Health Law Update

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Previously, we <a href="http://www.bakerlaw.com/health-law-update-april-18-2013/">reported</a> how the U.S. District Court for the District of Columbia found in UPMC Braddock v. Harris that providers of healthcare services are subject to federal equal employment opportunity mandates applicable to government contractors and subcontractors. Today, more than six months later, that decision continues to have legs.

Indeed, a recent decision by the U.S. Department of Labor's (DOL) Administrative Review Board (ARB) shows how aggressively the Office of Federal Contract Compliance Programs (OFCCP) is pursing investigations against healthcare providers. The ARB's decision, issued in OFCCP v. Florida Hospital of Orlando, also shows how heated the debate has become, with numerous industry groups and civil rights groups lining up on either side of the issue.

TRICARE is a federal government program designed to provide medical and dental care for members of the U.S. armed services, certain former members of the armed services and their dependents. Florida Hospital of Orlando (Hospital) subcontracts with Humana Military Healthcare Services (HMHS) to provide healthcare services for TRICARE beneficiaries. The ARB concluded that the Hospital, HMHS and TRICARE form an "integrated healthcare delivery system."

After the Hospital rebuffed the OFCCP's attempt to conduct an audit of the Hospital's compliance with various equal employment opportunity laws, an Administrative Law Judge (ALJ) ordered the Hospital to comply with the OFCCP's request for information. An appeal to the ARB followed.

The primary issue on appeal was whether the Hospital was a subcontractor under 41 C.F.R. § 60-1.3(1), which defines a "subcontract" as any arrangement between a contractor and any person "[f]or the purchase, sale or use of personal property or nonpersonal services which, in whole or in part, is necessary to the performance of any one or more contracts." In concluding that the Hospital was a subcontractor, the ARB relied upon and embraced several elements of the district court's decision in UPMC Braddock.

Addressing the question whether the subcontract between the Hospital and HMHS was for "nonpersonal services," the ARB relied upon and embraced the district court's assessment that determining whether a contract for healthcare services is for "nonpersonal services" requires an examination of the extent to which the prime contractor controls the delivery of services by the subcontractor. The ARB found that even though TRICARE and HMHS impose standards of care and require reporting (including reporting of information regarding medical staff qualifications and privileges), the Hospital operated independently and, therefore, the contract was for nonpersonal services.

In addition, the ARB relied upon UPMC Braddock to determine that the work performed by the Hospital was necessary to the performance of HMHS's contract with TRICARE because, without the Hospital, HMHS could not deliver the services. Finally, looking at UPMC Braddock, the ARB rejected the argument that the Hospital had not agreed to be a subcontractor (i.e., thereby agreeing to subject itself to OFCCP jurisdiction).

For all of these reasons, the ARB concluded that the Hospital was a subcontractor.

This decision is not the final word for the Hospital; the ARB remanded the matter to the ALJ for further consideration of the question whether the Hospital is exempt from OFCCP jurisdiction because the payments from the TRICARE program constitute federal financial assistance. Nonetheless, it is becoming clear that the UPMC Braddock decision will make it easier for the OFCCP to pursue investigations against healthcare providers who have contracts with entities responsible for providing health services to federal government employees.

DOL Continues Effort to Subject TRICARE Providers to Federal Equal Employment Opportunity Audits