The Office of Federal Contract Compliance Programs (OFCCP) lacks jurisdiction over a hospital that is a TRICARE health services provider in light of the National Defense Authorization Act (NDAA), the Department of Labor’s Administrative Review Board held on October 19, 2012. This ruling is significant for the health care industry, over which OFCCP has sought to expand its jurisdiction in recent years based on TRICARE contracts and subcontracts. 

TRICARE is the Department of Defense’s (DOD) health care program for active and retired military members. Since at least 2005, Florida Hospital has provided health care services for TRICARE beneficiaries through a provider network established by Humana Military Healthcare Services, Inc. (HMHS). HMHS, in turn, had a prime federal contract with DOD. In 2007, OFCCP initiated a compliance review of Florida Hospital, requesting copies of its affirmative action programs and other employment-related data. Florida Hospital declined to submit any data and asserted that OFCCP lacked jurisdiction over the hospital. In response, OFCCP issued an administrative complaint. In October 2010, an Administrative Law Judge held that OFCCP had jurisdiction over Florida Hospital because the hospital was a federal subcontractor, as it (1) provided medical services to TRICARE beneficiaries and (2) therefore, performed a “portion” of HMHS’s obligations under the prime federal contract.

Florida Hospital appealed this ruling to the Administrative Review Board. While the appeal was pending, the NDAA was signed into law in December 2011. Section 715 of the NDAA provides:

For the purpose of determining whether network providers . . . are subcontractors for purposes of the Federal Acquisition Regulation or any other law, 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 suppliers. . . .

As noted in our April 26, 2012 Legal Alert, following the enactment of the NDAA, OFCCP rescinded its enforcement directive - Directive 293 (Coverage of Health Care Providers and Insurers), which had outlined OFCCP's policy for determining whether it has jurisdiction over health care providers and insurers based on their relationship with federal health care programs.

Several months later, on October 19, 2012, the Administrative Review Board issued its decision in the Florida Hospital case, dismissing OFCCP’s complaint against Florida Hospital in its entirety. The majority found that Section 715 of the NDAA applies retroactively to Florida Hospital and that the statute prevents OFCCP from exercising jurisdiction over this hospital that provides health care services for TRICARE beneficiaries. Specifically, in light of Section 715 of the NDAA, Florida Hospital’s agreement with HMHS to provide health care services for TRICARE beneficiaries is not a “subcontract” within the meaning of OFCCP regulations. See OFCCP v. Florida Hospital of Orlando, DOL ARB No. 11-011 (Oct. 19, 2012) (citing 41 C.F.R. § 60-1.3). Since Florida Hospital is not subject to OFCCP’s jurisdiction, it is not subject to the federal affirmative action laws that required covered entities to develop and implement affirmative action plans.