82.44

OPINION NO. 82-44

The State Ethics Commission has been requested to advise the Chief of the Crippled Children's Division in the Mental Retardation and Developmental Disabilities Administration (MRDDA) as to whether he may have outside employment as a faculty member at a hospital which provides patient care to individuals referred and funded by his program.

This request is presented by the Chief of the Division of Crippled Children(s) Services in MRDDA, which is part of the Department of Health and Mental Hygiene (DHMH). The Crippled Children's program is established in the Health-General Article, §15-125, Annotated Code of Maryland, and is to "administer a program of services for children who are crippled or who have conditions that lead to crippling." The FY 1983 Budget Book describes the program as follows:

The emphasis in this program is upon early case finding, diagnosis, and treatment of handicapping conditions, or potentially handicapping conditions, in order to prevent permanent disability and to assure that every child may ultimately reach his fullest potential. The Crippled Children's Program provides: specialty clinic services in the local health departments, hospital outpatient care, hospital inpatient and convalescent care, purchase of appliances and prostheses, diagnostic and advisory services, and diagnostic and evaluation services at the University of Maryland and the Johns Hopkins hospitals. The Budget projected that in FY 1983 the program would service 310 inpatients, 5,523 outpatients, and 1,200 patients requiring special types of care. The program's proposed FY 1983 Budget was $4,876,733, including, among other items, $2,599,477 for contractual services and $981,094 for grants, subsidies and contributions.

The Requestor indicates that the program involves substantial work in community health departments by DHMH physicians supervised by him, with program consultation in the central office in Baltimore. These physicians evaluate cases and make diagnoses and referral decisions. If a patient needs inpatient care a referral is made by the physician based primarily on availability of particularly required specialized services. If a patient is recommended for inpatient hospital care, the regional Nurse Advisor in the County decides, based on financial eligibility criteria, whether the patient should be approved for Crippled Children's funds. The Requestor indicates that hospitals used in the purchase of care programs are generally university-affiliated institutions. He states that the care involved is usually highly specialized elective care and that a university facility is generally able to provide the highest quality care within the agency's cost limitations. Payment is made to the hospitals on a reimbursement basis rather than on a continuing contractual basis.

The Requestor has expressed an interest in serving as a faculty member at the Kennedy Institute, which is a unique facility providing a broad range of specialized crippled children's services. It is affiliated with Johns Hopkins Hospital and School of Medicine and is a private provider of care under the MRDDA's reimbursement program. The Institute is also the recipient of some MRDDA grant funds, including a Diagnostic and Evaluation Program that began in the late 1950's at Hopkins and was transferred to the Institute when it was established in the mid-1960's. The Requestor does have some official responsibilities involving annual negotiation of this grant. He indicates, however, that his proposed work with the Institute would not be related to this grant. He states that he would be doing management consulting types of projects. The Requestor does not at this time anticipate his duties including actually seeing patients, though he would like to consider this, as he believes it necessary to maintain clinical skills not being used in his State work. The Doctor estimates that approximately 10% of the Institute's patients are funded by Crippled Children's funds, with about 30% medical assistance patients, and the remainder paid by private insurance or out-of-State patients funded by programs in their home state.

This request is an outside employment case raising issues primarily under §3-103(a) of the Public Ethics Law (Article 40A, §3-103)(a), Annotated Code of Maryland, the Ethics Law). Subsection 3-103(a)(1)(i) prohibits outside employment with an entity that is under the authority of or contracts with his agency. Thus, a first issue is whether the Requestor's proposed employment would be forbidden as employment with an entity that is under the authority of or contracts with his agency. The Institute is, of course, subject to substantial regulation by DHMH. Moreover, its grantee and purchase of care reimbursement relationships with MRDDA (and the Crippled Children's program specifically) are contractual relationships that we believe are intended to be covered by §3-103(a)(1)(i). In evaluating this request, we have, however, considered whether our outside employment exception regulations would apply to allow this activity notwithstanding its coverage by the technical criteria of subsection (a)(1)(i). See COMAR 19A.02.01 (9:15 Md. R. 1517 (July 23, 1982)). We have also, consistent with the regulations, requested the views of the Requestor's agency.

