Health Law Alert: TRICARE Providers Can Breathe a Sigh of Relief

February 08, 2012

Good news for health care systems with contracts and subcontracts to provide services or benefits to beneficiaries under TRICARE.  On December 31, 2011, President Obama signed the National Defense Authorization Act (NDAA) into law.  Section 715 of the NDAA exempts TRICARE providers from coverage as federal contractors.

In 2010, an Administrative Law Judge at the U.S. Department of Labor (DOL) held that a hospital that subcontracted to provide medical services to TRICARE beneficiaries was a federal subcontractor subject to the affirmative action laws. The Office of Federal Contract Compliance Programs (OFCCP) then issued Directive 293, taking the position that “contractor (or subcontractor) obligations mandated by OFCCP programs cannot be altered, limited, or defeated by the inclusion in the contract of provisions contrary to such obligations.” OFCCP made clear that its position going forward was that certain arrangements with TRICARE constituted government contracts that created OFCCP jurisdiction. Directive 293 also provided guidance for assessing when health care providers and insurers were federal contractors or subcontractors.

The NDAA, which states that health care providers operating as part of a TRICARE managed care network of providers will not be considered federal contractors, clearly reverses the ALJ’s ruling as well as Directive 293.

While this is welcome news to anyone in the TRICARE system that could have conceivably been considered contractors or subcontractors, OFCCP Director Patricia Shiu stated in response, “This isn’t over yet.”  This new law does not affect other bases for coverage, such as providers’ participation in Medicare Parts C and D which, according to the OFCCP, may create government contractor status and affirmative action obligations.