The efforts of the Office of Federal Contract Compliance
Programs ("OFCCP" or the "Office") to assert
jurisdiction over nearly all of the U.S health care providers took
an interesting turn on April 25, 2012, when the Office unexpectedly
announced the rescission of Directive No. 293. As explained in a
prior Jones Day Commentary, Directive No. 293 was an
internal OFCCP memorandum entitled "Coverage of Health Care
Providers and Insurers" (the "Directive") offering
instructions for how the Office intended to carry out its coverage
assessments in the health care field. See Jones Day
Commentary, "
OFCCP Directive No. 293 Continues Expansion of Federal Contractor
Status for Health Care Providers" (Jan. 2011). The
Office's Notice of Rescission stated the Office's
conclusion that "recent legislation and related developments
in pending litigation warrant rescission of Directive 293 at this
time." See Notice of Rescission No. 301 (Apr. 25,
2012).
While the Directive was an internal memorandum that was never
publicly released by the Office, it made its way into the public
realm and was criticized widely for its expansive position on the
types of health care relationships that could subject a health care
provider to the Office's jurisdiction. Specifically, the
Directive asserted that the Office had jurisdiction over:
- Health care providers participating in HMO health plan contracts covering federal government employees, despite that the propriety of such coverage was being litigated in federal court, see UPMC Braddock v. Solis, No. 1-09-CV-01210 (D.D.C. filed June 30, 2009);
- Health care providers participating in TRICARE—a U.S. Department of Defense military health care program providing coverage to active and retired U.S. military personnel, despite that the propriety of such coverage was being litigated at the Department of Labor's Administrative Review Board ("ARB"), see OFCCP v. Florida Hospital, ARB Case No. 11-011; and
- Health care providers participating in Medicare Parts C or D, despite that the propriety of such coverage had never been litigated or otherwise asserted by the Office.
Late in 2011, Congress addressed the federal subcontractor
status of TRICARE network participants though Section 715 of the
National Defense Authorization Act for Fiscal Year 2012.
See Pub. L. No. 112-81, 125 Stat. 1298 (2011). Section 715
explicitly prohibited OFCCP jurisdiction over health care providers
based on their status as TRICARE network participants, stating that
"[f]or the purpose of determining whether network
providers...are subcontractors for purposes of the Federal
Acquisition Regulation or any other law, 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." Id.
§ 715.
In light of the passage of Section 715, Florida Hospital requested
that the ARB dismiss its case, in which the OFCCP based its
jurisdiction solely on Florida Hospital's status as a TRICARE
network provider. The ARB requested briefing on Section 715's
impact on the Office's ability to assert jurisdiction based
solely on participation in TRICARE. The OFCCP, unsurprisingly but
incorrectly, asserted that it still had jurisdiction over TRICARE
network participants notwithstanding Congress's clear intent to
the contrary. Jones Day, together with in-house counsel for the
American Hospital Association, submitted an amicus curiae
brief on behalf of the AHA and in support of Florida Hospital's
motion to dismiss.
After Florida Hospital, the AHA, and other interested parties filed
briefs urging the ARB to dismiss the case, the OFCCP held a webinar
entitled "Status of Pending Compliance Evaluations of Entities
that Participate in TRICARE Networks." At the webinar, which
was scheduled before Florida Hospital briefs were filed,
OFCCP representatives explained that they would continue to hold in
abeyance audits based solely on participation in TRICARE but would
proceed with audits where there was an alternative basis for
jurisdiction. Additionally, however, OFCCP Counsel Consuela Pinto
made the unexpected announcement that the Office had decided to
rescind the Directive in light of the passage of Section 715 and
developments in litigation.
OFCCP's Notice of Rescission states that the "OFCCP will
continue to use a case-by-case approach to make coverage
determinations in keeping with its regulatory principles applicable
to contract and subcontract relationships and OFCCP case law."
Although rescission of the Directive should not be interpreted as
OFCCP abandoning its interest in health care providers, it appears
to be an admission that the Office recognizes its aggressive
position on its jurisdiction over health care providers is
vulnerable.
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