Federal Register, Volume 84 Issue 215 (Wednesday, November 6, 2019)

[Federal Register Volume 84, Number 215 (Wednesday, November 6, 2019)]
[Proposed Rules]
[Pages 59746-59756]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23700]

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DEPARTMENT OF LABOR

Office of Federal Contract Compliance Programs

41 CFR Parts 60-1, 60-300, and 60-741

RIN 1250-AA08

Affirmative Action and Nondiscrimination Obligations of Federal
Contractors and Subcontractors: TRICARE and Certain Other Health Care
Providers

AGENCY: Office of Federal Contract Compliance Programs, Labor.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of Federal Contract Compliance Programs (OFCCP) is
proposing to amend its regulations pertaining to its authority over
TRICARE health care providers. The proposed rule is intended to
increase access to care for uniformed service members and veterans and
to provide certainty for health care providers who serve beneficiaries
of TRICARE. It is also believed that this proposed rule may result in
cost savings to the health care system. In a reconsideration of its
legal position, the proposed rule would provide that OFCCP lacks
authority over Federal health care providers who participate in
TRICARE. In the alternative, the proposed rule would establish a
national interest exemption from Executive Order 11246, Section 503 of
the Rehabilitation Act of 1973, and the Vietnam Era Veterans'
Readjustment Assistance Act of 1974 for health care providers with
agreements to furnish medical services and supplies to individuals
participating in TRICARE (in the alternative to a reconsideration of
OFCCP's authority over such providers). OFCCP would nevertheless have
authority over health care providers participating in TRICARE if they
hold a separate covered Federal contract or subcontract. Likewise,
health care providers would remain subject to all other Federal, state,
and local laws prohibiting discrimination and providing for equal
employment opportunity. OFCCP has determined that special circumstances
in the national interest justify proposing the exemption as it would
improve uniformed service members' and veterans' access to medical
care, more efficiently allocate OFCCP's limited resources for
enforcement activities, and provide greater uniformity, certainty, and
notice for health care providers participating in TRICARE.

DATES: To be assured of consideration, comments must be received on or
before December 6, 2019.

ADDRESSES: Comments may be submitted, identified by Regulatory
Information Number (RIN) 1250-AA08, by one of the following methods:
Electronically: The Federal eRulemaking portal at http://www.regulations.gov. Follow the instructions found on that website for
submitting comments.
Mail, Hand Delivery, or Courier: Addressed to Harvey D.
Fort, Deputy Director, Division of Policy and Program Development,
Office of Federal Contract Compliance Programs, 200 Constitution Avenue
NW, Room C-3325, Washington, DC 20210.
Instructions: Please submit one copy of your comments by only one
method. Due to security concerns, postal delivery in Washington, DC,
may be delayed. For faster submission, we encourage commenters to
transmit their comment electronically via the http://www.regulations.gov website. All submissions must include OFCCP's name
for identification.
Comments, including any personal information provided, become a
matter of public record and will be posted on http://www.regulations.gov. Do not include any personally identifiable or
confidential business information that you do not want publicly
disclosed.
The Department will also make all the comments it receives
available for public inspection during normal business hours at OFCCP
at the above address. If you need assistance to review the comments,
the Department will provide you with appropriate aids such as readers
or print magnifiers. To schedule an appointment to review the comments
and/or to obtain this notice of proposed rulemaking in an alternate

[[Page 59747]]

format, please contact OFCCP at the telephone numbers or address listed
below.

FOR FURTHER INFORMATION CONTACT: Harvey D. Fort, Deputy Director,
Division of Policy and Program Development, Office of Federal Contract
Compliance Programs, 200 Constitution Avenue NW, Room C-3325,
Washington, DC 20210. Telephone: (202) 693-0104 (voice) or (202) 693-
1337 (TTY). Copies of this document may be obtained in alternative
formats (large print, braille, audio recording) by calling the numbers
listed above.

SUPPLEMENTARY INFORMATION:

I. Legal Authority

Federal law requires Government contractors \1\ to refrain from
discriminating on the basis of race, sex, and other grounds.
Additionally, Government contractors must take affirmative action to
ensure equal employment opportunity.\2\ OFCCP, situated in the
Department of Labor (Department), enforces these contracting
requirements. OFCCP requires Government contractors to furnish
information about their affirmative action programs (AAPs) and related
employment records and data so OFCCP can ascertain compliance with the
laws it enforces.\3\
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\1\ As used in this preamble, the term contractor includes,
unless otherwise indicated, Federal Government contractors and
subcontractors. When used in reference to Executive Order 11246, it
also includes federally assisted construction contractors and
subcontractors.
\2\ See E.O. 11246, section 202(1); 29 U.S.C. 793(a); 38 U.S.C.
4212(a)(1); 41 CFR 60-1.40, 60-2.1 through 60-2.17; id. Sec. Sec.
60-300.40 through 60-300.45; id. Sec. Sec. 60-741.40 through 60-
741.47.
\3\ E.O. 11246, section 202(6); 41 CFR 60-1.4(a)(6), 60-1.43;
id. Sec. Sec. 60-300.40(d), 60-300.81; id. Sec. Sec. 60-741.40(d),
60-741.81; see also Chrysler Corp. v. Brown, 441 U.S. 281, 286
(1979).
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OFCCP enforces three nondiscrimination and equal employment
opportunity laws that apply to covered Federal contractors: Executive
Order (E.O.) 11246, as amended,\4\ Section 503 of the Rehabilitation
Act of 1973, as amended (Section 503),\5\ and the Vietnam Era Veterans'
Readjustment Assistance Act of 1974, as amended (VEVRAA).\6\ In 1965,
President Lyndon B. Johnson signed E.O. 11246, which (as amended)
prohibits discrimination on the basis of race, color, religion, sex,
sexual orientation, gender identity, and national origin, as well as
discrimination against applicants or employees because they inquire
about, discuss, or disclose their compensation or that of others,
subject to certain limitations. Six years after President Johnson
signed E.O. 11246, Congress added disability as a protected class
through Section 503 of the Rehabilitation Act.\7\ And in 1974, Congress
also covered veterans through the Vietnam Era Veterans' Readjustment
Assistance Act, which prohibits discrimination on the basis of veteran
status. All three laws also require Federal contractors to take
affirmative steps to ensure equal employment opportunity in their
employment practices.
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\4\ E.O. 11246, 30 FR 12319 (Sept. 24, 1965).
\5\ 29 U.S.C. 793.
\6\ 38 U.S.C. 4212.
\7\ 29 U.S.C. 793(a).
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OFCCP has rulemaking authority under all three laws.\8\
Additionally, OFCCP has authority to exempt a contract from E.O. 11246,
VEVRAA, and Section 503 if the Director of OFCCP determines that
special circumstances in the national interest require doing so.\9\
OFCCP's regulations allow the Director to grant national interest
exemptions to groups or categories of contracts where he finds it
impracticable to act upon each request for an exemption individually or
where the exemption will substantially contribute to convenience in the
administration of the laws.\10\ These categorical exemptions follow the
principle that an agency, whenever permitted, need not ``continually .
. . relitigate issues that may be established fairly and efficiently in
a single rulemaking proceeding'' that ``could invite favoritism,
disunity, and inconsistency.'' \11\ These long-standing regulatory
provisions allowing for categorical national interest exemptions are
owed deference.\12\ The provision permitting categorical exemption from
E.O. 11246 was part of the original notice-and-comment regulation that
implemented the Order, and has been in place for over fifty years.\13\
The provisions permitting categorical exemptions from VEVRAA and
Section 503 are patterned similarly and have been in place for decades
as well.\14\ Additionally, E.O. 11246's predecessor, E.O. 10925,
contained a similarly worded exemption provision which was implemented
through a regulation providing a substantially similar categorical
exemption.\15\ OFCCP has granted categorical exemptions in the national
interest in the past.\16\ OFCCP also may exercise prosecutorial
discretion in determining its enforcement priorities.\17\ OFCCP
proposes this rule pursuant to all these authorities.
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\8\ E.O. 11246, section 201; 38 U.S.C. 4212(a)(2); 29 U.S.C.
793(a); E.O. 11758, section 2; Sec'y Order 7-2009, 74 FR 58834 (Nov.
13, 2009).
\9\ E.O. 11246, section 204; E.O. 11758 sections 2-3, as
amended; 29 U.S.C. 793(c)(1); 41 CFR 60-300.4(b)(1). E.O. 11246
refers to an ``exemption'' while VEVRAA and Section 503 use the term
``waiver.'' This proposed rule uses the term ``exemption'' to refer
to both.
\10\ 41 CFR 60-1.5(b)(1), 60-300.4(b)(1), 60-741.4(b)(1).
\11\ Heckler v. Campbell, 461 U.S. 458, 467 (1983); see also
Lopez v. Davis, 531 U.S. 230, 243-44 (2001); Am. Hosp. Ass'n v.
NLRB, 499 U.S. 606, 612 (1991) (``[E]ven if a statutory scheme
requires individualized determinations, the decision maker has the
authority to rely on rulemaking to resolve certain issues of general
applicability unless Congress clearly expresses an intent to
withhold that authority.'' (discussing Campbell, 461 U.S. at 467;
FPC v. Texaco, Inc., 377 U.S. 33, 41-44 (1964); United States v.
Storer Broad. Co., 351 U.S. 192, 205 (1956)).
\12\ Cf., e.g., United States v. Cleveland Indians Baseball Co.,
532 U.S. 200, 220 (2001) (``We do not resist according such
deference in reviewing an agency's steady interpretation of its own
61-year-old regulation implementing a 62-year-old statute. Treasury
regulations and interpretations long continued without substantial
change, applying to unamended or substantially reenacted statutes,
are deemed to have received congressional approval and have the
effect of law.'') (quoting Cottage Sav. Ass'n v. Commissioner, 499
U.S. 554, 561 (1991))
\13\ See 33 FR 7804, 7807 (May 28, 1968); see also 33 FR 3000,
3003 (Feb. 15, 1968) (notice of proposed rulemaking).
\14\ See 39 FR 20566, 20568 (June 11, 1974); 41 FR 26386, 26387
(June 25, 1976).
\15\ See E.O. 10925, section 303; 41 CFR 60-1.3(b)(1) (1962).
\16\ See OFCCP, Hurricane Recovery National Interest Exemptions,
https://www.dol.gov/ofccp/hurricanerecovery.htm.
\17\ See 5 U.S.C. 701(a)(2); Heckler v. Chaney, 470 U.S. 821,
831 (1985); Andrews v. Consol. Rail Corp., 831 F.2d 678, 687 (7th
Cir. 1987); Clementson v. Brock, 806 F.2d 1402, 1404-05 (9th Cir.
1986); Carroll v. Office of Fed. Contract Compliance Programs, U.S.
Dep't of Labor, 235 F. Supp. 3d 79, 84 (D.D.C. 2017).
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II. Introduction

