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In response to an outcry from congressional Republicans, the Office of Federal Contract Compliance Programs is temporarily backing off TRICARE network providers. The OFCCP issued a Directive on May 7, establishing a five-year moratorium on enforcing the affirmative action obligations of TRICARE subcontractors.
You may recall the ongoing saga relating to the OFCCP's efforts to obtain jurisdiction over Florida Hospital of Orlando based solely on the basis of its TRICARE network agreements. Some members of Congress are unhappy with the OFCCP's continued insistence on asserting jurisdiction over TRICARE network providers after the passage of the National Defense Authorization Act of 2012, which provided that TRICARE network providers were not subcontractors under the Federal Acquisition Regulations. The House of Representatives recently held a hearing on a bill (H.R. 3633) entitled the Protecting Health Care Employers From Increased Administrative Burdens Act, which would prevent medical providers who receive funding from federal health care programs from being classified as federal contractors subject to the OFCCP's jurisdiction. Rep. Tim Walberg (R-MI), who introduced the bill in December 2013, said, "Regardless of any statutory ambiguity the administration thinks exists, the will of Congress is clear: OFCCP interference in TRICARE must stop." The bill is still pending.
On March 11, 2014, Secretary of Labor Thomas E. Perez sent a letter to various congressional committee chairs about the "confusion" surrounding the OFCCP's jurisdiction over TRICARE network providers. Although he said he understood 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.)
In light of the Secretary's promise, the OFCCP has withdrawn its administrative complaint against Florida Hospital and issued this new Directive, which states that the OFCCP will not initiate compliance reviews (and will close existing reviews) involving the following:
• Healthcare entities that participate in TRICARE only as subcontractors
• Healthcare entities that participate in TRICARE as subcontractors and as subcontractors under any Medicare program
• Healthcare entities that participate in TRICARE as subcontractors and as subcontractors under the Federal Employee Health Benefits Program
• Healthcare entities that participate in TRICARE as subcontractors and as subcontractors under any other federal health program.
The moratorium does not apply to healthcare providers that are direct contractors with the federal government or TRICARE subcontractors that have a separate non-healthcare-related federal subcontract. The moratorium also does not apply to investigations of discrimination complaints against healthcare providers.
The OFCCP is also offering extensive outreach and technical assistance to healthcare providers, even suggesting that contractors email the agency to ensure that they receive notice of technical assistance and training events. (That is also a convenient way for the OFCCP to create a list of healthcare entities subject to audit in 2019!)
Although this Directive provides some temporary relief to TRICARE subcontractors, the OFCCP makes it abundantly clear that it has no intention of deferring to Congress' current interpretation of the law. In addition, by including Medicare programs in the moratorium, the Directive also suggests that the OFCCP will reassert that it has jurisdiction over healthcare providers who participate in networks for Medicare Parts C and D.
Constangy recommends that affected healthcare providers continue – or begin – to ensure compliance with all OFCCP regulations, unless they are inclined to challenge jurisdiction, as did Florida Hospital. Although the OFCCP is currently exercising its discretion to forgo enforcement activities toward TRICARE network providers, this Directive could be rescinded at any time, particularly after a change in administration. Moreover, the OFCCP considers such entities to be covered subcontractors. To be able to certify compliance with all applicable laws, TRICARE network providers would need to be up to date with their affirmative action plan development and recordkeeping requirements. Even with a five-year hiatus, TRICARE network providers can expect renewed and vigorous enforcement on day 1,826!
If you have questions about the OFCCP's jurisdiction over healthcare providers, please contact a member of Constangy's Strategic Affirmative Action Practice Group or the Constangy lawyer of your choice.
Constangy, Brooks & Smith, LLP has counseled employers on labor and employment law matters, exclusively, since 1946. A "Go To" Law Firm in Corporate Counsel and Fortune Magazine, it represents Fortune 500 corporations and small companies across the country. Its attorneys are consistently rated as top lawyers in their practice areas by sources such as Chambers USA, Martindale-Hubbell, and Top One Hundred Labor Attorneys in the United States, and the firm is top-ranked by the U.S. News & World Report/Best Lawyers Best Law Firms survey. More than 140 lawyers partner with clients to provide cost-effective legal services and sound preventive advice to enhance the employer-employee relationship. Offices are located in Alabama, California, Florida, Georgia, Illinois, Massachusetts, Missouri, New Jersey, North Carolina, South Carolina, Tennessee, Texas, Virginia and Wisconsin. For more information, visit www.constangy.com.