TRICARE is a federal health care program for active and retired members of the military and their dependents. The TRICARE program is being managed by Tricare Management Activity (TMA). TMA is responsible for contracting with health insurance corporations to provide networks of healthcare providers to the beneficiaries of TRICARE. These healthcare insurance corporations can, in turn, also enter into contracts with hospitals to provide health care services to the beneficiaries of the contract between TMA and the insurance corporation. This is, in fact, was the case for Florida Hospital of Orlando.
Florida Hospital of Orlando’s encounter with the OFCCP all started in 2007; this was when the hospital received a desk audit scheduling letter from the agency. Florida Hospital refused to acknowledge the letter citing that they do not fall under OFCCP’s jurisdiction because they are, by no means, a federal contractor or a sub-contractor. Hence, the tug-of-war between the OFCCP and Florida Hospital began. In 2008, the OFCCP filed an administrative complaint to the Office of the Administrative Law Judges (ALJ) asking to permit the agency to continue with its compliance review. It was not until 2010 that the ALJ ruled in favor of the OFCCP and declared that the hospital, by virtue of its contract to provide medical services to TRICARE beneficiaries, is in effect a federal subcontractor. As expected, Florida Hospital filed an appeal with the Administrative Review Board in November of the same year.
On December 31, 2011, President Barack Obama signed the National Defense Authorization Act (NDAA) into law. This law states that healthcare providers operating as part of the TRICARE managed care network of providers will not be considered as contractors or subcontractors. Section 715 of the said law states “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.”
Despite the NDAA, Florida Hospital remained under the claws of the OFCCP – they were not quite off the hook yet (as everybody thought they would be). The OFCCP contended that the regulations define subcontract as:
…any agreement or arrangement between a contractor and any person (in which the parties do not stand in the relationship of an employer and an employee):
1) For the purchase, sale or use of personal property or nonpersonal services which, in whole or in part, is necessary to the performance of any one or more contracts; or
2) Under which any portion of the contractor’s obligation under any one or more contracts is performed, undertaken, or assumed.
Based on these prongs, the OFCCP argued that Florida Hospital met the definition of a subcontractor. Hence, when everybody thought that OFCCP’s TRICARE jurisdiction had been settled by the NDAA, it truly was not. Needless to say, the battle between the OFCCP and Florida Hospital continued. Until recently…
On March 28, 2014, the OFCCP withdrew its jurisdictional complaint against Florida Hospital of Orlando. The Department of Labor’s ALJ subsequently dismissed the case on April 1, 2014. What made the OFCCP withdraw its complaint? The agency had reached an agreement with Congress to create a five-year moratorium on affirmative obligations by healthcare providers who participate in TRICARE. As an effect, the OFCCP will also close any open audit involving healthcare providers if TRICARE was the only basis for such compliance review.
This can be viewed as a victory for TRICARE providers, albeit it is temporary. During this period of moratorium, Secretary of Labor Thomas Perez also pledged that they will provide information, training, and technical assistance to TRICARE subcontractors with regards to their federal contracting obligations. If we are to read between the lines, this means that the OFCCP will remain aggressive in pursuing its jurisdiction over healthcare providers. The OFCCP is steadfast in its stance that there are certain conditions where healthcare providers which operate under federally funded health programs can be considered as federal subcontractors. As always, we will all have to wait and see how the dice will roll…