OFCCP is proposing a rule that would clarify the scope of OFCCP's
authority \18\ and, to dispel any legal uncertainty, also further the
national interest by explicitly exempting certain health care providers
from OFCCP's enforcement activities. Specifically, in the E.O. 11246,
VEVRAA, and Section 503 regulations, OFCCP would revise its definition
of ``subcontractor''--meaning subcontractors regulated by OFCCP--to
exclude health care providers with agreements to furnish medical
services and supplies to individuals participating in TRICARE.
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\18\ OFCCP often refers to the scope of its authority to enforce
equal employment opportunity requirements as its jurisdiction. For
this proposed rulemaking, OFCCP believes the word authority is more
precise, since OFCCP does not have adjudicative power.
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OFCCP is concerned about differences in understanding among TRICARE
health care providers regarding the scope of OFCCP's authority, and
also about the potential that OFCCP's recent assertions of authority
may be affecting

[[Page 59748]]

uniformed service members' and veterans' access to health care.\19\
OFCCP has also recently established a moratorium on enforcing the
affirmative action obligations for health care providers deemed to be
putative TRICARE subcontractors. OFCCP is accordingly proposing these
changes to provide greater clarity to, and solicit feedback from,
health care providers and other stakeholders before the expiration of
the moratorium on May 7, 2021. OFCCP has reexamined its position that
health care providers participating in TRICARE are among those Congress
intended to be regulated and, for the reasons discussed below, now
believes they are not. Given the decade of confusion that has
accompanied this question, OFCCP also believes that lasting certainty
for the health care field and Government health care program serving
current and retired members of the armed services and their families is
highly desirable. Therefore, OFCCP is also proposing, in the
alternative, an exemption for health care providers under TRICARE.
OFCCP believes the exemption is justified by special circumstances in
the national interest. The exemption is expected to improve uniformed
service members' and veterans' access to medical care and more
efficiently allocate OFCCP's limited resources for enforcement
activities, and provide greater uniformity, certainty, and notice for
health care providers participating in TRICARE. Whether under the
rationale of a lack of authority or via an exemption from that
authority, the change proposed to OFCCP's regulatory text is the same:
A revision of OFCCP's definition of ``subcontractor'' (i.e.,
subcontractors regulated by OFCCP) to exclude health care providers who
only participate as providers in TRICARE.
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\19\ See OFCCP, Directive 2014-01, TRICARE Subcontractor
Enforcement Activities (May 7, 2014); OFCCP, Directive 2018-02,
TRICARE Subcontractor Enforcement Activities (May 18, 2018).
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The proposed rule is an E.O. 13771 deregulatory action because it
is expected to reduce compliance costs and potentially the cost of
litigation for regulated entities.

III. Administrative and Regulatory Background

A. Overview of OFCCP's Areas of Authority

E.O. 11246, VEVRAA, and Section 503 apply to entities holding
covered Government contracts and subcontracts.\20\ OFCCP has authority
to enforce the requirements of these three laws and their implementing
regulations. Contractors agree to those requirements in the equal
opportunity clauses included in their contracts with the Federal
Government, clauses which also require contractors to ``flow down''
these requirements to any subcontractors. The text of these clauses is
set forth in E.O. 11246 section 202 and the implementing regulations
for all three programs, and is also found in part 52 of title 48 of the
Code of Federal Regulations, which contains the Federal Acquisition
Regulation's standard contract clauses.\21\ Federal law provides that
these clauses ``shall be considered to be part of every contract and
subcontract required by [law] to include such a clause.'' \22\ This is
true ``whether or not the [equal opportunity clause] is physically
incorporated in such contracts.'' \23\ Persons who have no contractual
(or subcontractual) relationships with the Federal Government, however,
have no obligation to adhere to OFCCP's substantive requirements.\24\
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\20\ See E.O. 11246, section 202; 29 U.S.C. 793(a); 38 U.S.C.
4212(a)(1).
\21\ See 48 CFR 52.222-26, 52.222-35, 52.222-36.
\22\ 41 CFR 60-14(e), 60-741.5(e), 60-250.5(e).
\23\ Id.
\24\ See 41 CFR 60-1.1 (``The regulations in this part apply to
all contracting agencies of the Government and to contractors and
subcontractors who perform under Government contracts, to the extent
set forth in this part.''); see also id. Sec. Sec. 60-300.1(b), 60-
741.1(b).
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OFCCP's regulations define ``Government contract'' as any agreement
or modification thereof between a department or agency of the Federal
Government and any person for the purchase, sale or use of personal
property or nonpersonal services.\25\ Agreements pertaining to programs
or activities receiving Federal financial assistance, however, are not
considered covered contracts,\26\ nor are other noncontract Government
programs or activities. Federally assisted construction contracts,
however, do come within OFCCP's authority under E.O. 11246.\27\
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\25\ Id. Sec. Sec. 60-1.3, 60-300.2(n), 60-741.2(k).
\26\ See id. Sec. Sec. 60-1.1, 60-300.1(b), 60-741.4(a).
Programs and activities receiving Federal financial assistance must
comply with various other nondiscrimination laws, including Title VI
of the Civil Rights Act of 1964 (prohibiting discrimination on the
basis of race, color, or national origin) and Section 504 of the
Rehabilitation Act of 1973 (prohibiting discrimination on the basis
of disability).
\27\ 41 CFR 60-1.1.
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As defined in regulation, a covered ``contract'' includes a
``contract or a subcontract.'' \28\ A prime contract is an agreement
with the Federal Government agency itself. A ``subcontract'' is any
agreement or arrangement between a contractor and any person (in which
the parties do not stand in the relationship of an employer and an
employee): (1) For the purchase, sale or use of personal property or
nonpersonal services which, in whole or in part, is necessary to the
performance of any one or more contracts; or (2) Under which any
portion of the contractor's obligation under any one or more contracts
is performed, undertaken or assumed.\29\
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\28\ Id. Sec. Sec. 60-1.3, 60-300.2, 60-741.2.
\29\ Id. Sec. Sec. 60-1.3, 60-300.2(x), 60-741.2(x).
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Although, in general, organizations holding a contract or
subcontract as defined are covered under E.O. 11246, Section 503, and
VEVRAA, some exemptions apply. Contractors that only hold contracts
below OFCCP's basic monetary thresholds are exempt.\30\ Certain
affirmative action requirements only apply depending on the type and
dollar value of the contract held as well as the contractor's number of
employees.\31\ The regulations also exempt some categories of contracts
under certain circumstances or for limited purposes, including those
involving work performed outside the United States; certain contracts
with state or local governments; contracts with religious corporations,
associations, educational institutions or societies; educational
institutions owned in whole or in part by a particular religion or
religious organization; and contracts involving work on or near an
Indian reservation.\32\
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\30\ Id. Sec. Sec. 60-1.5(a)(1), 60-300.4(a)(1), 60-
741.4(a)(1). E.O. 11246's basic obligations apply to businesses
holding a Government contract in excess of $10,000, or Government
contracts which have, or can reasonably be expected to have, an
aggregate total value exceeding $10,000 in a 12-month period. E.O.
11246 also applies to government bills of lading, depositories of
Federal funds in any amount, and to financial institutions that are
issuing and paying agents for U.S. Savings Bonds. Section 503
applies to Federal contractors and subcontractors with contracts in
excess of $15,000. VEVRAA applies to Federal contractors and
subcontractors with contracts of $150,000 or more. The coverage
thresholds under Section 503 and VEVRAA increased from those listed
in the statutes and OFCCP's regulations in accordance with the
inflationary adjustment requirements in 41 U.S.C. 1908. See 80 FR
38293 (July 2, 2015); 75 FR 53129 (Aug. 30, 2010).
\31\ 41 CFR 60-1.40, 60-300.40, 60-741.40.
\32\ See id. Sec. Sec. 60-1.5, 60-300.4, 60-741.4.
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Additionally, as discussed earlier in this NPRM, OFCCP has
authority to exempt entities and categories of entities from E.O.
11246, VEVRAA and Section 503 if the Director of OFCCP determines that
special circumstances in the national interest require doing so.\33\
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\33\ E.O. 11246, section 204; 29 U.S.C. 793(c)(1); 41 CFR 60-
300.4(b)(1).

