OFCCP Lacks Jurisdiction over TRICARE
The health care industry scored a significant litigation victory over OFCCP recently when the Administrative Review Board (ARB) ruled that Florida Hospital of Orlando’s TRICARE network agreement did not cause it to be a covered subcontractor subject to OFCCP’s affirmative action rules. The ruling overturns an earlier Administrative Law Judge (ALJ) decision and is consistent with Congressional action late last year that exempted TRICARE network providers from OFCCP jurisdiction.
OFCCP Tries to Use TRICARE to Break into Health Care Industry
OFCCP enforces federal affirmative action rules that apply to certain employers who have direct contracts, or covered federal subcontracts, with the federal government. TRICARE is the Department of Defense’s health care program that serves active and retired military personnel and their families. TRICARE is administered through three entities, Humana Military Health System, TriWest and HealthNet, each of which routinely contract with hospitals to establish a network of providers to serve TRICARE beneficiaries.
Florida Hospital of Orlando (Hospital) had entered into a TRICARE network agreement with Humana Military Health System. In 2010, OFCCP convinced an ALJ that this arrangement caused the Hospital to be a covered federal subcontractor. The Hospital appealed the decision to the ARB, arguing that it should not be covered because participation in TRICARE was similar to participation in Medicare A and B and/or Medicaid, which are considered “federal financial assistance” and not federal contracts for purposes of OFCCP jurisdiction. Undeterred by the Hospital’s appeal, OFCCP continued to schedule affirmative action compliance reviews of TRICARE providers across the country.
Congress Gets Involved
The Florida Hospital of Orlando case drew national attention as many in the health care industry worried that if OFCCP ultimately prevailed, it would mean thousands of hospitals would have to start complying with burdensome federal affirmative action rules for the first time. Congress eventually intervened while the Hospital’s appeal was still pending. Specifically, Congress included the following language in the National Defense Authorization Act for Fiscal Year 2012 (NDAA):
Section 715: For the purpose of determining whether network providers under such provider agreements 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 supplies on the basis of such requirement.
President Obama signed this legislation on December 31, 2011, much to the delight of the health care industry.
OFCCP Keeps Fighting
Although many hoped the passage of the NDAA would end the debate as to whether TRICARE network agreements were federal subcontracts for purposes of affirmative action requirements, OFCCP did not give up the fight. Those hospitals that had already been selected for compliance review based solely on a TRICARE contract were disappointed with OFCCP’s decision to place their audits “on hold” rather than administratively close them.
In the ongoing litigation with the Hospital, OFCCP took the position, among others, that the NDAA did not apply retroactively. In other words, because the compliance review was initiated by OFCCP and covered a review period before the passage of the NDAA, OFCCP believed it should still have jurisdiction over the Hospital (and, by implication, all of those other health care providers whose TRICARE-based compliance audits had been put “on hold”).
ARB Says NDAA Applies Retroactively
Fortunately for the health care industry, the ARB concluded that the NDAA could be retroactively applied because doing so would not “increase any party’s liability, impair any rights, or impose new duties.” It remains to be seen whether OFCCP will appeal the ARB’s decision and/or finally decide to close those TRICARE audits that remain “on hold.”
Health Care Industry Not off the Hook Yet…
Even if OFCCP chooses to give up on the TRICARE network agreement issue, it is important to understand that there are several other potential bases on which OFCCP could attempt to assert jurisdiction over health care providers. These include, but are not limited to:
- Other TRICARE participation arrangements besides TRICARE network agreements;
- Certain arrangements under the Federal Employee Health Benefit Plan;
- Certain arrangements under Medicare Parts C (Medicare Advantage) or D (Prescription Drug Plans);
- Prime (direct) federal contracts with Executive Branch agencies such as the Departments of Defense, Veterans Affairs, Homeland Security, Health and Human Services or the Federal Bureau of Prisons;
- Covered federal subcontracts in which the health care provider is: (1) performing services that are necessary to the performance of another entity’s prime federal contract; or (2) performing or assuming a portion of another entity’s obligations under a prime federal contract.
What You Should Do
There remains a great deal of uncertainty over how and when OFCCP might be able to establish jurisdiction over health care providers. There is no doubt, though, that OFCCP plans to keep trying. More litigation between OFCCP and the health care industry is likely, and we will continue to monitor and report about any new developments. In the meantime, health care providers should assess their various contractual arrangements in an effort to determine the likelihood that OFCCP could establish jurisdiction over them. That determination process is often complex and should not be undertaken without advice from legal counsel familiar with OFCCP jurisdictional matters.
If you have questions regarding this topic, please contact Jon Bumgarner at 317.977.1474 or jbumgarner@wp.hallrender.com or your regular Hall Render attorney.
