As you may have heard by now, the Office of Federal Contract Compliance Programs ("OFCCP") has now asserted jurisdiction over many hospitals that have long believed themselves beyond the reach of the OFCCP and its affirmative action plan requirements. This vast expansion of OFCCP jurisdiction is due in large part to the October 2010 decision in OFCCP v. Florida Hospital of Orlando.
In that case, an Administrative Law Judge ("ALJ") for the United States Department of Labor determined that Florida Hospital of Orlando was a "government subcontractor" based solely on the hospital's TRICARE contracts. TRICARE is a federal healthcare program for active and retired members of the military and their families. TRICARE contracted with Humana Military Healthcare Services, Inc. ("HMHS") to provide networks of healthcare providers for TRICARE beneficiaries. In turn, Florida Hospital of Orlando contracted with HMHS to become a participating hospital and provide care to hospitalized TRICARE beneficiaries.
Florida Hospital of Orlando argued it was not a federal subcontractor and that its participation in TRICARE was akin to participation in Medicare, where participants are not subject to OFCCP jurisdiction. The ALJ rejected Florida Hospital's argument, reasoning that Medicare does not provide services, but merely pays for them. Because TRICARE's focus is on the delivery of services and not simply payment for services, TRICARE is not akin to Medicare which is a federal financial assistance program.
There are more than 500,000 TRICARE providers. OFCCP has expanded its jurisdiction to include hospitals that have never believed themselves to be government contractors.
Hospitals in this situation have two choices - either concede jurisdiction and meet the affirmative action and other requirements of OFCCP or challenge the OFCCP's asserted jurisdiction. Prior to making a decision, the hospital must first assess whether it would be deemed a government contractor or subcontractor even under the new standards. For instance, if a hospital simply treats patients covered by TRICARE, but does not have an agreement with TRICARE or one of the TRICARE network providers such as HMHS, a strong argument can be made that the institution is not a government contractor or subcontractor. Second, the Florida Hospital of Orlando decision was an ALJ decision and has been appealed to the Department of Labor's Administrative Review Board. Given the decision's widespread impact, it is unlikely the ALJ's decision will be the last word on this subject.
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