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[[Page 59749]]

B. Overview of Prior Treatment of Health Care Providers Participating
in TRICARE

OFCCP has routinely audited health care providers who are
Government contractors, and it would continue to do so under this
proposal.\34\ Provided below is a brief overview of TRICARE and
developments regarding OFCCP's interpretations and practice regarding
its authority over health care providers participating in TRICARE.
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\34\ As noted throughout this proposal, health care providers
who are prime government contractors, or who hold subcontracts apart
from their provider relationship to a government health care
program, included in this rule, would remain under OFCCP's
authority.
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1. TRICARE
TRICARE is the Federal health care program serving uniformed
service members, retirees, and their families.\35\ TRICARE is managed
by the Defense Health Agency, which contracts with managed care support
contractors to administer each TRICARE region. The managed care support
contractors enter into agreements with individual and institutional
health care providers in order to create provider networks for fee-for-
service, preferred-provider, and health maintenance organization (HMO)-
like programs. Fee-for-service plans reimburse beneficiaries or the
health care provider for the cost of covered services. The TRICARE HMO-
like program involves beneficiaries generally agreeing to use military
treatment facilities and designated civilian providers and to follow
certain managed care rules and procedures to obtain covered services.
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\35\ See 32 CFR 199.17(a).
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2. OFCCP and Health Care Providers Participating in TRICARE
In 2007, OFCCP for the first time in litigation asserted
enforcement authority over a health care provider based solely on the
hospital's delivery of medical care to TRICARE beneficiaries. The
provider in this case, a hospital in Florida, disagreed with OFCCP's
view, and OFCCP initiated enforcement proceedings in 2008 under the
caption OFCCP v. Florida Hospital of Orlando. In 2010, an
administrative law judge (ALJ) found for the agency.\36\
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\36\ OFCCP v. Fla. Hosp. of Orlando, No. 2009-OFC-00002, 2010 WL
8453896 (ALJ Oct. 18, 2010).
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In December 2010--soon after the ALJ's decision in Florida
Hospital--OFCCP issued a new directive on health care providers that
superseded previous directives.\37\ Directive 293 asserted that OFCCP
had authority over certain health care providers participating in
TRICARE and other Government health care programs.
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\37\ See OFCCP, Directive 293, Coverage of Health Care Providers
and Insurers (Dec. 16, 2010) (rescinded Apr. 25, 2012).
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Congress responded the next year. The National Defense
Authorization Act for Fiscal Year 2012 (NDAA) included a provision
addressing the maintenance of the adequacy of provider networks under
the TRICARE program and TRICARE health care providers as purported
Government subcontractors. Sec. 715of the NDAA provided that, for the
purpose of determining whether network providers under TRICARE provider
network agreements are Government subcontractors, 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.\38\ In April 2012, 16 months after it
had been issued, OFCCP formally rescinded Directive 293.\39\
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\38\ Public Law 112-81, section 715, 125 Stat. 1298, 1477
(2011), codified at 10 U.S.C. 1097b(a)(3).
\39\ See Notice of Rescission No. 301 (Apr. 25, 2012).
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Meanwhile, the Florida Hospital litigation continued. Six months
after OFCCP formally rescinded Directive 293, in October 2012, the
Department's Administrative Review Board (ARB or Board) held that the
NDAA's amendment to the TRICARE statute precluded OFCCP from asserting
authority over the Florida hospital.\40\ The Board dismissed OFCCP's
administrative complaint against the hospital. Four of the five judges
agreed that the hospital did not satisfy the second prong of OFCCP's
regulatory definition of ``subcontract.'' Two judges, Judge Corchado
and Judge Royce, would have found for the agency on the basis of the
first prong of the regulatory definition of ``subcontract.'' \41\
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\40\ OFCCP v. FLA. Hosp. of Orlando, No. 11-011, 2012 WL 5391420
(ARB Oct. 19, 2012).
\41\ Judge Brown concluded that the question about the first
prong was not properly before the Board.
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The Board subsequently granted OFCCP's request for reconsideration.
This time, a three-judge majority ruled for the agency. In July 2013,
the Board concluded that the Florida hospital at issue satisfied the
first prong of the agency's regulatory definition of ``subcontract.''
\42\ The Department's ARB remanded to the ALJ, however, to determine
whether TRICARE constituted Federal financial assistance outside
OFCCP's jurisdiction. Judge Igasaki and Judge Edwards dissented on the
basis of their original opinion in the Board's first decision. They
concluded that ``the enactment of Section 715 of the NDAA removes
OFCCP's jurisdiction under either Prong One or Prong Two based on the
specific contract at issue in this case.'' \43\
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\42\ OFCCP v. Fla. Hosp. of Orlando, No. 11-011, 2013 WL 3981196
(ARB July 22, 2013).
\43\ Id. at *25 (Igasaki & Edwards, JJ., dissenting).
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While the remand of Florida Hospital was pending, Congress
introduced legislation to exempt all health care providers from OFCCP's
enforcement activities and held a hearing regarding OFCCP's enforcement
activities.\44\ The Secretary of Labor at the time, in a letter to the
leaders of the House Committee on Education and the Workforce and the
Subcommittee on Workforce Protection, stated that the leaders ``ha[d]
made clear that, in [their] judgment, Congress intended to eliminate
entirely OFCCP's jurisdiction over TRICARE subcontractors.'' \45\ The
Secretary's letter proposed that ``in lieu of legislative action,''
OFCCP would ``exercise prosecutorial discretion over the next five
years to limit its enforcement activities with regard to TRICARE
subcontractors.'' \46\
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\44\ H.R. 3633, Protecting Health Care Providers from Increased
Administrative Burdens Act, Hearing Before the Subcomm. On Workforce
Protections of the H. Comm. on Educ. & the Workforce, 113th Cong.
(Mar. 13, 2014) [hereinafter ``2014 Hearing''].
\45\ Id. at 3-5 (Sec'y of Labor Thomas E. Perez, Letter to
Congressional Leaders, Mar. 11, 2014).
\46\ Id. at 4.
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In May 2014, OFCCP issued Directive 2014-01, establishing a five-
year moratorium on enforcement of affirmative action obligations for
health care providers deemed to be TRICARE subcontractors.\47\ OFCCP
also administratively closed its open compliance reviews of contractors
covered by the moratorium, which resulted in the dismissal of the
Florida Hospital case.\48\
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\47\ OFCCP, Directive 2014-01, TRICARE Subcontractor Enforcement
Activities (May 7, 2014).
\48\ OFCCP v. Fla. Hosp. of Orlando, No. 2009-OFC-00002 (ALJ
Apr. 1, 2014).
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On May 18, 2018, OFCCP issued Directive 2018-02, a two-year
extension of the previous moratorium.\49\ Pursuant to this Directive,
the moratorium will expire on May 7, 2021. OFCCP explained that it
extended the moratorium out of concern that the approaching expiration
of the moratorium and accompanying uncertainty over the applicability
of the laws OFCCP enforces might contribute to the difficulties
veterans and uniformed service members face when accessing health care.
The Directive also explained that the extension would provide
additional time to receive

