On December 16, 2010, OFCCP Director Patricia Shiu signed Directive 293 to provide “comprehensive guidance for assessing when health care providers and insurers are federal contractors and subcontractors based on their relationship with a Federal health care program or with participants in a Federal health care program.” This new directive was aimed at clarifying the confusion left by two prior OFCCP directives (Nos. 189 and 262) as to the types of arrangements that would subject medical providers and hospitals to OFCCP’s jurisdiction.

For the first time, OFCCP sets out its position that contractual arrangements under Medicare Part C (Medicare Advantage) and Medicare Part D (prescription drug plans) will impose OFCCP jurisdiction, in addition to its previously-articulated position in recent litigation that contractual arrangements with the Federal Employees Health Benefit Program (FEHBP) and TRICARE already impose jurisdiction. Importantly, OFCCP reaffirms its position that arrangements to receive reimbursement under Medicare Parts A (medical insurance) and B (hospital insurance) do not subject a medical provider to OFCCP jurisdiction, nor do arrangements in which medical providers simply get reimbursed from an insurer such as Blue Cross or Blue Shield. Yet, given the number of providers that already have signed the types of agreements described in the directive or are contractually participating in the Medicare Part D prescription drug program, OFCCP’s jurisdictional reach just became vast.

The directive comes at a time when the Department of Labor is actively litigating two cases on these same issues: UPMC Braddock, et al. v. Solis, involving subcontracts to provide medical services for employees participating in the Federal Employees Health Benefit Program and OFCCP v. Florida Hospital of Orlando, 2009-OFC-2 (Oct. 18, 2010) in which Florida Hospital of Orlando has filed exceptions to the Administrative Law Judge’s summary decision and order.

There is a Federal Acquisition Regulation (FAR) that excludes hospitals and medical providers from the definition of contractor, 48 C.F.R. section 1602-170.14, and TRICARE’s Management Activity office has taken the position that it never intended that its vast network of medical providers would be subject to OFCCP’s “onerous federal contracting rules.” Nevertheless, OFCCP’s position is that “contractor (or subcontractor) obligations mandated by OFCCP programs cannot be altered, limited, or defeated by the inclusion in the contract of provisions contrary to such obligations.”

OFCCP recognizes that there is a wide range of relationships that exist between health care providers and/or insurers, federal health care programs, and participants in federal health care programs. It intends to evaluate the contractual and subcontractual relationship in each case in which a medical provider or health care entity opposes jurisdiction to see if it falls within the directive’s examples of the type of arrangements that impose jurisdiction.

Hospitals, medical providers, health plans, and pharmaceutical companies are well advised to gather documentation of their contractual and subcontractual relationships to the federal government or TRICARE, and determine whether they are covered by OFCCP’s jurisdiction. The annual preparation of affirmative action plans, the substantive outreach to veterans and individuals with disabilities, and the complicated record keeping obligations that OFCCP jurisdiction imposes require lead time to implement. Although OFCCP regulations provide 120 days from contract signing for new contractors to come into compliance, the new OFCCP administration may be rigid about affording health care entities additional time to comply, given its position in this directive.

This entry was written by Alissa Horvitz.