On June 21, 2011, the Senate Armed Services Committee approved (pdf) a draft of the National Defense Authorization Act for Fiscal Year 2012 (pdf) that would end efforts by the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) to extend federal affirmative action obligations to hospitals that participate in or accept reimbursement through the TRICARE program.

TRICARE is the Department of Defense’s health care program for active duty and retired military and their families. OFCCP has been taking the position that providers participating in TRICARE are government subcontractors subject to various affirmative action and equal employment opportunity compliance requirements enforced by OFCCP. The Senate Bill would reject OFCCP’s position by explicitly excluding TRICARE institutional, professional, and pharmacy network providers from being considered subcontractors for the purposes of Federal Acquisition Regulation (FAR) or any other law, in order to maintain adequate TRICARE provider networks.

The legislative action comes in the wake of an administrative law judge’s determination in OFCCP v. Florida Hospital of Orlando (pdf) that a hospital that served as an “in-network” provider in the TRICARE program constituted a federal contractor, and was therefore subject to OFCCP compliance obligations. The OFCCP’s intent to expand its jurisdiction over health care providers was articulated in Directive 293. (pdf) The Directive, which was signed by OFCCP Director Patricia Shiu on December 16, 2010, provides “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.” The Directive sets out OFCCP’s position that certain arrangements with the Federal Employees Health Benefit Program (FEHBP) and TRICARE constitute government contracts that create OFCCP jurisdiction. The Directive also states that arrangements under Medicare Part C (Medicare Advantage) and Medicare Part D (prescription drug plans) can similarly create government contracts supporting OFCCP jurisdiction.

The bill including the TRICARE exemption now moves to the Senate floor for full Senate consideration and vote. The House of Representatives approved its version of the Defense appropriations bill (H.R. 1540) that does not include such a provision on May 26, 2011. If the full Senate approves the draft including the TRICARE exemption, the bills would need to be reconciled before a final vote.