Whether the OFCCP may assert jurisdiction over hospitals, nursing homes, large medical practices, and other health care providers is not a new issue. Administrative actions and internal OFCCP directives regarding the Agency’s jurisdiction in the health care industry date back to the late 1990s. Although some health care providers have knowingly entered into direct contracts with the federal government, placing them within the jurisdictional ambit of the OFCCP, questions loomed regarding whether an institution’s acceptance of Medicare Parts A and B subjected it to OFCCP jurisdiction.
That question was answered by the OFCCP in Transmittal No. 189. The OFCCP revealed that jurisdiction would not be asserted on the sole basis of Medicare/Medicaid reimbursements; however, the Agency reserved its right to decide whether Medicare Parts C or D would subject an entity to jurisdiction. Medicare Part C touches upon the Medicare Advantage programs and Part D deals with the prescription drug plans.
In 1996, the OFCCP filed an administrative complaint against Bridgeport Hospital alleging that the hospital violated its contractual obligations when it refused to maintain an AAP and submit it to the OFCCP for audit. The OFCCP argued that the hospital was a covered entity because it provided services and/or supplies to persons receiving health care benefits under a Blue Cross Blue Shield (“BCBS”) plan. BCBS held a prime contract with the Office of Personnel Management (“OPM”), under the Federal Employees Health Benefits Plan (“FEHBP”).
On cross motions for summary judgment, an administrative law judge (“ALJ”) ruled in favor of Bridgeport Hospital, holding that the hospital was not a covered federal subcontractor under 41 C.F.R. § 60-1.3, and the ALJ decision was upheld on appeal by the Administrative Review Board (“ARB”).
In the wake of the Bridgeport Hospital decision, the OFCCP issued Directive Transmittal 262 and stated it would not use the FEHBP as a basis to assert jurisdiction over health care providers. For the remainder of 2003 and continuing through late 2006, this issue appeared to be resolved.
In November 2006, without rescinding Directive Transmittal 262, the OFCCP filed an administrative complaint against three hospitals in the Pittsburgh area. The three hospitals had health maintenance organization (“HMO”) contracts to provide medical products and services to U.S. government employees. The OFCCP asserted that providing services to federal employee policyholders was a service “necessary” to performance of the BCBS contract with the OPM. As was the case with the Bridgeport Hospital matter, the OFCCP alleged jurisdictional non-compliance because the three Pittsburgh hospitals did not respond to requests to produce documents or allow the OFCCP to access their premises for on-site reviews. The hospitals denied that they were covered entities and moved for summary judgment. Ultimately, on appeal, the ARB granted relief to the OFCCP. The ARB found that, unlike the Bridgeport Hospital case that did not involve services, the Pittsburgh hospitals contract with the OPM required the creation of an HMO and depended on medical providers to offer medical services and supplies. The Pittsburgh hospitals appealed this decision. The appeal is still pending with the U.S. District Court for the District of Columbia.
The next important legal decision in this arena occurred in 2009 in an Orlando hospital case. The Florida Hospital of Orlando (“Florida Hospital”) contracted with a regional Tricare administrator to provide medical services to Tricare beneficiaries as part of a contract with Tricare to develop a regional provider network. Tricare is the health care program serving uniformed service members, retirees, and their families worldwide.
The OFCCP filed an administrative complaint against the Florida Hospital and alleged a violation of the OFCCP’s jurisdictional statute. This marked a different approach by the OFCCP, focusing on Tricare rather than the FEHBP.
The ALJ ultimately granted the OFCCP’s motion for summary judgment in the case, concluding that the Florida Hospital was subject to the OFCCP’s jurisdiction and a subcontractor because it provided services to Tricare beneficiaries. The ALJ further rejected the argument that the Florida Hospital was providing assistance similar to Medicare, noting that Medicare merely paid for services, whereas Tricare provided medical services. Interestingly, the ALJ reached its conclusion even though Tricare did not consider its network providers to be subcontractors or require them to submit to any federal contract or compliance provisions. This case is on appeal.