OFCCP TRICARE Directive 2014-01

Background: The Office of Federal Contract Compliance Programs (OFCCP) enforces Executive Order (E.O.) 11246, as amended, Section 503 of the Rehabilitation Act of 1973 (Section 503), as amended, and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA), as amended. Collectively, these laws prohibit federal contractors and subcontractors from discriminating on the basis of race, color, religion, sex, national origin, and status as a qualified individual with a disability or protected veteran. They also require federal contractors and subcontractors to take affirmative steps to ensure equal employment opportunity in their employment processes.

 Directive 2014-01: The OFCCP has recently acknowledged a lack of common understanding between the Department of Labor and covered subcontractors of the TRICARE community regarding the OFCCP’s jurisdiction to audit certain facilities under the laws and regulations they administer. Due to this, and legal challenges brought forth, the Department of Labor issued Directive 2014-01 on May 7, 2014.

The good news: Directive 2014-01 puts in place a five-year moratorium on OFCCP’s enforcement of TRICARE subcontractors covered under the directive. During the moratorium, the OFCCP will assist with outreach and technical assistance programs to provide greater transparency and education to the TRICARE community on the laws enforced by the OFCCP, and coverage under such.

In addition, covered TRICARE subcontractors with open and pre-existing audit evaluations will receive administrative closure within 30 days of the effective date of this directive, or, May 7, 2014. TRICARE subcontractors receiving an OFCCP scheduling letter after the effective date of this directive should reach out to their local OFCCP office to request an administrative closure of the evaluation.

For further information regarding the policies, procedures, and coverage of this directive, please follow the link below to the OFCCP’s website: http://www.dol.gov/ofccp/regs/compliance/directives/dir2014_01.htm.

OFCCP’s 5 Year Moratorium on TRICARE and Florida Hospital of Orlando

TRICARE LogoTRICARE is a federal health care program for active and retired members of the military and their dependents. The TRICARE program is being managed by Tricare Management Activity (TMA). TMA is responsible for contracting with health insurance corporations to provide networks of healthcare providers to the beneficiaries of TRICARE. These healthcare insurance corporations can, in turn, also enter into contracts with hospitals to provide health care services to the beneficiaries of the contract between TMA and the insurance corporation. This is, in fact, was the case for Florida Hospital of Orlando.

Florida Hospital of Orlando’s encounter with the OFCCP all started in 2007; this was when the hospital received a desk audit scheduling letter from the agency. Florida Hospital refused to acknowledge the letter citing that they do not fall under OFCCP’s jurisdiction because they are, by no means, a federal contractor or a sub-contractor. Hence, the tug-of-war between the OFCCP and Florida Hospital began. In 2008, the OFCCP filed an administrative complaint to the Office of the Administrative Law Judges (ALJ) asking to permit the agency to continue with its compliance review. It was not until 2010 that the ALJ ruled in favor of the OFCCP and declared that the hospital, by virtue of its contract to provide medical services to TRICARE beneficiaries, is in effect a federal subcontractor. As expected, Florida Hospital filed an appeal with the Administrative Review Board in November of the same year.

On December 31, 2011, President Barack Obama signed the National Defense Authorization Act (NDAA) into law. This law states that healthcare providers operating as part of the TRICARE managed care network of providers will not be considered as contractors or subcontractors. Section 715 of the said law states “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 [e.g. federal contractors subject to OFCCP jurisdiction], 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.”

Despite the NDAA, Florida Hospital remained under the claws of the OFCCP – they were not quite off the hook yet (as everybody thought they would be). The OFCCP contended that the regulations define subcontract as:

…any agreement or arrangement between a contractor and any person (in which the parties do not stand in the relationship of an employer and an employee):

 1)      For the purchase, sale or use of personal property or nonpersonal services which, in whole or in part, is necessary to the performance of any one or more contracts; or

2)      Under which any portion of the contractor’s obligation under any one or more contracts is performed, undertaken, or assumed.

Based on these prongs, the OFCCP argued that Florida Hospital met the definition of a subcontractor. Hence, when everybody thought that OFCCP’s TRICARE jurisdiction had been settled by the NDAA, it truly was not. Needless to say, the battle between the OFCCP and Florida Hospital continued. Until recently…

On March 28, 2014, the OFCCP withdrew its jurisdictional complaint against Florida Hospital of Orlando. The Department of Labor’s ALJ subsequently dismissed the case on April 1, 2014. What made the OFCCP withdraw its complaint? The agency had reached an agreement with Congress to create a five-year moratorium on affirmative obligations by healthcare providers who participate in TRICARE. As an effect, the OFCCP will also close any open audit involving healthcare providers if TRICARE was the only basis for such compliance review.

