Oct 29, 2010

Hospital Receiving Insurance Payments For Providing Medical Services To Federal Employees Is Required To Have An Affirmative Action Plan

On October 12, 2009, we issued a client alert advising that the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) was attempting to subject hospitals and other medical providers to heightened equal employment opportunity and affirmative action obligations simply for providing treatment to active and retired military service members and their families.

In OFCCP v. Florida Hospital of Orlando (Oct. 18, 2010), an Administrative Law Judge (“ALJ”) held that the respondent hospital that participated in a health care provider network administered by Humana Military Healthcare Services, Inc. (“Humana”) for TRICARE, was a federal subcontractor subject to the OFCCP’s jurisdiction. Federal contractors and subcontractors are generally required to comply with equal employment opportunity and affirmative action obligations enforced by the OFCCP pursuant to Executive Order 11246, Section 503 of the Rehabilitation Act, and the Vietnam Era Veterans’ Readjustment Assistance Act.

Previous decisions reflect the OFCCP’s long term efforts to increase its jurisdiction over health care providers. In OFCCP v. Bridgeport Hospital (Jan. 31, 2003), the Administrative Review Board (“ARB”) that reviews ALJ decisions, held that a hospital providing medical services to federal employees under an agreement with Blue Cross and Blue Shield (“BCBS”) was not subject to OFCCP coverage. The ARB reasoned that the hospital did not assume a portion of BCBS’s contractual obligations to the Office of Personnel Management (“OPM”), and, therefore, was not a federal subcontractor, because while BCBS was contracted to provide insurance, the hospital was contracted to provide medical services. Subsequently, in OFCCP v. UPMC Braddock (May 29, 2009), the ARB held that the respondent hospitals that contracted with the University of Pittsburgh Medical Center (“UPMC”) to provide medical services to federal employees pursuant to a contract between UPMC and the OPM, were federal subcontractors. The ARB determined that UPMC had contracted with OPM to provide medical services, not insurance, so its agreement with the respondent hospitals constituted a subcontract of the same obligations. Similarly, in the Florida Hospital of Orlando decision, the ALJ found that Humana was contracted to provide medical services to TRICARE recipients and was, therefore, passing its own equal employment opportunity and affirmative action obligations as a federal contractor down to the provider network members. The Florida Hospital of Orlando decision could be subject to challenge and further review in the federal courts.

Smith, Gambrell & Russell, LLP will continue to monitor the progress of the case and will report on any decisions as they develop.

To learn more about how this decision may affect your company or if you have any questions regarding these issues, be sure to contact your employment counsel at Smith, Gambrell & Russell, LLP.

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