In a decision with potentially far-reaching consequences for acute care medical facilities, the U.S. Department of Labor's Administrative Review Board (Board) ruled on May 29, 2009, that three University of Pittsburgh Medical Center (UPMC) hospitals that provided medical services to U.S. government employees under a contract between UPMC Health Plan and a federal agency constitute "federal subcontractors" and must comply with all of the programs administered by the Office of Federal Contract Compliance Program (OFCCP). Those programs include the requirement that the hospitals develop and maintain affirmative action plans in accordance with Executive Order 11246, the Rehabilitation Act, and the Vietnam Era Veterans Readjustment Assistance Act.

The UPMC Health Plan had a contract with the U.S. Office of Personnel Management (OPM). The three hospitals in question, UPMC Braddock, UPMC Southside and UPMC McKeesport, provided medical services to federal employees in accordance with this contract. In January 2004, OFCCP sent a letter to each of the hospitals notifying them that they had been selected for a compliance review and requesting copies of the hospitals' affirmative action plans and related documents. The hospitals denied they were government contractors or subcontractors and refused to participate in the compliance reviews. OFCCP then filed a complaint asserting that all three hospitals were violating federal law. In January 2008, a Department of Labor administrative law judge issued a decision sustaining OFCCP's position. The hospitals appealed and the Board affirmed.

The Board rejected the hospitals' assertion that they should be excused from compliance because the UPMC Health Plan never notified them of the contract with OPM. The hospitals' further argument that the terms of the Health Plan's contract with OPM excluded "providers of direct medical services and supplies" from the definition of "subcontractor" also was rejected. The Board held that parties cannot invalidate the equal employment opportunity provisions of federal law by their contracts.

The Board further distinguished OFCCP v. Bridgeport Hospital, DOL ARB, No. 00-034 (2003). In Bridgeport, the Board had held that a Connecticut hospital was not a subcontractor within the meaning of Executive Order 11246 simply because it had a contract with a local Blue Cross Blue Shield plan, and that plan had a contract with OPM to provide health insurance to federal employees. The Board distinguished Bridgeport by observing that the UPMC Health Plan is "more than an insurer." The UPMC Health Plan described itself as a health maintenance organization and utilized the three hospitals and other medical professionals as healthcare delivery providers. On this basis, the Board concluded that the hospitals, by agreeing to provide services to UPMC Health Plan participants, had agreed to provide "a portion of the [UPMC Health Plan]'s obligation," making them subcontractors covered by OFCCP's jurisdiction.

The Board's decision is subject to further appeal through the federal courts, and, given that the hospitals have been contesting this matter for the past five years, it seems likely these appeals will be made. Most acute care hospitals have not made the effort to comply with the programs the OFCCP administers on the basis of the rationale of the Bridgeport case. If the Board's decision stands, much will need to be done to bring the industry into compliance