Contractor Watchdog May Relax Audits of TRICARE Hospitals

The Labor Department’s federal contractor watchdog dipped its toe into the rulemaking pool for the first time under President Donald Trump’s administration.

The agency’s plan, published May 9 in the spring 2018 regulatory agenda, features a single proposed rule that “would include limiting and otherwise altering the obligations of TRICARE and other healthcare providers” under the anti-discrimination laws the Office of Federal Contract Compliance Programs enforces.

The proposal, expected by April 2019, will likely pique the interest of longtime OFCCP watchers, as a battle over whether the agency has authority over TRICARE medical providers stretches back nearly a decade. It was paused in 2014 with a five-year moratorium on compliance enforcement against the health care providers.

TRICARE is the Defense Department’s health care program covering active and retired military members. The Labor Department argued that hospitals and health care facilities participating in TRICARE’s provider network and providing health care services to TRICARE members are federal subcontractors and therefore subject to the OFCCP’s audit and enforcement powers.

Because the regulatory agenda specifically says “limiting” TRICARE’s equal employment opportunity obligations, it looks like the office wants to make the moratorium permanent.

“Otherwise, a rulemaking makes little sense,” attorney Chris Wilkinson of Orrick, Herrington & Sutcliffe in Washington told Bloomberg Law in a May 9 email. He served in the DOL’s Solicitor’s Office when the OFCCP was fighting to assert jurisdiction in the late 2000s over a Florida hospital that participated in TRICARE’s provider network and didn’t want to be audited.

The OFCCP annually evaluates federal contractors and subcontractors to make sure they’re not discriminating in hiring on the basis of sex, race, national origin, veteran status, disability, and other protected categories.

If the proposed rule does make permanent the moratorium on TRICARE medical providers, and if it loops in “other healthcare providers,” it would be the only industry-focused carve out from OFCCP compliance, John Fox said. He’s a former OFCCP policy official and is now a partner at Fox, Wang & Morgan in Los Gatos, Calif.

“Hospitals are massive employment facilities with thousands of employees and hundreds of job titles. The record-keeping requirements for hospital staff and the complexity of the OFCCP’s audits probably have more to do with a potential permanent moratorium than any ideological bent,” he said.

The Labor Department didn’t immediately respond to Bloomberg Law’s request for comment.