This can be viewed as a victory for TRICARE providers, albeit it is temporary. During this period of moratorium, Secretary of Labor Thomas Perez also pledged that they will provide information, training, and technical assistance to TRICARE subcontractors with regards to their federal contracting obligations. If we are to read between the lines, this means that the OFCCP will remain aggressive in pursuing its jurisdiction over healthcare providers. The OFCCP is steadfast in its stance that there are certain conditions where healthcare providers which operate under federally funded health programs can be considered as federal subcontractors. As always, we will all have to wait and see how the dice will roll…

OFCCP v. Florida Hospital of Orlando

The U.S. Department of Labor’s Administrative Review Board (ARB) in OFCCP v. Florida Hospital of Orlando ruled that the OFCCP lacks jurisdiction over Florida Hospital of Orlando, a TRICARE health services provider. The ARB based it’s decision on Section 715 of the National Defense Authorization Act (NDAA).

Background Summary

2007: The OFCCP sent Florida Hospital a scheduling letting informing them that they were scheduled for an OFCCP desk audit. The hospital replied stating that they were neither a federal contractor or federal subcontractor and would not comply with the OFCCP audit. The OFCCP then issued a  Notice to Show Cause.

2008: The OFCCP filed an Administrative Complaint with the Office of Administrative Law Judges requesting that Florida Hospital be permanently enjoined for refusing to comply and that it be directed to permit OFCCP access to Florida Hospital to complete its compliance review.

2010: The Administrative Law Judge (ALJ) ruled in favor of the OFCCP asserting that Florida Hospital was a federal subcontractor. Then in November, the hospital filed an appeal with the Administrative Review Board. In December, President Obama signed the NDAA into law which included directives in Section 715 regarding TRICARE contracts.

Section 715 of the NDAA states:

“…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 be a contract for the performance of health care services or supplies on the basis of such requirement…”

2012: In October the ARB ruled that Section 715 could be applied retroactively and that Florida Hospital of Orlando as a TRICARE health service provider is not under the jurisdiction of the OFCCP. The ARB reversed the Administrative Law Judges’ ruling and dismissed the OFCCP complaint.

While this is great news for those with TRICARE contracts, health services organization would be wise to seek counsel as to how the affirmative action laws may apply to them. The OFCCP, in this case and others, has shown that it is serious about asserting its authority over hospitals and medical providers that it believes to be in its jurisdiction.

If you’d like to read other commentary about OFCCP v. Florida Hospital of Orlando, visit the sites below:

OFCCP Webinar: Status of Pending Compliance Evaluations of Entities that Participate in TRICARE Networks

From the OFCCP Webinar Invitation:

The National Defense Authorization Act of 2012 (NDAA) contains a provision relating to the Office of Federal Contract Compliance Program’s (OFCCP) jurisdiction over TRICARE subcontractors. Please join OFCCP Director of Program Operations Tom Dowd and Counsel Consuela Pinto for a webinar to explain how OFCCP will enforce the law regarding such subcontractors in light of this provision.

Because the NDAA does not address OFCCP coverage unrelated to TRICARE, the webinar will explain how OFCCP is moving forward with compliance evaluations of entities that participate in TRICARE and also hold another federal contract or subcontract. The webinar also will explain how OFCCP is putting compliance evaluations of those entities for which a TRICARE subcontract is the only basis of jurisdiction “on hold,” in light of the fact that this issue is currently being litigated in the Florida Hospital case.

This event requires registration.

Topic: Status of Pending Compliance Evaluations of Entities that Participate in TRICARE Networks

Host: Brenda Williams Stewart

Date and Time:

  • Tuesday, March 27, 2012 2:00 pm, Eastern Daylight Time (New York, GMT-04:00)
  • Tuesday, March 27, 2012 11:00 am, Pacific Daylight Time (San Francisco, GMT-07:00)
  • Tuesday, March 27, 2012 12:00 pm, Central Time (Saskatchewan, GMT-06:00)
  • Tuesday, March 27, 2012 11:00 am, Mountain Time (Arizona, GMT-07:00)

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To register for the online event

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  1. Go to https://doltraining.webex.com/doltraining/onstage/g.php?d=661834933&t=a&EA=williamsstewart.brenda%40dol.gov&ET=ec5b6dbab00a0b24a2ac608168d88622&ETR=b21ebfe0a40e49a43ef65e7f86d3e618&RT=MiMxMQ==&p
  2. Click “Register”
  3. On the registration form, enter your information and then click “Submit”.

Once the host approves your registration, you will receive a confirmation email message with instructions on how to join the event.

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For assistance
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You can contact Brenda Williams Stewart at:
williamsstewart.brenda@dol.gov

 

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