[[Page 59750]]

feedback from stakeholders. The Directive extended the scope of the
moratorium to cover providers participating in the Department of
Veterans Affairs' health benefits programs.\50\
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\49\ OFCCP, Directive 2018-02, TRICARE Subcontractor Enforcement
Activities (May 18, 2018).
\50\ Id. at 1 n.1.
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IV. Proposal To Reconsider OFCCP's Authority Over TRICARE

Since bringing the Florida Hospital case over a decade ago, and as
reiterated in its 2014 and 2018 moratoria, OFCCP has consistently held
the position that it holds authority over TRICARE providers.\51\ In
preparing this proposed rulemaking, OFCCP has carefully examined the
authorities it administers, its legal position as stated in litigation
and repeated public statements and guidance, the decisions in Florida
Hospital, and Congress's recent actions. OFCCP has concluded that its
recent assertions of authority over TRICARE providers warrant
reconsideration. For the reasons below, OFCCP now believes it does not
have authority over these providers simply because these providers
choose to participate in TRICARE.
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\51\ See, e.g., OFCCP, Frequently Asked Questions: TRICARE
Subcontractor Enforcement Activities (Q. ``Our hospital participates
in the Federal Employees Health Benefits Program, but not TRICARE.
Are we covered by the Moratorium?'' A. ``No. If your hospital does
not participate in TRICARE, it is not covered by the Moratorium.''),
https://www.dol.gov/ofccp/regs/compliance/faqs/tricare_faq.htm.
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When OFCCP issued Directive 293, asserting authority over these
health care providers, Congress reacted quickly by enacting Section 715
of the 2012 NDAA. ``Where an agency's statutory construction has been
fully brought to the attention of the public and the Congress, and the
latter has not sought to alter that interpretation although it has
amended the statute in other respects, then presumably the legislative
intent has been correctly discerned.'' N. Haven Bd. of Ed. v. Bell, 456
U.S. 512, 535 (1982) (internal quotation marks omitted). OFCCP's
history in this area shows the opposite with regard to TRICARE
providers.
Regarding section 715 itself, it was clearly intended, both by its
text and by the surrounding context, to reverse OFCCP's assertion of
authority over TRICARE providers. The section states, ``For the purpose
of determining whether network providers''--e.g., hospitals and
physicians--``are subcontractors . . . , 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 on the basis of such
requirement.'' The ARB held in Florida Hospital that it could
nonetheless deem a health care provider a subcontractor where the
TRICARE regional administrator could not ``fulfill its contract to
create an integrated health delivery system without the services from
network providers like Florida Hospital.'' \52\ But, upon
reconsideration, OFCCP now believes the dissenting opinion in Florida
Hospital gave the better reading of the statute. The dissent explained
that because the ``managed care prime contract . . . includes the
requirement to maintain a network of providers, OFCCP's jurisdiction is
removed. Under Section 715, the subcontract is no longer a
`subcontract' under [OFCCP's regulatory definition] because the element
of the contract that is `necessary to the performance of any one or
more contracts' involves the provisions of health care network provider
services to TRICARE beneficiaries.'' \53\ The dissent's reading would
prevent the statute from becoming a nullity--since the purpose of
creating a provider network is to provide health care.
---------------------------------------------------------------------------

\52\ Fla. Hosp., 2013 WL 3981196, at *19.
\53\ Id. at *29.
---------------------------------------------------------------------------

For this reason, after careful consideration, OFCCP has
reconsidered its position and now believes it does not have
jurisdiction over TRICARE providers.

V. Proposal To Establish a National Interest Exemption for Health Care
Providers Participating in TRICARE

OFCCP believes that lasting certainty for TRICARE health care
providers and patients is highly desirable. Therefore, OFCCP is also
proposing, as an alternative, an exemption from E.O. 11246, Section
503, and VEVRAA for health care providers with agreements to furnish
medical services and supplies to individuals participating in TRICARE.
Nothing in the proposed action is intended to interfere with OFCCP's
vital mission of enforcing equal employment opportunity in
organizations that contract with the Government. OFCCP would retain
authority over a health care provider participating in such a network
or arrangement if the health care provider holds a separate covered
Federal contract or subcontract. But as explained below, OFCCP believes
that there are several reasons why special circumstances in the
national interest warrant an exemption for TRICARE health care
providers who do not hold such separate contracts.
First, OFCCP is concerned that the prospect of exercising authority
over TRICARE providers is affecting or will affect the Government's
ability to provide health care to uniformed service members, veterans,
and their families. Congressional inquiries and testimony, as well as
amicus filings in the Florida Hospital litigation, have brought to
OFCCP's attention the risk that health care providers may be declining
to participate in Federal health care programs that serve members of
the military and veterans because of the presumed costs of compliance
with OFCCP's regulations.\54\ The former president of a TRICARE managed
care support contractor testified that he feared they would lose
smaller providers in their network because of the administrative costs
and burdens associated with OFCCP's requirements, and he predicted that
it would make it ``much more difficult to build and retain provider
networks.'' \55\ TRICARE managed care support contractors similarly
stated in an amicus brief that subjecting TRICARE providers to OFCCP's
requirements would ``make the already difficult task of finding health
care professionals willing to act as network providers even more
difficult.'' \56\ A partner of a law firm testified that he has seen
health care provider clients choose not to participate in TRICARE and
in other programs because of the costs of compliance.\57\ The American
Hospital Association also testified that some hospitals may decline to
participate out

[[Page 59751]]

of concern that they could be found to be Federal contractors.\58\
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\54\ 2014 Hearing, supra note 44; Examining Recent Actions by
the Office of Federal Contract Compliance Programs, Hearing Before
the Subcomm. on Workforce Protections of the H. Comm. on Education
and the Workforce, 113th Cong. (2013) [hereinafter 2013 Hearing];
Reviewing the Impact of the Office of Federal Contract Compliance
Programs' Regulatory and Enforcement Actions, Hearing Before the
Subcomm. on Health, Emp't, Labor & Pensions of the H. Comm. on Educ.
& the Workforce, 112th Cong. (2012).
\55\ 2014 Hearing, supra note 44, at 24-26, 46-47, 149 (Prepared
Statement and Testimony of Thomas Carrato, President, Health Net
Federal Services).
\56\ Amicus Brief of Humana Military Health Services, Inc.,
Health Net Federal Services, LLC, and TriWest Healthcare Alliance
dated May 2, 2012, at 9, Fla. Hosp., 2013 WL 3981196; see also
Amicus Brief of Human Military Health Services, Inc., Health Net
Federal Services, LLC, and TriWest Healthcare Alliance dated
December 29, 2010, at 2, Fla. Hosp., 2013 WL 3981196 (``Subjecting
the network providers to Federal Affirmative action requirements
will make it more difficult for the [TRICARE managed care support]
contractors to find and retain providers willing to sign network
agreements due to the added compliance requirements.'').
\57\ 2014 Hearing, supra note 44, at 34-35, 47 (Statement and
Testimony of David Goldstein, Shareholder, Littler Mendelson P.C.).
\58\ Id. at 17-18 (Prepared Statement of the American Hospital
Association); 2013 Hearing, supra note 54, at 139 (Testimony of Curt
Kirschner, Partner, Jones Day, on behalf of the American Hospital
Association).
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Providers' decisions not to participate may exacerbate the well-
documented difficulties that uniformed service members, veterans, and
their families have accessing health care.\59\ The unique nature of the
health care system heightens OFCCP's concern about the refusal of
providers to participate in health care programs for uniformed service
members and veterans. Creating adequate networks of providers is a
critical component of ensuring access to health care. These networks
need to offer comprehensive services and cover all geographical areas
where beneficiaries reside. An inadequate network may mean that
beneficiaries are unable to obtain urgent and life-saving treatment.
The willingness of health care providers to participate in TRICARE is
thus especially important.
---------------------------------------------------------------------------

