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By signing the National Defense Authorization Act (“NDAA”) on December 31st, President Obama dealt a blow to the OFCCP’s determined effort in gaining jurisdiction over the healthcare industry. For more than a decade, the OFCCP has been fighting, and seemingly winning, the battle to claim that healthcare facilities are considered subcontractors and are therefore subject to compliance under Executive Order 11246, Section 503 of the Rehabilitation Act, and the Vietnam Era Veteran Readjustment Assistance Act (VEVRAA).

OFCCP began their campaign to gain jurisdiction over healthcare with a very public dispute with Bridgeport Hospital (OFCCP v. Bridgeport Hospital, ARB No. 00-234 (Jan. 31, 2003)) where OFCCP filed a complaint when the hospital did not provide an Affirmative Action Plan after receiving an audit letter. The hospital responded by stating that they were not a subcontractor and therefore not subject to OFCCP authority. In that particular case, the OFCCP was thwarted when the Administrative Law Judge (“ALJ”) of the Department of Labor rejected the OFCCP’s jurisdictional argument. Later in 2003, OFCCP issued a directive that conceded the issue by stating “Based on the ARB decision, OFCCP cannot use FEHBP coverage as a basis to assert jurisdiction over a health care provider.”

However, the Bridgeport case was not the end of the OFCCP’s efforts to audit healthcare facilities. In 2009, the OFCCP filed a complaint against three University of Pittsburgh Medical Center (UPMC) facilities (UPMC Braddock, ARB No. 08-048 (May 29, 2009)) seeking to audit the Affirmative Action Plan. UPMC countered that they were not a subcontractor and therefore not subject to the three laws. In this case, both sides requested summary judgment in their favor; however, the ALJ awarded summary judgment to the OFCCP stating that a Federal contract could not exclude the equal opportunity requirements and therefore UPMC was subject to the three Equal Opportunity laws enforceable by the Federal government. This case is still pending under appeal and the final decision will certainly impact the entire healthcare community.

Another case that worked to support OFCCP’s efforts towards placing healthcare facilities in its jurisdiction was a case against Florida Hospital of Orlando where the hospital disputed OFCCP’s request for audit stating that they were not a contractor (OFCCP v. Florida Hospital of Orlando, DOL OALJ No. 2009-OFC-00002 (Oct. 18, 2010)). The ALJ granted summary judgment for the OFCCP, ruling that Florida Hospital was a Federal subcontractor because it provided medical services to TRICARE beneficiaries. Florida Hospital of Orlando argued that it was not a Federal subcontractor because it received financial assistance from the Federal government similar to Medicare funding and Medicare has been declared as not placing healthcare facilities within the sphere of Federal contractor status. The introduction of TRICARE as a factor in determining contractor status provided OFCCP with another avenue for enforcing EEO laws on the healthcare community.

These steps lead us to current events where, in something of a surprise turn of events, OFCCP appears to be facing a step backward in progress they have been making in enforcing their jurisdiction over the healthcare industry. While President Obama has taken a very favorable position towards the enforcement of equal employment opportunity, particularly as it relates to compensation and the employment of veterans, apparently even the President must make concessions at times and his signing of the National Defense Authorization Act for 2012 (NDAA) would appear to be one of those scenarios. “The fact that I support this bill as a whole does not mean I agree with everything in it,” the president said in a statement. Included in the NDAA is Section 715, which states that a TRICARE-managed care support contract that includes the requirement to establish, manage, or maintain a network of providers may not be considered a contract for the performance of health care services or supplies for the purpose of determining whether such network providers are subcontractors under the Federal Acquisition Regulation or other law. The NDAA, in essence, exempts certain TRICARE network providers from being considered Federal contractors and subcontractors subject to OFCCP jurisdiction. As should be expected, the OFCCP and its Director, Patricia Shiu, is not backing down. In the December 21, 2011, edition of the Bureau of National Affairs’ Daily Labor Report, it was reported that OFCCP Director Patricia A. Shiu stated that the OFCCP is now reviewing its policies on this topic and the possible effect of Section 715 of the NDAA on the Florida Hospital case. Director Shiu is also reported to have said that Section 715 seeks to exempt certain TRICARE providers from complying with civil rights laws, and that “this is not over yet”, as the OFCCP is committed to enforcing those laws.

It is important to note that while TRICARE alone may not link a healthcare facility to the Federal EEO laws, there are still other relationships common to healthcare that would place the organization under Prime contractor or subcontractor status. Coverage over such a provider may be established by other means such as a contractual relationship with the U.S. Department of Veterans’ Affairs or the Department of Defense. Coverage may also be established for a teaching hospital doing research for a university that has a contract with the Federal government.



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