Providing Care to Federal Employees May Mean Affirmative Action Plans and Additional Compliance Requirements
July 8, 2009
By: Eric Whytsell
If you provide medical services to federal government employees, you may be a government contractor without knowing it. And what you don’t know can hurt you.
Most health care providers have never heard of the Office of Federal Contract Compliance Programs (OFCCP), a branch of the Labor Department tasked with enforcing federal regulations prohibiting federal contractors and subcontractors from discriminating based upon race, color, sex, religion, national origin, disability, and veteran status. Most are unaware of these laws’ numerous reporting, recordkeeping, and affirmative action requirements.
Of course, most providers don’t consider themselves government contractors. However, even without a direct contractual relationship with the U.S. government, a health care provider may be a “federal government subcontractor” for the purposes of the OFCCP laws.
A recent case from the Department of Labor’s Administrative Review Board highlights this risk. In OFCCP v. UPMC Braddock1, OFCCP sent letters to a group of hospitals in the Pittsburgh area scheduling compliance reviews of their facilities and requesting copies of their affirmative action plans. Each hospital had an HMO contract with the University of Pittsburgh Medical Center Health Plan to provide medical products and services to U.S. government employees covered by the plan. The Health Plan had contracted with the U.S. Office of Personnel Management (OPM) to provide coverage for the federal employees. However, the hospitals never agreed to become government subcontractors. In fact, the Health Plan contract with OPM specifically excluded the member hospitals from its definition of “subcontractor.” Arguing that they were not covered by the OFCCP rules, the hospitals did not comply with OFCCP’s requests.
The Administrative Review Board ruled that the hospitals – whether they realized it or not – were federal subcontractors subject to OFCCP jurisdiction. Although the contract between OPM and the Health Plan excluded the hospitals from its definition of “subcontractor,” the OFCCP laws cannot be contracted away. The Board found that Health Plan’s failure to include the OFCCP regulations in the hospitals’ contracts did not excuse the hospitals from compliance. Instead, the equal opportunity clauses of the OFCCP regulations were incorporated into the hospitals’ contracts with the Health Plan by operation of law.
he Board also found that the hospitals’ contracts with the Health Plan met the definition of “subcontract” in the OFCCP regulations. It distinguished an earlier decision, OFCCP v. Bridgeport Hospital2,in which the contract between Blue Cross and OPM had been for the provision of health insurance rather than medical care. There, since the hospital did not undertake any of Blue Cross’ obligations to provide insurance coverage, it was not a “subcontractor” under the OFCCP definition.
In UPMC Braddock, however, the Board explained that, “unlike Blue Cross, the [Health Plan] is more than an insurer.” It is an HMO that contracts with individual physicians, medical groups, and hospitals to provide the medical services it offers. Noting that the provision of medical services and supplies was a “critical component” of the Health Plan’s contract with OPM, the Board held the hospitals had undertaken a portion of the Health Plan’s obligation under its contract with OPM and, therefore, were “subcontractors” under the OFCCP definition.
As UPMC Braddock makes clear, OFCCP has had the health care industry in its sights for some time. The decision promises to embolden OFCCP’s already aggressive enforcement efforts. In 2008 alone, OFCCP conducted over 4000 compliance evaluations, many aimed at businesses that were entirely unaware of their regulatory obligations. Health care providers should not wait for a compliance review letter before working to determine whether they fall within OFCCP’s sweeping mandate.
The failure of a covered subcontractor to comply with applicable requirements, even if inadvertent, is a serious matter. Under certain circumstances, non-compliance with such employment law requirements can result in debarment from all federal contracting -- and subcontracting -- for three years or more. Perhaps more importantly, debarred providers are also precluded from participating in the Medicare and Medicaid programs.
Jackson Kelly can help you determine whether and to what extent your organization is subject to the OFCCP laws and develop an effective compliance program in response. For more information, please contact Jim Thomas at (304) 340-1319 or Eric Whytsell at (202) 973-0227.
 OFCCP v. UPMC Braddock, et. al, ARB Case No. 08-047 (May 29, 2009).
 OFCCP v. Bridgeport Hospital, ARB Case No. 00-034 (Jan. 31, 2003).