\59\ See, e.g., Government Accountability Office Report, GAO-18-
361, TRICARE Surveys Indicate Nonenrolled Beneficiaries' Access to
Care Has Generally Improved (Mar. 2018), available at https://www.gao.gov/assets/700/690964.pdf. The GAO found that, although
there has been a slight improvement in TRICARE beneficiaries' access
to care, 29 percent of nonenrolled beneficiaries still reported that
they experienced problems finding a civilian provider. Nonenrolled
beneficiaries are those that have not enrolled in TRICARE Prime,
which is a managed care option that that mostly relies on military
hospitals and clinics to provide care.
---------------------------------------------------------------------------

OFCCP requests comments from stakeholders that will help it to more
thoroughly evaluate the potential impact of OFCCP compliance on
uniformed service members' and veterans' health care provider networks.
Particularly, OFCCP seeks comments from health care providers regarding
the impact of potential Federal subcontractor status on their decision
to participate in health care programs for uniformed service members
and veterans.
Second, OFCCP believes that an exemption is in the national
interest because pursuing enforcement efforts against TRICARE providers
is not the best use of its and providers' resources were it to,
consistent with its public position until the issuance of this NPRM,
attempt to exercise authority over those providers. Given the history
in this area, such attempts--which would occur in the absence of this
NPRM--could again meet with protracted litigation and unclear ultimate
results: The Florida Hospital case proceeded for seven years and would
have continued for some time into the future had it not been
voluntarily dismissed. OFCCP believes its limited resources are better
spent elsewhere, and it would be unreasonable to impose substantial
compliance costs on health care providers when the legal justification
for doing so would be open to challenge in light of the language in the
NDAA and the question left unresolved in Florida Hospital as to whether
TRICARE constitutes Federal financial assistance.
Third, OFCCP believes an exemption would be in the national
interest because it would provide uniformity and certainty in the
health care community with regard to legal obligations concerning
participation in TRICARE. OFCCP conducts a case-by-case inquiry as to
whether a particular entity is a covered subcontractor. The proposed
exemption would dispense with an agreement-by-agreement analysis and
the attendant uncertainty, legal costs, and litigation risk. Providers
could choose to furnish medical services to beneficiaries of different
types of TRICARE programs without hiring costly lawyers and performing
time-intensive contract analysis to determine, as best they can,
whether they are a subcontractor or simply a provider.
This exception would also harmonize OFCCP's approach with that of
the Department of Defense. OFCCP is the office charged with
administering and enforcing its authorities, but comity between
agencies is desirable whenever possible, reduces confusion for the
public, and helps ensure evenhanded and efficient administration of the
law. The Department of Defense stated in the Florida Hospital
litigation that ``it would be impossible to achieve the TRICARE mission
of providing affordable health care for our nation's active duty and
retired military members and their families'' if all TRICARE providers
were subject to OFCCP's requirements.\60\ The Department of Defense
also classifies TRICARE as Federal financial assistance in DoD
Directive 1020.1.\61\ A unified approach should reduce confusion for
the public and assist coordination in regulating Government contracts
in the health care field.\62\
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\60\ OFCCP v. Fla. Hosp. of Orlando, No. 2009-OFC-002, 2010 WL
8453896, at *2 (ALJ Oct. 18, 2010).
\61\ See Dep't of Defense, Directive 1020.1, Nondiscrimination
on the Basis of Handicap in Programs and Activities Assisted or
Conducted by the Department of Defense, ] E1.1.2.21 (Mar. 31, 1982).
\62\ Note that this regulation would not affect health care
entities' obligations under Title VII of the Civil Rights Act or
other civil rights laws enforced by other agencies.
---------------------------------------------------------------------------

As noted earlier, of course, the uniformed service members and
veterans' health care providers discussed here would still be subject
to OFCCP's authority if they are prime contractors or have a covered
subcontract with a Government contractor. For example, a teaching
hospital that participates as a TRICARE provider but that also has a
research contract with the Federal Government would still be considered
a covered contractor subject to OFCCP authority.
For all of these reasons, the Director of OFCCP has determined that
the proposed exemption would be justified by special circumstances in
the national interest because it would increase access to care for
uniformed service members and veterans and allow OFCCP to better
allocate its resources, and provide uniformity and certainty for the
Government and for health care providers. The Director of OFCCP is also
proposing that the requirements would be met for granting an exemption
to a group or category of contracts. Since there are tens of thousands
of providers that may be eligible for the exemption, it would be
impracticable for OFCCP to act upon each provider's request
individually and issuing a group exemption would substantially
contribute to convenience in the administration of the laws.\63\ OFCCP
requests comments from stakeholders on the proposed exemption.
---------------------------------------------------------------------------

\63\ 41 CFR 60-1.5(b)(1), 60-300.4(b)(1), 60-741.4(b)(1).
\64\ FEHBP is the Federal health care program serving civilian
Federal employees, annuitants, and their dependents. 5 U.S.C. 8901
et seq. The program is administered by the U.S. Office of Personnel
Management. FEHBP offers two general types of plans: Fee-for-service
plans and HMO plans. The Department's Administrative Review Board
held OFCCP did not have authority over a health care provider based
on a reimbursement agreement with a health insurance carrier
offering a fee-for-service FEHBP plan, but did have authority over a
health care provider's agreement to provide services pursuant to a
FEHBP HMO plan. See OFCCP v. UPMC Braddock, No. 08-048, 2009 WL
1542298 (ARB May 29, 2009), aff'd, UPMC Braddock v. Harris, 934 F.
Supp. 2d 238 (D.D.C. 2013), vacated as moot, UPMC Braddock v. Perez,
584 F. App'x 1 (D.C. Cir. 2014); In re Bridgeport Hosp., No. 00-023,
2003 WL 244810 (ARB Jan. 31, 2003).
---------------------------------------------------------------------------

OFCCP is also considering and requests comments on whether health
care providers participating in the Federal Employees Health Benefits
Program (FEHBP) \64\ should not be covered by OFCCP's authority. OFCCP
is interested in comments from stakeholders and health care providers
that participate in other Government health care programs, such as
FEHBP, about the impact of OFCCP's requirements, if there is difficulty
attracting and retaining participating providers, and whether a uniform
rule

[[Page 59752]]

is needed to avoid legal uncertainty. Some stakeholders have indicated
that other Government health care programs may face difficulties
similar to TRICARE.\65\
---------------------------------------------------------------------------

\65\ 2014 Hearing, supra note 44, at 17-18 (Prepared Statement
of the American Hospital Association), 25-26, 46-47 (Prepared
Statement and Testimony of Thomas Carrato, President, Health Net
Federal Services), 34-35, 39-40 (Statement and Testimony of David
Goldstein, Shareholder, Littler Mendelson P.C.); 2013 Hearing, supra
note 54, at 67-68, 139 (Statement and Testimony of Curt Kirschner,
Partner, Jones Day, on behalf of the American Hospital Association).
---------------------------------------------------------------------------

VI. Section-by-Section Analysis

Section 60-1.3 Definitions

OFCCP proposes adding a paragraph to the definition of subcontract
in the E.O. 11246 regulations noting that a subcontract does not
include an agreement between a health care provider and health
organization pursuant to which the health care provider agrees to
furnish health care services or supplies to beneficiaries of TRICARE.
OFCCP also proposes adding definitions of ``agreement,'' ``health care
provider,'' and ``health organization.''

