 the Rehabilitation Act of 1973; and the Vietnam Era Veterans Readjustment Assistance Act.

For years, a significant area of controversy with regard to OFCCP’s jurisdiction over health care providers has centered around the definition of a government “subcontractor.”  The issue in UPMC was whether three hospitals which did not directly contract with the federal government are nonetheless covered subcontractors.  The District Court has now held that those hospitals are covered subcontractors by virtue of their having entered into a contract with UPMC, the insurance carrier for UPMC Health Plan, to provide medical services to FEHBP insureds.

In so holding, the Court:

  • invalidated FEHBP regulations that expressly state that a subcontract to provide medical services is not  a government “subcontract,” holding that FEHBP lacks the authority to define “subcontract” in a way that it at odds with DOL regulations;
  • interpreted “non-personal services” to include medical services;
  • held that contracts with hospitals are “necessary to the performance” of the insurance company’s contract with the federal government, and thus covered government “subcontracts,” (and holding that an HMO, unlike a traditional insurer, contracts with the federal government to provide insurance as well as medical services);
  • held that the consent of the hospitals to become government contractors was not required (a decision in accord with longstanding OFCCP decisions).

This decision is expected to empower the OFCCP to be ever more aggressive in its assertion of jurisdiction over those who provide medical services to government employees and beneficiaries.  Although UPMC deals with hospital agreements with an HMO as opposed to a traditional insurer, the decision is broadly written and may well be held to be more broadly applicable.

For a detailed analysis of the history of OFCCP and the health care industry, see AHLA Connections, Vol. 15, Issue 5, May 2011 (“New Assertions of Jurisdiction by the OFCCP”) and a HEAL Blog post, “More on the Continuing Saga of OFCCP Jurisdiction in the Health Care Field,” posted June 1, 2012.