Health Care Providers and Other Companies May Unknowingly Be Government Subcontractors
June 5, 2009
Based on a recent decision by the Department of Labor’s Administrative Review Board, many employers, in particular hospitals and other health care providers, may unknowingly be government subcontractors subject to affirmative action obligations.
In OFCCP v. UPMC Braddock, a group of hospitals had contracted with an HMO to provide services for the HMO’s insureds. The HMO had a contract with the government to provide coverage for federal employees, but the hospitals themselves had no federal contracts. Nor did the hospitals’ contracts with the HMO alert them that they were government subcontractors or that they were subject to affirmative action obligations. The DOL’s Administrative Review Board, nonetheless, concluded the hospitals’ services were necessary for the HMO to fulfill its contract with the government. According to the Review Board, that arrangement rendered the hospitals government subcontractors under Executive Order 11246, regardless of what their particular contracts provided.
The Review Board distinguished an earlier decision in which it had concluded that a hospital was not a government subcontractor just because it had a contract with an insurance company providing health insurance to federal employees. The Review Board stated that the health plan in the Braddock case was “more than an insurer.” The health plan was a health maintenance organization and the hospitals “were operating primarily as health care delivery providers and not strictly as insurance providers.”
Unless this decision is successfully appealed, health care providers that have contracted with HMOs to provide services to federal employees or military employees and their dependents may need to develop affirmative action programs and otherwise comply with the laws enforced by the OFCCP, including Executive Order 11246, Section 503 of the Rehabilitation Act, and Section 402 of the Vietnam Era Veteran’s Readjustment Assistance Act.
This decision also has implications outside of the health care field. The Review Board found that the affirmative action obligations are included in every government contract and subcontract by operation of law, even if the subcontract itself does not contain the obligations. Under this decision, companies will need to look beyond the terms of their contracts to determine whether they are government subcontractors.
Health care providers and other employers should consult with counsel to determine the ramifications of this recent decision to their own particular circumstances.
In OFCCP v. UPMC Braddock, a group of hospitals had contracted with an HMO to provide services for the HMO’s insureds. The HMO had a contract with the government to provide coverage for federal employees, but the hospitals themselves had no federal contracts. Nor did the hospitals’ contracts with the HMO alert them that they were government subcontractors or that they were subject to affirmative action obligations. The DOL’s Administrative Review Board, nonetheless, concluded the hospitals’ services were necessary for the HMO to fulfill its contract with the government. According to the Review Board, that arrangement rendered the hospitals government subcontractors under Executive Order 11246, regardless of what their particular contracts provided.
The Review Board distinguished an earlier decision in which it had concluded that a hospital was not a government subcontractor just because it had a contract with an insurance company providing health insurance to federal employees. The Review Board stated that the health plan in the Braddock case was “more than an insurer.” The health plan was a health maintenance organization and the hospitals “were operating primarily as health care delivery providers and not strictly as insurance providers.”
Unless this decision is successfully appealed, health care providers that have contracted with HMOs to provide services to federal employees or military employees and their dependents may need to develop affirmative action programs and otherwise comply with the laws enforced by the OFCCP, including Executive Order 11246, Section 503 of the Rehabilitation Act, and Section 402 of the Vietnam Era Veteran’s Readjustment Assistance Act.
This decision also has implications outside of the health care field. The Review Board found that the affirmative action obligations are included in every government contract and subcontract by operation of law, even if the subcontract itself does not contain the obligations. Under this decision, companies will need to look beyond the terms of their contracts to determine whether they are government subcontractors.
Health care providers and other employers should consult with counsel to determine the ramifications of this recent decision to their own particular circumstances.
