Tricare Providers Are Not Federal Subcontractors

Merle M. DeLancey, Jr.

The Office of Federal Contract Compliance Programs (“OFCCP”) ended a long-running controversy by issuing a final rule stating that healthcare providers participating in the TRICARE military healthcare program are not federal subcontractors. TRICARE provides healthcare benefits to uniformed service members, retirees, and their families. In its final rule, the OFCCP, which enforces anti-discrimination laws as to government contractors, states that it does not have authority to enforce regulatory obligations in Executive Order 11246, Section 503 of the Rehabilitation Act of 1973, and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, including affirmative action obligations, with respect to TRICARE providers.

Controversy regarding the status of TRICARE providers as potential federal subcontractors began in 2007 when OFCCP first asserted its authority over an Orlando, Florida, hospital serving TRICARE beneficiaries. Years of litigation ensued. In 2011, Congress sought to resolve any confusion by including a provision in the National Defense Authorization Act for Fiscal Year 2012 barring the OFCCP from asserting jurisdiction over a healthcare provider based on TRICARE participation.

Notwithstanding Congress’ clear intent to foreclose OFCCP’s further assertions of jurisdiction based solely on TRICARE, the agency continued its enforcement efforts. Eventually, perhaps seeing the writing on the wall, in 2014, the agency implemented a five-year moratorium on enforcement actions against TRICARE providers. In 2018, OFCCP extended the moratorium an additional two years during which, in November 2019, the agency initiated a proposed rulemaking leading to its final rule issued earlier this month.

The OFCCP’s final rule makes clear, for now, that TRICARE providers are not required to comply with certain employment protections involving race, sex, and other characteristics, including implementing affirmative action plans. In the final rule, the agency states that even if it had authority over TRICARE providers, it would grant a national interest exception for the providers.

According to the agency, the final rule gives certainty to more than 87,000 healthcare providers regarding their legal obligations and aims to improve access to medical care for veterans and their families, increase cost savings for TRICARE providers, and allocate the agency’s limited resources more efficiently.

The final rule only applies to healthcare providers under the TRICARE program. To the extent a healthcare provider has a separate federal prime contract or subcontract, it is still subject to the agency’s rules and regulations. Thus, if you are a TRICARE provider, you can breathe a sigh of relief but you must remain vigilant regarding direct contracts with other federal agencies and, more importantly, scrutinize whether subcontracts involving federal healthcare programs, other than TRICARE, could nonetheless make you a federal subcontractor subject to OFCCP’s rules and regulations and other Federal Acquisition Regulations. Our previous guidance in this area can be found in our blog post, Who Is a Subcontractor under a Federal Government Contract?