TRICARE is the federal government’s healthcare program for active duty and retired military members and their families. For many years, healthcare systems reasonably assumed that their subcontracts to provide services or benefits to federal employees under TRICARE would not invoke the jurisdiction of the Office of Federal Contract Compliance Programs (OFCCP), and thus would not mandate federal equal employment and affirmative action obligations. This assumption seemed particularly rational where the subcontract expressly provided that the healthcare system was not a federal contractor. In addition, the OFCCP's own March 2003 directive stated that healthcare providers that have a relationship with participants in the Federal Employees Health Benefits Program (FEHBP) are not covered under OFCCP's programs based solely on that relationship and thus are not subject to OFCCP’s federal contractor requirements.

Nevertheless, in Directive 293, signed by OFCCP Director Patricia Shiu in December, 2010, the OFCCP took the position 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.” Directive 293 was intended by the OFCCP to provide “comprehensive guidance for assessing when healthcare 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.” In this Directive, discussed in a previous blog post, the OFCCP clarified its position that certain arrangements with the Federal Employees Health Benefit Program (FEHBP) and TRICARE constitute government contracts that create OFCCP jurisdiction.  OFCCP has litigated this position as well. In UPMC Braddock v. Solis, OFCCP convinced the Administrative Review Board that three hospitals in Pittsburgh that received payments from an HMO in the course of providing medical services to U.S. government employees are covered federal subcontractors. The case is on appeal to the U.S. District Court. The same issue is also being litigated in OFCCP v. Florida Hospital of Orlando, in which Florida Hospital of Orlando has filed exceptions to the Administrative Law Judge’s summary decision and order finding OFCCP jurisdiction.

However, relief is on the way as a result of a joint House and Senate review and an addition to appropriations legislation for the Department of Defense. Both the House and Senate have approved a conference report on the National Defense Authorization Act for Fiscal Year 2012 (H.R. 1540), which includes a provision stipulating that, in determining whether TRICARE network providers are to be considered subcontractors subject OFCCP jurisdiction, healthcare providers operating as part of a TRICARE managed care network of providers will not be considered to be federal contractors or sub-contractors.

To this end, the conference report adds to the bill a new section 715, Maintenance of the adequacy of provider networks under the TRICARE program:

In establishing rates and procedures for reimbursement of providers and other administrative requirements, including those contained in provider network agreements, the Secretary shall, to the extent practicable, maintain adequate networks of providers, including institutional, professional, and pharmacy. For the purpose of determining whether network providers under such provider network agreements are subcontractors for purposes of the Federal Acquisition Regulation or any other law [e.g. federal contractors subject to OFCCP jurisdiction], a TRICARE managed care support contract that includes the requirement to establish, manage, or maintain a network of providers may not be considered to be a contract for the performance of health care services or supplies on the basis of such requirement.

In other words, despite their disagreement on almost every other issue, the House and Senate have agreed, in the defense appropriations bill, to legislatively overrule the Department of Labor’s OFCCP, and exempt from OFCCP’s jurisdiction TRICARE providers that provide healthcare services or supplies as part of a network of providers.  President Obama is expected to sign the bill.