Section 60-300.2 Definitions

OFCCP proposes adding a paragraph to the definition of subcontract
in the VEVRAA regulations noting that a subcontract does not include an
agreement between a health care provider and health organization
pursuant to which the health care provider agrees to furnish health
care services or supplies to beneficiaries of TRICARE. OFCCP also
proposes adding definitions of ``agreement,'' ``health care provider,''
and ``health organization.''

Section 60-741.2 Definitions

OFCCP proposes adding a paragraph to the definition of subcontract
in the Section 503 regulations noting that a subcontract does not
include an agreement between a health care provider and health
organization pursuant to which the health care provider agrees to
furnish health care services or supplies to beneficiaries of TRICARE.
OFCCP also proposes adding definitions of ``agreement,'' ``health care
provider,'' and ``health organization.''

VII. Regulatory Analysis

E.O. 12866 (Regulatory Planning and Review), E.O. 13563 (Improving
Regulation and Regulatory Review), and E.O. 13771 (Reducing Regulation
and Controlling Regulatory Costs)

Under E.O. 12866, the U.S. Office of Management and Budget's
(OMB's) Office of Information and Regulatory Affairs (OIRA) determines
whether a regulatory action is significant and, therefore, subject to
the requirements of E.O. 12866 and OMB review. Section 3(f) of E.O.
12866 defines a ``significant regulatory action'' as an action that is
likely to result in a rule that: (1) Has an annual effect on the
economy of $100 million or more, or adversely affects in a material way
a sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or State, local or tribal
governments or communities (also referred to as economically
significant); (2) creates serious inconsistency or otherwise interferes
with an action taken or planned by another agency; (3) materially
alters the budgetary impacts of entitlement grants, user fees, or loan
programs, or the rights and obligations of recipients thereof; or (4)
raises novel legal or policy issues arising out of legal mandates, the
President's priorities, or the principles set forth in E.O. 12866. The
Office of Management and Budget has determined that this proposed rule
is a significant action under E.O. 12866 and has reviewed the proposed
rule.
E.O. 13563 directs agencies to propose or adopt a regulation only
upon a reasoned determination that its benefits justify its costs;
tailor the regulation to impose the least burden on society, consistent
with obtaining the regulatory objectives; and in choosing among
alternative regulatory approaches, select those approaches that
maximize net benefits. E.O. 13563 recognizes that some benefits are
difficult to quantify and provides that, where appropriate and
permitted by law, agencies may consider and discuss qualitatively
values that are difficult or impossible to quantify, including equity,
human dignity, fairness, and distributive impacts.
This proposed rule is expected to be an E.O. 13771 deregulatory
action.

The Need for the Regulation

The proposed regulatory changes are needed to provide clarity
regarding OFCCP's authority over health care providers that provide
services and supplies under TRICARE, improve uniformed service members'
and veterans' access to medical care, more efficiently allocate OFCCP's
limited resources for enforcement activities, and provide greater
uniformity, certainty, and notice for health care providers
participating in TRICARE. The proposed rule is intended to address
concerns regarding the risk that health care providers may be declining
to participate in TRICARE, which reduces the availability of medical
services for uniformed service members, veterans, and their families.
OFCCP is proposing to exempt health care providers with agreements to
furnish medical services and supplies to individuals participating in
TRICARE from E.O. 11246, Section 503, and VEVRAA.

Discussion of Impacts

In this section, the Department presents a summary of the costs and
savings associated with the changes proposed in this notice of proposed
rulemaking. The estimated labor cost to contractors is reflected in
Table 1, below. The mean hourly wage of Management Analysts (SOC 13-
1111) is $45.38 and Human Resources Managers (SOC 11-3121) is
$60.91.\66\ The Department adjusted these wage rates to reflect fringe
benefits such as health insurance and retirement benefits, as well as
overhead costs such as rent, utilities, and office equipment. The
Department used a fringe benefits rate of 46 percent \67\ and an
overhead rate of 17 percent,\68\ resulting in fully loaded hourly
compensation rates for Management Analysts of $73.97 ($45.38 + ($45.38
x 46%) + ($45.38 x 17%)) and Human Resources Managers of $99.28 ($60.91
+ ($60.91 x 46%) + ($60.91 x 17%)).
---------------------------------------------------------------------------

\66\ BLS, Occupational Employment Statistics, Occupational
Employment and Wages, May 2018, https://www.bls.gov/oes/current/oes_nat.htm.
\67\ BLS, Employer Costs for Employee Compensation, https://www.bls.gov/ncs/data.htm. Wages and salaries averaged $24.86 per
hour worked in 2018, while benefit costs averaged $11.52, which is a
benefits rate of 46%.
\68\ Cody Rice, U.S. Environmental Protection Agency, ``Wage
Rates for Economic Analyses of the Toxics Release Inventory
Program,'' (June 10, 2002), https://www.regulations.gov/document?D=EPA-HQ-OPPT-2014-0650-0005.

[[Page 59753]]

Table 1--Labor Cost
----------------------------------------------------------------------------------------------------------------
Fully loaded
Major occupational groups Mean hourly Fringe benefit Overhead rate hourly
wage rate compensation
----------------------------------------------------------------------------------------------------------------
Management Analysts............................. $45.38 46% 17% $73.97
Human Resources Managers........................ $60.91 46% 17% $99.28
----------------------------------------------------------------------------------------------------------------

The Department estimates that 48 percent of the burden hours will
be associated with Management Analysts and 52 percent for Human
Resources Managers. Thus, the average hourly rate is estimated at
$87.13 per hour (($73.97 x .48) + (99.28 x .52)).

Cost of Regulatory Familiarization

The Department acknowledges that 5 CFR 1320.3(b)(1)(i) requires
agencies to include in the burden analysis for new information
collection requirements the estimated time it takes for contractors to
review and understand the instructions for compliance. To minimize the
burden, OFCCP will publish compliance assistance materials including,
fact sheets and responses to ``Frequently Asked Questions.'' OFCCP may
also host webinars for the contractor community that will describe the
new requirements and conduct listening sessions to identify any
specific challenges contractors believe they face, or may face, when
complying with the requirements.
The Department believes that human resource personnel (human
resource managers and management analysts) at each health care
contractor establishment or firm within its authority will be
responsible for understanding or becoming familiar with the new
requirements. Therefore, the Department estimates that it will take a
minimum of 30 minutes for a human resource professional at each TRICARE
contractor establishment to either read the proposed rule, read the
compliance assistance materials provided by OFCCP, or participate in an
OFCCP webinar to learn more about the new requirements. Consequently,
the estimated burden for rule familiarization is 42,309 hours (84,617
establishments x \1/2\ hour).\69\ The Department calculates the total
estimated cost of rule familiarization as $3,686,383 (42,309 hours x
$87.13/hour) in the first year. The Department seeks public comments
regarding the estimated number of establishments that would review this
rule, the estimated time to review the rule, and whether management
analysts and human resource managers would be the most likely staff
members to review the rule. Table 2, below, reflects the estimated
regulatory familiarization costs for the proposed rule.