These regulations, which became effective on August 2, 1982, were developed pursuant to introductory language in §3-103(a), which provides that the prohibitions of subsection (a)(1) apply "except as permitted by regulation of the Commission where such interest is disclosed or where such employment does not create a conflict of interest or appearance of conflict." This exception provision was added to the Ethics Law in 1981 partly based on the recommendation of the Commission that flexibility be added to the absolute prohibitions in §3-103(a), to avoid situations where a violation would result from purely technical application of the elements of §3-103(a) even where there is no conflicting relationship between the private interest or employment and official duties. In developing exception criteria implementing the employment portion of this provision, we sought to define the circumstances where the relationship between an employee's official duties and private employment are so remote that the possibility of a conflict of interest or the appearance of conflict is unlikely.

If all of these regulatory standards of remoteness are met then employment would be allowable, despite the existence of authority or contractual links between an individual's State and private employers. The criteria include findings that:

A. The State duties do not significantly impact on the outside employer or a contract between the outside employer and the agency.

B. The employee is not directly supervised by a person whose duties significantly impact on the outside employer or a contract between the outside employer and the agency.

C. The employee does not supervise a person whose duties significantly impact the outside employer or a contract between the outside employer and the agency.

D. The employee is not affiliated with the specific unit in the agency that exercises authority over or contracts with the outside employer.

E. The employee has complied with other relevant sections of the Ethics Law.

F. The outside employment involves no non-ministerial duties significantly relating to the agency's authority over the employer.

G. The employee's private duties do not involve negotiating or carrying out a contract between the agency and the outside employer (except for broad fixed reimbursement contracts).

H. The private compensation is not directly funded by the State contract.

I. The specific employment circumstances do not otherwise create a conflict of interest or the appearance of a conflict.

In some instances (items B, C, D and F) even where a problem is raised under the criterion, the outside activity may be allowed, if the Head of the employee's agency determines that the proposed private activity would not result in a conflict or appearance of conflict that would impair the credibility of the agency, and the Commission concurs in that view. Also, some of the exception criteria deal with relationships between official and private activities that are closer than others. For example, item A requires a finding that the individual's State duties do not significantly impact on the private employer, and item I deals with the issue of whether the specific employment circumstances otherwise create a conflict or the appearance of conflict.

In reviewing the circumstances presented in this request, we believe that issues are raised under several items, including A, B, C, D and I. The Requestor is the Chief of the DHMH unit that manages a substantial program involving the same area of expertise in which the Institute specializes. The program involves a grant which, though not a substantial percentage of the Institute's budget, does represent a significant portion ($500,000 or approximately 10%) of the DHMH Crippled Children's Program budget. Moreover, the Requestor is the supervisor of other professionals who are responsible for referrals and patient-care decisions involving the Institute. While the Requestor indicates that he would disqualify himself from any matters involving the Institute, we are not convinced that, given his position as Chief of the Program, it is possible for him to completely avoid a situation that could be viewed as a conflict or appearance of conflict Moreover, in response to our request for the DHMH view, we have been advised that, while there is no question of the Requestor's integrity,

based on the information available to us, including his job description as it is now written, we do not believe we can recommend acceptance of his request for approval to act on the faculty at the John F. Kennedy Institute. Due to the nature of his current job, we believe that there could be a reasonable public apprehension about the existence of a conflict of interest and the possibility of the jobs impinging on each other.

We therefore conclude that the employment by the requestor would be prohibited by §3-103(a)(1)(i) of the Law, and that the exception regulations authorized by §3-103(a) may not be applied to overcome this bar.1

Herbert J. Belgrad, Chairman
    Jervis S. Finney
    Reverend John Wesley Holland
    Betty B. Nelson
    Barbara M. Steckel

Date: October 20, 1982

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1 Since we believe that the application of §3-103(a)(1)(i) fully disposes of this request, we have not addressed the application of §3-101 (disqualification) or §3-103(a)(1)(ii) (inconsistent employment).