AO 2012-13: Hospital association may contribute to independent expenditure-only committees

An association of physician-owned hospitals and persons affiliated with it may make contributions to independent expenditure-only committees because they are not considered to be federal contractors.

Background

Physician Hospitals of America (“Physician Hospitals”) is an association of physician-owned hospitals that operates in Texas. Physician Hospitals does not have contracts with the federal government, nor does it receive any payments from the federal government under any federal program. The member hospitals that comprise the association are owned by various entities including partnerships, professional associations, trusts and individuals.

The hospitals provide service to patients through several federal programs including Medicare and Medicaid, TRICARE and CHAMPUS. [FN1] The hospitals are then directly reimbursed by the federal government for patients’ claims for services rendered, pursuant to the specific federal program. In light of their involvement with these federal programs, Physician Hospitals asks whether it may make contributions to independent expenditure-only political committees.

Analysis

The Federal Election Campaign Act (the Act), as amended, prohibits any person who enters into any contract with the United States, or any agency or department thereof, from making contributions to any political party, political committee or candidate. 2 U.S.C. § 441c(a)(1). However, this prohibition does not apply when a person contracts with an entity other than the United States or a department or agency of the United States, even if the entity is funded in whole or in part from funds appropriated by Congress. 11 CFR 115.1(d).

The Commission’s Explanation and Justification for 11 CFR 115.1(d) states that the regulation excludes from the definition of “federal contractor” service providers who receive payments from Medicare or Medicaid. Additionally, in past advisory opinions, the Commission has stated that service providers under Medicare and Medicaid do not qualify as federal contractors. The Commission also concluded that since programs like TRICARE and CHAMPUS are “programmatically similar” to Medicare and Medicaid, service providers under those programs are likewise not considered federal contractors under Commission regulations.

As a result, Physician Hospitals, its member hospitals and the physician owners of the hospitals are not prohibited by the Act or Commission regulations from making contributions to independent expenditure-only political committees.

FOOTNOTE:

1. TRICARE is a health care program serving active duty service members and is the successor program to CHAMPUS, the Civilian Health and Medical Program of the Uniformed Services.

Date issued: April 27, 2012; Length: 4 pages.

Resources:

• Advisory opinion 2012-13 [PDF; 4 pages]
• Commission discussion of AO 2012-06