Affirmative Action Comes to a Hospital Near You

by Sherman & Howard L.L.C.
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Does the OFCCP have jurisdiction over hospitals that contract to provide medical services to members of the military?  We hoped we were done with this issue when the Congress enacted the National Defense Authorization Act ("NDAA") in December 2011.  The Department of Labor Administrative Review Board ("ARB") however has decided that the NDAA did not extinguish the issue[1]

Six lawyers from the Department of Labor, 2 lawyers for Florida Hospital of Orlando, and 18 lawyers for various friends of the court have created confusion over this issue for almost 6 years, but the current holding of the ARB is this: a hospital that sub-contracts with a network system to provide services to military personnel has a government sub-contract and so might be subject to OFCCP oversight and federal affirmative action requirements.  The ARB left open the issue of whether providing military personnel with healthcare might be an excluded government assistance program.  For more information, follow the link here.

TRICARE is a program of the Department of Defense.  Its job is to make sure military personnel and their families have access to healthcare.  TRICARE contracts with "managed care support" systems (e.g. Humana Military Healthcare Services) to establish networks of healthcare providers (e.g. hospitals) who, in turn, agree to provide medical services.  In the middle of a fight over the OFCCP's claimed jurisdiction to audit the Florida Hospital of Orlando - and faced with the fear that government affirmative action requirements would drive up the cost of health care for military personnel - Congress enacted the NDAA in 2011.  The NDAA excluded TRICARE contracts that "establish, manage, or maintain a network of providers" from the universe of contracts for the performance of healthcare services or supplies.  This provision seemed to mean that hospitals contracting with TRICARE's managed care support systems could not be considered to have a government contract to provide healthcare services and were free from affirmative action requirements and OFCCP review.

Recently, the ARB ruled otherwise.  Revisiting an earlier decision in the same dispute, the ARB concluded that, although the NDAA stopped the OFCCP from asserting that the hospitals had a government contract to provide healthcare services, the NDAA left open another route for the OFCCP to get to the hospital.  The hospital had sub-contracted with the managed care support system (Humana) to provide a service that was necessary to Humana's contract with TRICARE.  A sub-contract to provide nonpersonal services that are necessary for the performance of a government contract is a basis for OFCCP jurisdiction even if the NDAA stops us from calling it a government contract to provide healthcare services. 

Don't let yourself think this is over now.  Two members of the ARB dissented from the ruling and more appeals seem likely.


[1] OFCCP v. Florida Hospital of Orlando, ARB Case No. 11-011 (July 22, 2013).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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