Health Care Law Blog

Healthcare Providers Need to Review Contracts to Determine Federal Contractor Status

The Office of Federal Contracts Compliance Programs ("OFCCP"), a branch of the Department of Labor, has targeted the healthcare industry for increased enforcement with regard to affirmative action. The OFCCP issued, though not publically, a December 16, 2010 directive which affirmed its position that merely receiving reimbursement from most Medicare programs or federal grants is not enough to create federal contractor status (which requires compliance with affirmative action).  The OFCCP directive stated, however, that the following do establish federal contractor status: direct contracts between health care providers and TRICARE (the Department of Defense health care program for active and retired military members), Federal Employees Health Benefit Plan ("FEHBP"), or Medicare Advantage or Part D programs.

Recent administrative law opinions have found that even subcontractor relationships can establish federal contractor status and thus require affirmative action compliance.

In OFCCP v. UPMC Braddock, the ARB found that three hospitals were federal subcontractors through an HMO health plan contract. Specifically, the hospital had a contract to provide medical services for a non-governmental agency HMO (the University of Pittsburgh Medical Center Braddock).  The HMO entered into a contract to provide medical services to the federal employees of the United States Office of Personnel Management.  Through their contracts with HMO, who contracted to provide services to federal employees, the hospitals, as subcontractors, were required to comply with the affirmative action requirements of federal contractors.

Similarly, in OFCCP v. Florida Hospital of Orlando, Florida Hospital had a contract with Humana Military Services ("Humana") in which it provided health care services for Humana's beneficiaries under TRICARE.  The administrative law judge found that Florida Hospital's provision of such services was not merely reimbursement and determined the hospital was a subcontractor based on the agreement it had with Humana.  The lesson to be learned from this opinion is that it is important for health care providers to determine whether they are only receiving reimbursement or whether they can be classified as federal subcontractors.

Overall, health care providers should have their current contracts reviewed to determine their contractor status. If a federal contractor status exists, the health care provider must begin taking steps toward affirmative action compliance, such as implementing an Affirmative Action Program with written plans (including statistical analyses). Health care providers have only 120 days after entering into the contract to comply with the affirmative action requirements.

Please contact Foster Swift to review your contracts and help you comply with all of the affirmative action requirements.

Categories: Compliance, Regulatory