|April 30, 2012|
Previously published on April 26, 2012
Executive Summary: The Office of Federal Contract Compliance Programs (OFCCP) has rescinded its December 2010 enforcement directive (No. 293) which provided guidance on when health care providers or insurers may be considered federal contractors. The OFCCP has also stated that it will put on hold scheduled compliance evaluations where the only basis for jurisdiction over an entity is its participation in TRICARE. The OFCCP announced these decisions during an agency webinar on April 25, 2012.
The agency's decision to rescind Directive 293 follows the enactment of the National Defense Authorization Act (NDAA) which stated that TRICARE network providers will not be considered federal subcontractors for purposes of OFCCP jurisdiction. This rescission does not change the jurisdictional basis for health care providers. It simply means that the OFCCP no longer has a specific guideline on jurisdiction for health care entities. The OFCCP will still assert jurisdiction over health care providers which have appropriate non-TRICARE contracts.
After the NDAA was enacted, the Hospital in OFCCP v. Florida Hospital of Orlando filed a motion to dismiss since TRICARE was the only basis for OFCCP jurisdiction. The OFCCP submitted a legal brief after the passage of NDAA. According to the OFCCP's brief, the agency maintains jurisdiction over the Hospital because the law is not retroactive. More importantly, the OFCCP interprets the new law to impact only one prong of the subcontractor definition, specifically the second prong (assumption of a contractor's obligation). Thus, the OFCCP contends that the first subcontractor prong (necessary to the performance of one or more contracts) is still effective after NDAA to give it jurisdiction over the Hospital as a TRICARE network provider. The Administrative Review Board will eventually decide the impact of NDAA on this specific case.
During the recent webinar, the OFCCP also announced that it will "put on hold" the compliance reviews of health care providers in which OFCCP jurisdiction was solely based on TRICARE. The OFCCP intends to send letters to these health care providers regarding the OFCCP's position. Although Directive 293 is no longer effective, the OFCCP stated that it will maintain jurisdiction over health care providers which have contracts or subcontracts other than TRICARE. For these health care providers, the OFCCP will issue communication indicating that the agency has jurisdiction and that the health care provider is expected to continue with the compliance review.
Employers' Bottom Line:
The content of the OFCCP webinar was good news for health care employers for whom the only basis of OFCCP jurisdiction is participation in TRICARE. Health care providers who contested jurisdiction should receive correspondence from the OFCCP in the near future regarding the status of their compliance review. At that time the entity will learn whether jurisdiction was based solely on TRICARE or if OFCCP contends jurisdiction can be established separately from TRICARE participation. The OFCCP will determine on a case-by-case basis whether Medicare Parts C or D grant the agency jurisdiction over a health care provider by examining the specific contracts at issue.
 For more information, please see our December 16, 2011 Legal Alert, "Senate Passes National Defense Authorization Act," available at: http://www.fordharrison.com/shownews.aspx?show=7817.
 For more information on this case, please see our October 26, 2010 Legal Alert, "Hospital's Participation in TRICARE Subjects it to Federal Contractor Affirmative Action Obligations," available at: http://www.fordharrison.com/shownews.aspx?show=6708.