CLIENT UPDATE

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November 14, 2010

Hospital that Participates in Tricare Found to be Federal Subcontractor

On October 18, 2010, a United States Department of Labor Administrative Law Judge (ALJ) ruled that the Florida Hospital of Orlando is a government contractor because it provides medical services under Tricare. (Tricare is a managed care program for active duty and retired military service members, their survivors and families). The case is reported at OFCCP v. Fla. Hosp. of Orlando, DOL OALJ, No. 2009-OFC-00002.  Hospitals and other employers that are deemed federal government contractors must comply with the affirmative action and equal employment opportunity obligations enforced by the Office of Federal Contract Compliance Programs (“OFCCP”) of the United States Department of Labor.

The ALJ reaffirmed the general rule that the mere acceptance of government insurance benefits, such as Medicare, does not subject a hospital to OFCCP jurisdiction.  The ALJ also reaffirmed that a hospital is not a government contractor simply because it agrees to provide medical services for an insurer such as Blue Cross/Blue Shield, even if that insurance company has a contract with the Office of Personnel Management to provide health insurance to federal employees. See e.g. OFCCP v. Bridgeport Hospital, DOL ARB, No. 00-034, 1/31/03).  However, the ALJ in the Orlando case found that participation in Tricare was more indicative of being a federal government contractor than merely accepting insurance payments as was the case in Bridgeport Hospital.  In so holding, the ALJ followed an earlier case involving an HMO and the University of Pittsburgh (UPMC Health Plan) in which it was held that the hospital’s participation in the HMO rendered it subject it to OFCCP jurisdiction.  See OFCCP v. UPMC Braddock, DOL ARB, No. 08-048, 5/29/09.

Significance for Hospitals

In the absence of a superseding judicial authority, if a hospital participates in a federal HMO, that hospital must comply with the affirmative action and equal employment opportunity obligations enforced by the OFCCP. 

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