Hospitals Providing Medical Services to Federal Employees May Be Covered Contractors for AAP Purposes

Ford & Harrison LLP Legal Alert
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Hospitals Providing Medical Services to Federal Employees:

Recent OFCCP activity demonstrates the agency's desire to establish jurisdiction over hospitals and other health care providers even when the hospital does not have a direct contract with a federal agency (e.g., the Bureau of Prisons or the VA).
Providing Services to HMOs: Recently, the Administrative Review Board (ARB) upheld an Administrative Law Judge's (ALJ) determination that three hospitals which received payments from an HMO for providing medical products and services to individuals covered by the HMO, including employees of the U.S. government, were federal subcontractors subject to federal equal employment and affirmative action obligations. See OFCCP v. UPMC Braddock, ARB No. 08-048 (ARB May 29, 2009). In this case, the Office of Personnel Management (OPM) had a contract with University of Pittsburgh Medical Center (UPMC) Health Plan (an HMO) to provide medical benefits to federal government employees. The three defendant hospitals had contracts with UPMC to provide medical products and services to individuals covered by the HMO. The OFCCP filed administrative complaints with the Department of Labor (DOL) against the three hospitals for non-compliance with Executive Order 11246, Section 503 of the Rehabilitation Act, and Section 402 of the Vietnam Era Veterans' Readjustment Assistance Act of 1974 because they did not produce documents in response to OFCCP's request and did not allow OFCCP access to their premises for onsite reviews.
The ARB upheld the ALJ's grant of judgment in favor of the OFCCP, even though the hospitals did not consent to be federal subcontractors and the language of their contracts with the HMO specifically excluded them from the definition of subcontractor. The ARB held that the equal employment opportunity clauses in the three federal laws were implied by law in the hospitals' contracts and that the contractual terms did not override the requirements of federal law. The ARB also distinguished its earlier decision in OFCCP v. Bridgeport Hospital (Jan. 31, 2003), in which it held that a hospital providing medical services to federal employees under an agreement with Blue Cross and Blue Shield was not a federal subcontractor. In Bridgeport, the ARB found that Blue's contract with the OPM was to provide insurance, while its contract with Bridgeport was for the provision of medical services. Thus, the hospital was not considered a subcontractor of the federal contract. However, in the recent UPMC case, the ARB found that the provision of medical services and supplies was a critical component of the contract between the OPM and UPMC Health Plan. The ARB also found that the contract depended on medical providers like the hospitals to enable UPMC Health Plan to meet the obligations of its contract with OPM. Rejecting the hospitals' arguments that they should be considered insurance providers, the ARB found "ample evidence that the Defendants were operating primarily as health care delivery providers and not strictly as insurance providers." Thus, the ARB found the Bridgeport decision inapplicable and held that the hospitals were subcontractors subject to the equal employment obligations of the three laws.
Providing Services to TRICARE Beneficiaries: Another OFCCP jurisdictional development is that several hospitals have received compliance review letters from the OFCCP in which the agency argues that the hospital is a federal contractor based on the provision of services to TRICARE beneficiaries. Some hospitals/other health care professionals have entered into agreements with HUMANA Military or other third parties to be included in a network of providers for TRICARE beneficiaries to utilize. Ford & Harrison recently learned that one hospital in Florida is challenging the OFCCP's jurisdiction based on TRICARE services alone. According to the OFCCP, this situation is in litigation; thus, we will report on any decisions in this case as they develop.
What do these recent developments mean for hospitals/other health care providers? With the UPMC case and the pending Florida hospital TRICARE issue, it is apparent that if OFCCP prevails in its arguments, many hospitals/health care providers will be required to maintain AAPs and adhere to all the requirements associated with them.
If you have any questions regarding these issues, please contact an attorney in Ford & Harrison's Affirmative Action Compliance Group or the Ford & Harrison attorney with whom you usually work. Linda Cavanna-Wilk and Karen Tyner contributed to this Alert.