Table 2--Regulatory Familiarization Cost
------------------------------------------------------------------------

------------------------------------------------------------------------
Total number of health care contractor 84,617.
establishments.
Time to review rule...................... 30 minutes.
Management Analysts and Human Resources $87.13.
Managers fully loaded hourly
compensation (weighted 52 percent and 48
percent, respectively).
Regulatory familiarization cost in the $3,686,383.
first year.
------------------------------------------------------------------------

Cost Savings

While the proposed rule does not include any additional costs, it
may result in cost savings as it reconsiders OFCCP's authority over
health care providers with agreements to furnish medical services and
supplies to individuals participating in TRICARE, and in the
alternative, proposes a national interest exemption from E.O. 11246,
VEVRAA, and Section 503 for these health care providers, thus
eliminating any requirements associated with developing, updating, and
maintaining AAPs.
To fully estimate the associated cost savings, the Department could
use various data and information, only some of which are currently
available. The partial analysis that follows sets forth relevant
evidence and other helpful data that could be used to produce a more
robust cost savings estimate to be used in the final rule.
To estimate the number of Federal contractors potentially impacted
by the proposed rule, the Department identified the number of health
care providers participating in TRICARE.\70\ The Department further
refined this universe to those entities with 50 or more employees,
since the greatest burdens associated with the E.O. 11246, VEVRAA, and
Section 503 requirements are associated with developing, updating, and
maintaining AAPs.\71\ The Department then determined the rate of
compliance using OFCCP's compliance evaluation data from Fiscal Years
2012 through June 2019. The data showed that approximately 95 percent
of health care providers scheduled for an OFCCP compliance evaluation
during that period submitted their AAPs when requested and the
remaining 5 percent submitted their AAPs after receiving a show cause
notice. The scheduled health care providers included contractors
ranging from 50 to more than 501 employees.
---------------------------------------------------------------------------

\69\ The determination of the estimated number of health care
contractor establishments is discussed under Cost Savings, below.
\70\ OFCCP considered using its most recent EEO-1 numbers to
conduct this analysis, but the reporting requirements are limited to
prime contractors and first tier subcontractors. However, OFCCP's
universe includes all tiers of subcontractors that meet the
jurisdictional thresholds. Using EEO-1 data would underestimate the
impact of the proposed rule. Thus, OFCCP relied upon the analysis
described herein.
\71\ The requirement to develop AAPs is based on employing 50 or
more employees and having a contract that meets specific thresholds.
OFCCP does not have information regarding the value of the contracts
or financial agreements. Thus, the estimated number of
establishments may be overstated as it may include establishments
that have contracts of less than $50,000 (E.O. 11246 and section
503) or have contracts of less than $150,000 (VEVRAA).
---------------------------------------------------------------------------

The Department identified the number of health care providers in
the U.S. Census Bureau's Statistics of U.S. Businesses, using North
American Industry Classification System (NAICS) 621, 622, and 623.
There are 707,634 health care providers of which 28.3 percent or
200,260 have 50 or more employees.\72\
---------------------------------------------------------------------------

\72\ Number of Firms, Number of Establishments, Employment, and
Annual Payroll by Enterprise Employment Size for the United States,
All Industries: 2016, https://www2.census.gov/programs-surveys/susb/tables/2016/us_6digitnaics_2016.xlsx?# (last accessed February 24,
2019).

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[[Page 59754]]

The Department of Defense annual report to Congress reported that
there were 155,500 TRICARE Primary Care Network Providers and 143,500
TRICARE Specialist Network Providers in FY2018.\73\ The Department
estimates that 28.3 percent of these providers have 50 or more
employees. The Department believes that 84,617 providers ((155,500 +
143,500) x 28.3%)) are potentially impacted by the proposed rule.
---------------------------------------------------------------------------

\73\ Evaluation of TRICARE Programs, Fiscal Year 2019, Report to
Congress, https://www.health.mil/Military-Health-Topics/Access-Cost-Quality-and-Safety/Health-Care-Program-Evaluation/Annual-Evaluation-of-the-TRICARE-Program (last accessed September 17, 2019).
---------------------------------------------------------------------------

Calculating cost savings is made more difficult because the savings
may depend on whether the health care provider is still obligated to
maintain an AAP under other contracts. Such obligations may come from
many additional sources. For example, if the providers would qualify as
Federal contractors due to activities outside what is covered by this
proposed rule; or if they contract with states that mandate AAPs for
certain employers.\74\ Therefore, the estimate of affected TRICARE
providers may overstate the number of entities that would actually
realize cost savings as a result of this proposed rule. The Department
requests comments that may assist refinement of the analysis,
including: How often are health care providers subject to AAP rules
imposed by states, and how similar are the state-level requirements to
the provisions being rescinded by this proposed rule?
---------------------------------------------------------------------------

\74\ https://ballotpedia.org/Federal_and_state_affirmative_action_and_anti-discrimination_laws.
---------------------------------------------------------------------------

The rule proposes to amend Sec. 60-1.3 to note that a subcontract
does not include an agreement between a health care provider and a
health organization pursuant to which the health care provider agrees
to furnish services to beneficiaries of TRICARE. The clarification and
amendment would result in a cost savings, as some affected contractors
would no longer be required to comply with E.O. 11246 requirements and
to engage in such activities as creating, updating, or maintaining AAPs
or providing notifications to employees, subcontractors, or unions. The
Department's current OMB approved Information Collection Request (ICR)
for its supply and service program (1250-0003), ICR Reference No:
201811-1250-001, estimates an average of 91.44 hours per contractor to
comply with the E.O. 11246 requirements.
The rule proposes to amend Sec. 60-300.2 to note that a
subcontract does not include an agreement between a health care
provider and a health organization pursuant to which the health care
provider agrees to furnish services to beneficiaries of TRICARE. The
clarification and amendment would result in a cost savings, as some
affected contractors would no longer be required to comply with VEVRAA
requirements and to engage in such activities as creating, updating, or
maintaining AAPs, listing job opportunity notices with the local or
state employment service delivery systems, or providing notifications
to employees, subcontractors, or unions. The Department's current OMB
approved ICR for its VEVRAA requirements (1250-0004), ICR Reference No:
201610-1250-001, estimates an average of 16.86 hours per contractor to
comply with the VEVRAA requirements.
The rule also proposes to amend Sec. 60-741.2 to note that a
subcontract does not include an agreement between a health care
provider and a health organization pursuant to which the health care
provider agrees to furnish services to beneficiaries of TRICARE. The
clarification and amendment would result in a cost savings, as some
affected contractors would no longer be required to comply with Section
503 requirements and to engage in such activities as creating,
updating, or maintaining AAPs, or providing notifications to employees,
subcontractors, or unions. OFCCP's current OMB approved ICR for its
Section 503 requirements (1250-0005), ICR Reference No: 201610-1250-
002, estimates an average of 7.92 hours per contractor to comply with
the Section 503 requirements.

Summary of Costs and Cost Savings

The Department estimates the annualized costs of the proposed rule
for rule familiarization at $419,569 at a discount rate of 3 percent or
$490,522 at a discount rate of 7 percent.
The Department invites comments regarding the assumptions, data
sources, and methodologies used to estimate the impacts of this
proposed rule. Additionally, the Department solicits comments from
health care providers on their current costs of compliance that would
be mitigated by this rulemaking. Finally, the Department requests
comments on any available data that would indicate the extent to which
health care providers, who are not otherwise required due to separate
Federal contracts or subcontracts, have an expectation of compliance or
have complied with current requirements.

Summary of Transfer and Benefits

E.O. 13563 recognizes that some rules have benefits that are
difficult to quantify or monetize but are nevertheless important, and
states that agencies may consider such benefits. This rule has equity
and fairness benefits, which are explicitly recognized in E.O. 13563.
The proposed rule is designed to achieve these benefits by
providing clear guidance to contractors, and increasing contractor
understanding of OFCCP's authority as it relates to heath care
providers. If the proposed rule decreases the confusion of Federal
contractors, this impact most likely represents a transfer of value to
taxpayers (if contractor fees decrease because they do not need to
engage third party representatives to interpret OFCCP's requirements).

Alternative Discussion

In proposing this rule, the Department considered a non-regulatory
alternative. This alternative was to continue issuing moratoria or
other sub regulatory guidance in which OFCCP would exercise enforcement
discretion and not schedule compliance evaluations of certain health
care providers. The Department rejected this alternative, as it would
result in much greater uncertainty among the regulated entities. The
Department requests comments on any regulatory alternatives it might
consider.

Regulatory Flexibility Act and E.O. 13272 (Consideration of Small
Entities)

The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq.,
establishes ``as a principle of regulatory issuance that agencies shall
endeavor, consistent with the objectives of the rule and applicable
statutes, to fit regulatory and informational requirements to the scale
of the business organizations and governmental jurisdictions subject to
regulation.'' Public Law 96-354. The Act requires the consideration for
the impact of a proposed regulation on a wide-range of small entities
including small businesses, not-for-profit organizations, and small
governmental jurisdictions.
Agencies must perform a review to determine whether a proposed or
final rule would have a significant economic impact on a substantial
number of small entities.\75\ If the determination is that it would,
then the agency must prepare a regulatory flexibility analysis as
described in the RFA.\76\
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\75\ See 5 U.S.C. 603.
\76\ Id.

