The U.S. Department of Labor’s Administrative Review Board has rejected the attempt by the Office of Federal Contract Compliance Programs (OFCCP) to subject health care providers to federal affirmative action requirements.

In OFCCP v. Florida Hospital of Orlando, the Board reversed an administrative law judge’s determination that Florida Hospital of Orlando is a federal subcontractor, subject to Executive Order 11246, Section 503 of the Rehabilitation Act, and the Vietnam Era Veterans Readjustment Assistance Act. The ALJ had determined that Florida Hospital was a federal subcontractor because it provided health care services for beneficiaries pursuant to a contract with Humana Military Healthcare Services Inc. (HMHS), which has an agreement with TRICARE, the U.S. Department of Defense’s worldwide health care program for active duty and retired military service members and their families. More specifically, the ALJ found that the hospital contracted to perform part of HMHS’s obligations under its TRICARE contract to provide medical services.

The Board, however, disagreed,  basing its decision on the recently enacted National Defense Authorization Act for Fiscal Year 2012 (NDAA). The NDAA was signed by President Obama on December 31, 2011, while the case was pending before the Board. The applicable provision of the NDAA requires the Department of Defense to maintain adequate networks of health care providers for TRICARE beneficiaries and provides that a TRICARE contract that includes the requirement to establish, manage, or maintain a network of providers may not be considered a contract for the performance of health care services or supplies on the basis of that requirement.

Board found that Florida Hospital’s contract with HMHS fell within the scope of that provision because it “involves the provision of healthcare providers pursuant to a managed care prime contract between TRICARE and HMHS that includes the requirement to maintain a network of providers.” As a result, Florida Hospital could not be considered a federal subcontractor pursuant to the NDAA, and thus was not subject to the OFCCP’s jurisdiction. It remains to be seen whether OFCCP will appeal the Board’s decision to federal court.

This decision significantly restricts the OFCCP's jurisdiction over health care providers that participate in federal programs. For more information on the Board's decision, please contact David S. Fryman, 215.864.8105 or, or the member of Ballard Spahr’s Labor and Employment Group with whom you work.

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