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When thinking about the new developments in the OFCCP’s jurisdictional dispute with TRICARE network providers, the old adage about March weather came to mind. (The crazy spring weather we are experiencing probably also had something to do with prompting the analogy). In case you are not familiar with this ongoing saga, let me provide some history.

OFCCP sues Florida Hospital

The OFCCP filed an administrative complaint against Florida Hospital of Orlando on December 18, 2008, contending that the hospital was a federal subcontractor by virtue of its participation in a TRICARE network of healthcare providers. Basically, Humana Military Healthcare Services contracted with the Department of Defense and agreed to provide medical services to military members and their families. To fulfill this agreement, HMHS contracted with entities like Florida Hospital to provide the actual medical services. Therefore, the OFCCP argued that Florida Hospital was a covered subcontractor and was unlawfully refusing to submit to a compliance review.

ALJ Proceedings

On October 18, 2010, an Administrative Law Judge issued a Summary Decision and Order finding that Florida Hospital was a federal subcontractor and ordering it to comply with the compliance review request. The ALJ found that Florida Hospital was a subcontractor because it was performing a portion of HMHS’s obligations by providing medical services that HMHS had contracted to provide.

OFCCP Issues Directive

Shortly after the ALJ’s Decision, the OFCCP issued Directive 293 on “Coverage of Health Care Providers and Insurers,” which stated that the OFCCP had coverage over TRICARE network providers based on the reasoning of the ALJ’s findings.

ARB Proceedings (Round I) & NDAA

Florida Hospital appealed the ALJ’s decision to the DOL Administrative Review Board. While the case was pending before the ARB, President Obama signed the National Defense Authorization Act for Fiscal Year 2012, which included a provision relating to TRICARE providers:

  • In establishing rates and procedures for reimbursement of providers and other administrative requirements, including those contained in provider network agreements, the Secretary shall, to the extent practicable, maintain adequate networks of providers, including institutional, professional, and pharmacy. For the purpose of determining whether network providers under such provider network 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 a contract for the performance of health care services or supplies on the basis of such requirement.

On October 19, 2012, after concluding that the NDAA applied to the Florida Hospital case, the ARB ruled that OFCCP did not have jurisdiction over TRICARE network providers. The ARB rejected the OFCCP’s argument that NDAA only eliminated jurisdiction under one part of the definition of a subcontractor (an agreement under which any portion of the contractor’s obligations is performed or assumed), but that the other portion was still applicable (an agreement that is necessary to the performance of the contract). The ARB accordingly dismissed the OFCCP’s complaint.

OFCCP Rescinds Directive

On April 25, 2012, four months after NDAA was enacted, the OFCCP rescinded Directive 293.

ARB Proceedings (Round II)

Not willing to accept defeat, the OFCCP petitioned the ARB to reconsider its decision. On July 22, 2013, the ARB issued another decision, this time accepting the OFCCP’s argument that the NDAA did not foreclose the finding that TRICARE network providers were federal subcontractors. The ARB agreed that the language of the NDAA did not affect the OFCCP’s ability to assert jurisdiction based on the premise that Florida Hospital’s agreement was necessary to the performance of HMHS’s DoD contract, as opposed to Florida Hospital performing a portion of HMHS’s DoD contract. (I have to admit it; this is some slick lawyering by the OFCCP and the Solicitor’s Office! This argument seemed dead in the water given the broad language of NDAA, but they convinced the ARB. I still don’t get it).

All was not lost for Florida Hospital, though. The ARB also ruled that there was insufficient information regarding whether TRICARE was a federal financial assistance program, which would divest the OFCCP of jurisdiction after all. It therefore remanded the case back to the ALJ for further wrangling.

OFCCP Backs Off

Meanwhile, some members of Congress were none-to-pleased with the OFCCP’s continued insistence on asserting jurisdiction over TRICARE network providers after the passage of NDAA. The House held a hearing on a bill that would prevent medical providers receiving funding from federal health care programs from being classified as federal contractors subject to the OFCCP’s jurisdiction. (H.R. 3633). Representative Tim Walberg (Michigan) who introduced the bill stated, “Regardless of any statutory ambiguity the administration thinks exists, the will of Congress is clear: OFCCP interference in TRICARE must stop.” This bill is still pending.

On March 11, 2014, Secretary of Labor Perez sent a letter to various Congressional committee chairpersons about the “confusion” surrounding the OFCCP’s jurisdiction over TRICARE network providers. Although Secretary Perez indicated that he now understands that “Congress intended to eliminate entirely OFCCP’s jurisdiction over TRICARE subcontractors,” he declined to defer to that interpretation. Instead, the Secretary offered that “OFCCP exercise prosecutorial discretion over the next five years to limit its enforcement activities with regard to TRICARE subcontractors while it engages in extensive outreach and technical assistance to inform TRICARE participants of their responsibilities. . . .” Secretary Perez listed several steps that the OFCCP would take, including establishing a “five-year moratorium on enforcement of the affirmative action obligations required of all TRICARE subcontractors.” (Emphasis added).

Assuming that the OFCCP follows through on the initiatives outlined in Secretary Perez’s letter (and it looks like it will as it withdrew the administrative complaint against Florida Hospital on March 28, 2014), then TRICARE network providers will certainly receive some breathing room. However, the Secretary’s letter, although appeasing in tone, makes it abundantly clear that the OFCCP has no intention of demurring to Congress’ current interpretation of the law. Sure, you may get a five-year hiatus to come into compliance, but I would expect a renewed and vigorous enforcement on day 1,826!

Given the OFCCP’s initial “lion-ish” approach towards its jurisdiction over TRICARE providers, it may appear that Secretary Perez’s conciliatory response to Congress was “lamb-like.” But remember, “March” will arrive again before we know it! Unless Congress takes further action, the OFCCP will be back. TRICARE network providers should use this time wisely.



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