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[[Page 59755]]

However, if an agency determines that a proposed or final rule is
not expected to have a significant economic impact on a substantial
number of small entities, section 605(b) of the RFA provides that the
head of the agency may so certify and a regulatory flexibility analysis
is not required. See 5 U.S.C. 605. The certification must include a
statement providing the factual basis for this determination and the
reasoning should be clear. The Department does not expect this rule to
have a significant economic impact on a substantial number of small
entities. The annualized cost at a discount rate of 7 percent for rule
familiarization is $5.80 per entity ($43.57 in the first year) which is
far less than 1 percent of the annual revenue of the smallest of the
small entities affected by this proposed rule. Therefore, the
Department certifies that this proposed rule will not have a
significant impact on a substantial number of small affected entities.

Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires
that the Department consider the impact of paperwork and other
information collection burdens imposed on the public. According to the
1995 amendments to the Paperwork Reduction Act (5 CFR
1320.5(b)(2)(vi)), an agency may not collect or sponsor the collection
of information or impose an information collection requirement unless
the information collection instrument displays a currently valid OMB
control number. The Department has determined that there is no new
requirement for information collection associated with this proposed
rule. The information collection requirements contained in the existing
E.O. 11246, VEVRAA and Section 503 regulations are currently approved
under OMB Control No. 1250-0003 (OFCCP Recordkeeping and Reporting
Requirements--Supply and Service), OMB Control No. 1250-0004 (OFCCP
Recordkeeping and Reporting Requirements--38 U.S.C. 4212, Vietnam Era
Veterans' Readjustment Assistance Act of 1974, as amended), and OMB
Control No. 1250-0005 (OFCCP Recordkeeping and Reporting Requirements--
Section 503 of the Rehabilitation Act of 1973, as amended, 29 U.S.C.
703). Consequently, this proposed rule does not require review by the
Office of Management and Budget under the Paperwork Reduction Act of
1995, 44 U.S.C. 3501 et seq.

E.O. 13132 (Federalism)

The Department has reviewed this proposed rule in accordance with
E.O. 13132 regarding federalism, and has determined that it does not
have ``federalism implications''. This rule will not ``have substantial
direct effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.''

E.O. 13175 (Consultation and Coordination With Indian Tribal
Governments)

This proposed rule does not have tribal implications under E.O.
13175 that requires a tribal summary impact statement. The proposed
rule does not have substantial direct effects on one or more Indian
tribes, on the relationship between the Federal Government and Indian
tribes or on the distribution of power and responsibilities between the
Federal Government and Indian tribes.

List of Subjects

41 CFR Part 60-1

Administrative practice and procedure, Equal employment
opportunity, Government contracts, Reporting and recordkeeping
requirements.

41 CFR Part 60-300

Administrative practice and procedure, Civil rights, Employment,
Equal employment opportunity, Government contracts, Government
procurement, Individuals with disabilities, Investigations, Reporting
and recordkeeping requirements, Veterans.

41 CFR Part 60-741

Craig E. Leen,
Director, Office of Federal Contract Compliance Programs.
For the reasons set forth in the preamble, OFCCP proposes to amend
41 CFR parts 60-1, 60-300, and 60-741 as follows:

PART 60-1--OBLIGATIONS OF CONTRACTORS AND SUBCONTRACTORS

0
1. The authority citation for part 60-1 continues to read as follows:

Authority: Sec. 201, E.O. 11246, 30 FR 12319, 3 CFR, 1964-1965
Comp., p. 339, as amended by E.O. 11375, 32 FR 14303, 3 CFR, 1966-
1970 Comp., p. 684, E.O. 12086, 43 FR 46501, 3 CFR, 1978 Comp., p.
230, E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., p. 258 and E.O.
13672, 79 FR 42971.

Subpart A--Preliminary Matters; Equal Opportunity Clause;
Compliance Reports

0
2. In Sec. 60-1.3, revise the definition of ``Subcontract'' to read as
follows:

Sec. 60-1.3 Definitions.

* * * * *
Subcontract. (1) Means any agreement or arrangement between a
contractor and any person (in which the parties do not stand in the
relationship of an employer and an employee):
(i) For the purchase, sale or use of personal property or
nonpersonal services which, in whole or in part, is necessary to the
performance of any one or more contracts; or
(ii) Under which any portion of the contractor's obligation under
any one or more contracts is performed, undertaken or assumed; and
(2) Does not include an agreement between a health care provider
and a health organization under which the health care provider agrees
to provide health care services or supplies to natural persons who are
beneficiaries under TRICARE.
(i) An agreement means a relationship between a health care
provider and a health organization under which the health care provider
agrees to provide health care services or supplies to natural persons
who are beneficiaries under TRICARE.
(ii) A health care provider is a physician, hospital, or other
individual or entity that furnishes health care services or supplies.
(iii) A health organization is a voluntary association,
corporation, partnership, managed care support contractor, or other
nongovernmental organization that is lawfully engaged in providing,
paying for, insuring, or reimbursing the cost of health care services
or supplies under group insurance policies or contracts, medical or
hospital service agreements, membership or subscription contracts,
network agreements, health benefits plans duly sponsored or
underwritten by an employee organization or association of
organizations and health maintenance organizations, or other similar
arrangements, in consideration of premiums or other periodic charges or
payments payable to the health organization.
* * * * *

[[Page 59756]]

PART 60-300--AFFIRMATIVE ACTION AND NONDISCRIMINATION OBLIGATIONS
OF FEDERAL CONTRACTORS AND SUBCONTRACTORS REGARDING DISABLED
VETERANS, RECENTLY SEPARATED VETERANS, ACTIVE DUTY WARTIME OR
CAMPAIGN BADGE VETERANS, AND ARMED FORCES SERVICE MEDAL VETERANS

0
3. The authority citation for part 60-300 continues to read as follows:

Authority: 29 U.S.C. 793; 38 U.S.C. 4211 and 4212; E.O. 11758
(3 CFR, 1971-1975 Comp., p. 841).

Subpart A--Preliminary Matters, Equal Opportunity Clause

0
4. In Sec. 60-300.2, revise paragraph (x) to read as follows:

Sec. 60-300.2 Definitions.

* * * * *
(x) Subcontract. (1) Means any agreement or arrangement between a
contractor and any person (in which the parties do not stand in the
relationship of an employer and an employee):
(i) For the purchase, sale or use of personal property or
nonpersonal services which, in whole or in part, is necessary to the
performance of any one or more contracts; or
(ii) Under which any portion of the contractor's obligation under
any one or more contracts is performed, undertaken or assumed; and
(2) Does not include an agreement between a health care provider
and a health organization under which the health care provider agrees
to provide health care services or supplies to natural persons who are
beneficiaries under TRICARE.
(i) An agreement means a relationship between a health care
provider and a health organization under which the health care provider
agrees to provide health care services or supplies to natural persons
who are beneficiaries under TRICARE.
(ii) A health care provider is a physician, hospital, or other
individual or entity that furnishes health care services or supplies.
(iii) A health organization is a voluntary association,
corporation, partnership, managed care support contractor, or other
nongovernmental organization that is lawfully engaged in providing,
paying for, insuring, or reimbursing the cost of health care services
or supplies under group insurance policies or contracts, medical or
hospital service agreements, membership or subscription contracts,
network agreements, health benefits plans duly sponsored or
underwritten by an employee organization or association of
organizations and health maintenance organizations, or other similar
arrangements, in consideration of premiums or other periodic charges or
payments payable to the health organization.
* * * * *

PART 60-741--AFFIRMATIVE ACTION AND NONDISCRIMINATION OBLIGATIONS
OF FEDERAL CONTRACTORS AND SUBCONTRACTORS REGARDING INDIVIDUALS
WITH DISABILITIES

0
5. The authority citation for part 60-741 continues to read as follows:

Authority: 29 U.S.C. 705 and 793; E.O. 11758 (3 CFR, 1971-1975
Comp., p. 841).

Subpart A--Preliminary Matters, Equal Opportunity Clause

0
6. In Sec. 60-741.2, revise paragraph (x) to read as follows:

Sec. 60-741.2 Definitions.