The Office of Federal Contract Compliance Programs (“OFCCP”) continues to target hospitals and other medical providers that it believes are federal contractors or subcontractors under Executive Order No. 11246. This list now includes those hospitals that participate in either (1) a provider network which has contracted with the federal government to treat patients under TRICARE1; or (2) an HMO that contracts or subcontracts with the U.S. Office of Personnel Management (“OPM”) to provide medical services to current or retired federal employees.
According to the OFCCP, those health-care providers are required to have a written affirmative action plan for any year in which they receive more than $50,000 for services under such a contract, whether or not the contract alerts them to their federal contractor or subcontractor status. Such health-care provider must also grant OFCCP access to their facilities to conduct compliance evaluations.
Recent OFCCP Decision
An OFCCP administrative law judge (ALJ) recently held, in Florida Hospital of Orlando, that the Florida Hospital was a federal subcontractor under Executive Order No. 11246 (and, thus, was required to have a written affirmative action plan) because it provides medical services to TRICARE beneficiaries as part of a health-care provider network whose founding entity had contracted with the division of the U.S. Department of Defense (“DOD”) that administers the TRICARE program.
Specifically, DOD contracted with a subsidiary of Humana, Inc. to provide managed care support including enrollment, medical management, claims processing and customer services. It also required Humana to establish networks of providers that agreed to follow the rules of the TRICARE program when treating TRICARE patients. The Florida Hospital later contracted with Humana to be one of the providers in its network. That contract did not notify the Florida Hospital of its status as a federal subcontractor as required by Executive Order No. 11246.
The ALJ rejected the Florida Hospital’s argument that TRICARE, like Medicare, is only a federal financial assistance program that simply pays for medical services and, therefore, was outside of the scope of Executive Order No. 11246. The ALJ reached this decision even though the DOD had designated TRICARE as a financial assistance program and specifically stated that:
It would be impossible to achieve the TRICARE mission of providing affordable health care for our nation’s active duty and retired military members and their families if onerous federal contracting rules were applied to the more than 500,000 TRICARE providers in the United States . . . . [I]t was never the intent of the agency to do so.
Instead, the ALJ found that TRICARE, in fact, provided medical services rather than just paid for them.
The ALJ analogized its case to last year’s OFCCP decision in the UPMC Braddock case. In Braddock, the ALJ found that three Pittsburgh area hospitals were federal subcontractors because they provided health-care services to an HMO that had contracted with OPM to provide such services to federal employees.
The ALJ also distinguished the OFCCP’s 2003 Bridgeport Hospital decision. In that case, the ALJ held that, even though the hospital had contracted with Blue Cross/Blue Shield (“BCBS”) to provide medical services on behalf of BCBS, the hospital was not a federal subcontractor because BCBS had contracted with OPM only to provide health insurance to federal employees—not actual medical services. Because the primary contract with OPM was not a contract for services but rather for health insurance, the hospital’s contract with BCBS was not a subcontract under Executive Order No. 11246.
Both the Braddock and Florida Hospital administrative decisions have been appealed to federal courts and final decisions are still pending. While not binding in Ohio, these cases will have significant persuasive authority.
Proactive Steps Health-Care Providers Should Consider
While health-care providers await these federal courts decision, we recommend that they proactively: (1) review their contracts with all HMOs; (2) request copies and review any contracts between the HMOs and OPM; and (3) determine whether and to what extent they participate in the TRICARE program. If possible, the hospital should also determine the amount of services provided to military families or federal employees under these contracts because a health-care provider should not be required to have a written affirmative action plan if the revenue from such contracts is less than $50,000 per year.
However, it may be difficult to obtain the information and contracts necessary to determine a health-care provider’s possible current obligations. Thus, the best protection against an OFCCP audit is to simply draft and implement a written affirmative action plan now. At the very least, however, we recommend that health-care providers begin to gather and retain the necessary information of all applicants who apply for openings or promotions required under Executive No. 11246 (e.g., applicant’s race, sex, veteran status, etc.). This information will greatly assist a health-care provider with drafting an affirmative action plan should it become necessary later because it will be significantly more difficult and costly to try to retroactively collect this same information, particularly for unsuccessful applicants.