Federal Government Targets TRICARE Subcontractors For Compliance with Requirements Applicable to Government Contractors


In October 2010, the U.S. Department of Labor Office of Federal Contractor Compliance Programs (OFCCP) confirmed that a hospital participating in TRICARE is a federal contractor required to comply with Affirmative Action Plan obligations under Executive Order 11246. Hospitals that hold TRICARE contracts should take steps to ensure compliance and prepare for a potential audit by OFCCP.

On October 18, 2010, the U.S. Department of Labor Office of Federal Contract Compliance Programs (OFCCP) issued a summary decision and order in OFCCP v. Florida Hospital of Orlando, Case No. 2009-OFC-00002. In Florida Hospital, the OFCCP concluded that hospitals that enter into participating hospital agreements with TRICARE contractors to provide health care services to TRICARE beneficiaries are “federal contractors” subject to the requirements of Executive Order (EO) 11246. This decision is consistent with the holding in an earlier OFCCP decision issued on May 28, 2009, OFCCP v. UPMC Braddock, Case No. 08-848, in which the OFCCP concluded that hospitals that enter into an HMO contract to provide health care services to U.S. government employees also constitute federal contractors.

In contrast to Florida Hospital and Braddock, the OFCCP has held that under certain circumstances health care providers, including hospitals, that agree to subcontract with fee-for-service insurance providers to provide health care services to beneficiaries that include federal employees are not federal contractors. OFCCP v. Bridgeport Hospital, Case No. 00-034 (Jan. 31, 2003). The key distinction between Florida Hospital and Braddock versus Bridgeport, in the opinion of the OFCCP, is that a fee-for-service contract to provide services to insurance beneficiaries is distinguishable from an HMO participation agreement, where the HMO acts as “more than an insurer” and

“[p]rovision of medical services and supplies was a critical component of the” HMO contract with the federal government.

Florida Hospital and Braddock illustrate that hospitals that enter into agreements to provide medical services to federal employees, whether by virtue of HMO participation agreements to provide care to federal employees or through TRICARE agreements, must be prepared to comply with certain specific employment-related requirements as federal contractors and particularly with EO 11246 if they satisfy certain requirements.

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