During a hearing conducted by the House Subcommittee on Workforce Protections, Littler’s David Goldstein testified about the Office of Federal Contract Compliance Programs’ (OFCCP) persistent attempts to assert jurisdiction over many healthcare providers based on TRICARE participation. TRICARE is the Department of Defense (DoD) program that pays for the medical benefits of active duty and retired military personnel and their families. The federal contractors that administer the TRICARE program enter into contracts with hospitals and other medical providers to provide medical care and supplies to military personnel and their family members covered by TRICARE.  

Reversing prior positions, the OFCCP under President Obama has  asserted that healthcare entities that agree to participate in the TRICARE program are federal subcontractors that must comply with the affirmative action and other arduous requirements imposed and enforced by the agency.  As Goldstein stated during the hearing, “healthcare providers are already highly regulated,” and are subject to federal and state nondiscrimination requirements, so subjecting them to additional OFCCP requirements would impose significant administrative and financial burdens. 

The issue of OFCCP compliance is an important one for healthcare provides.  Goldstein explained that “many healthcare providers mak[e] decisions not to participate in certain programs and arrangements because the costs of compliance are simply greater than the benefits of participation.  And we are talking not only about the financial costs of compliance, but also how OFCCP regulation impacts the ways in which providers deliver services to their patients.”  

The issue was believed to have been laid to rest when, in 2011, Congress passed the National Defense Authorization Act (NDAA) for Fiscal Year 2012.  Goldstein explained, “this measure included language that was very widely and reasonably understood as putting an end to this debate and providing that the OFCCP could not exercise jurisdiction based on providers’ participation in TRICARE.”  Nonetheless, just last summer, the OFCCP reignited the issue in ongoing litigation with Florida Hospital – in which the OFCCP claimed it had jurisdiction based on the hospital’s TRICARE participation – when the Administrative Review Board (ARB) granted the agency’s request for reconsideration.  In a decision that followed shortly thereafter, the ARB held that the NDAA did not foreclose all of OFCCP’s arguments for jurisdiction.  This matter was remanded to an administrative law judge, and is still unresolved.  According to Goldstein, “the ARB’s decision to accept re-hearing of the Florida Hospital case and its subsequent reversal of its original decision are unprecedented.” 

As a result of this confusion, Subcommittee Chair Tim Walberg (R-MI) introduced the bill that was the subject of the hearing, the Protecting Health Care Providers from Increased Administrative Burdens Act (H.R. 3633). This legislation would prevent the OFCCP from asserting jurisdiction over healthcare providers based on their federal health program participation.  Specifically, this bill provides: 

A State, a local government, or other recipient that receives a payment from the Federal Government, directly or indirectly and regardless of reimbursement methodology, related to the delivery of health care services to individuals, whether or not such individuals are or have been employed by the Federal Government, shall not be treated as a Federal contractor or subcontractor by the Office of Federal Contract Compliance Programs based on the work performed or actions taken by such individuals that resulted in the receipt of such payments. 

Walberg said the bill is an attempt to “rein in executive overreach,” and “prevent an administrative nightmare for healthcare providers,” and those needing access to care.  

In response to this legislation and the impending hearing, Labor Secretary Thomas Perez on Tuesday sent a letter to House leaders, offering a “compromise.” According to Perez, 

I believe that . . . in lieu of legislative action, we can come to a workable administrative solution that addresses your concerns and provides greater clarity to the TRICARE subcontractor community while maintaining important civil rights protections . . . The Department can achieve those goals by having 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 and works with other Federal agencies to clarify coverage of health care providers under Federal statutes applicable to contractors and subcontractors. 

In other words, the agency would impose a five-year moratorium on OFCCP audits of healthcare institutions, during which time the OFCCP would embark on a campaign of compliance assistance to such hospitals and medical institutions in an effort to teach them about subcontractor jurisdiction and their compliance obligations.  This, however, is not a compromise that would definitively settle the OFCCP jurisdictional issue, nor would it comply with Congress’s intent established by the NDAA.  As Goldstein said, “to the extent that the Department of Labor’s proposal would not end the Florida Hospital litigation and does not represent a commitment by the OFCCP to relinquish its claims of jurisdiction over TRICARE participants in non-audit contexts, such as complaint investigations, nothing is really being resolved,” adding that “accepting this proposal would reinforce a very disturbing trend that contractors have seen at the OFCCP in the context of compliance reviews.  And that is an indifference by the agency to the letter of the law when, in its judgment, the letter of the law is inconsistent with the agency’s goals.”  

When asked by Chairman Walberg whether the DOL’s proposal would alleviate any uncertainty, Goldstein reiterated that it would not, explaining that “there are hospitals that are sitting on the sidelines now,” waiting for a resolution to this issue.  He said unless this issue is resolved soon, “there will be at least 5, maybe 10 more years of uncertainty,” during which “providers will not be willing to provide services to our service members and their families.”  

Goldstein also pointed out that there is a difference of opinion regarding OFCCP jurisdiction within the administration itself.  The DoD and the Office of Personnel Management, Goldstein testified, believe imposing OFCCP requirements “limits the number of providers that are willing to offer such services.” 

Fellow panelist Thomas Carrato, President of Health Net Federal Services, agreed, testifying that many healthcare providers are “not willing or able to shoulder the additional burdens of OFCCP compliance,” and that, as a result, it is more difficult to build and maintain provider networks. 

Another panelist, testifying on behalf of the American Hospital Association, said that the DOL’s proposal sets forth a “vaguely defined, case-by-case” way of assessing jurisdiction.  He said that the agency differentiates between fee-for-service and managed care plans, which, he said, “is a distinction without a difference.”  The DOL’s “compromise” simply “kicks the can down the road for enforcement.” 

Ranking member Joe Courtney (D-CT) claimed that because the DOL proposal would delay enforcement for five years, the issue would resolve itself, as there will be a new president and labor secretary by then.  Rep. John Kline (R-MN) said that this option is “a terrible position for the Congress and providers to be in.”  He agreed with Goldstein that “Congress made it very clear” that the OFCCP cannot assert jurisdiction on this issue.  

A complete list of panelists and links to their testimony can be found here.