Affirmative Action Obligations May Apply To Hospitals

January 2011

The Office of Federal Contracts Compliance (OFCCP) has sought to impose affirmative action obligations on hospitals for years.  Until recently, their efforts were met with resistance.  Last month, however, an administrative law judge (ALJ) decided that a Florida hospital was subject to federal affirmative action laws by virtue of its contract to provide health care services to TriCare beneficiaries.

In the past the receipt of Medicare or Medicaid funds has not been considered sufficient grounds to apply OFCCP coverage to hospitals.  In this regard, our firm obtained a ruling on behalf of FHCA in the 1980s that provides, in pertinent part, “because coverage under [the OFCCP] is based on a contractual rather than a financial assistance relationship, [Medicare and Medicaid] provider agreements do not create a basis for OFCCP jurisdiction.”  The OFCCP, however, was able to distinguish the agreements with Medicare and Medicaid from the obligations that arise when hospitals agree to provide health care services to TriCare beneficiaries.

TriCare is a Department of Defense program that provides worldwide health care for active duty and retired military and their families. Tricare’s program is administered by Humana Military Healthcare Services, Inc. (“Humana”).  The contract between Humana and TriCare provides that Humana “shall provide a managed, stable, high-quality network, or networks, of individual and institutional healthcare providers.”  In order to carry out this obligation, Humana subcontracts with hospitals and doctors to provide network services for TriCare beneficiaries.

The ALJ rejected the argument that TriCare contracts should be treated like Medicare/Medicaid agreements and thereby not trigger OFCCP coverage.  Instead, the ALJ noted that the TriCare contracts were not, like those applicable to Medicare/Medicaid, simple reimbursement arrangements, but instead consisted of agreements to provide medical services.  Accordingly, due to this distinction, the ALJ found that the TriCare arrangement gave the hospital “government subcontractor” status, thereby invoking OFCCP jurisdiction.

This decision will no doubt generate renewed energy into the OFCCP’s efforts to apply its mandates to hospitals and other health care facilities with TriCare contracts.  Such mandates include the obligation to implement an Affirmative Action Program consisting of written Affirmative Action Plans, Affirmative Action outreach activities, additional record-keeping requirements, and other like obligations.  Although this case was recently appealed to the DOL's Administrative Review Board, until a final determination is reached, facilities should review their TriCare contracts to determine whether OFCCP coverage might apply. 

NLRB Proposes New Rule for Notification of Employee Rights.

The National Labor Relations Board (NLRB) has recently proposed a rule requiring the posting of employee rights under the National Labor Relations Act.  Previously, the requirement to post such notices applied only to government contractors and subcontractors.  Under the proposed rule, however, the notification obligation would apply to private employers as well.

The proposed notice basically informs employees that they have the right to act together to improve wages and working conditions, to form, join and assist a union, to bargain collectively with their employer, and to choose not to do any of these activities. It also provides examples of unlawful employer and union conduct and instructs employees how to contact the NLRB with questions or complaints. Currently, the rule is up for a sixty day public comment period, and could potentially become a final rule in late March or early April.