[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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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).

---------------------------------------------------------------------------

[[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\
---------------------------------------------------------------------------

    \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

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


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.

* * * * *
    (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.
* * * * *
[FR Doc. 2019-23700 Filed 11-5-19; 8:45 am]
 BILLING CODE 4510-45-P