84.09

OPINION NO. 84-9

The State Ethics Commission has considered an opinion request as to whether a part-time physician in the Medical Assistance Compliance Administration may have a private practice where he accepts medical assistance patients.

This advisory opinion request arose in the context of disclosure by the employee (the Doctor) on the Commission's Financial Interest Exception Disclosure Form that he has a private general practice that includes medical assistance patients. The Doctor is a medical professional employed in the State's medical assistance program (Medicaid). This program, which is funded largely through federal funds, is established in Title 15 of the Health-General Article, Annotated Code of Maryland. It is a program designed to "provide comprehensive medical or other health care for indigent individuals or medically indigent individuals or both...." The Secretary of the Department of Health and Mental Hygiene (DHMH) is authorized to contract with insurance companies, health practitioners, hospitals and other entities or individuals for the provision of care to eligible program recipients. These providers of care are reimbursed for their services through invoices submitted in accordance with reimbursement regulations established by DHMH. The Law provides for review of the health care provided, by private groups appointed by the DHMH Secretary, as well as by a compliance unit within the Department, and the reimbursements are also monitored by DHMH. There are both civil and criminal penalties for fraudulent or improper medical assistance activities by providers.

The Medical Assistance Compliance Administration (MACA) is the group under the DHMH Assistant Secretary for Medical Care Programs that is responsible for monitoring the health care providers. The Doctor works as a Physician C in the Acute Care Unit that is part of MACA's Division of Health Services Review. He is part-time (50 percent), and serves as a medical professional responsible for reviewing requests for preauthorization required pursuant to COMAR 10.09.02.06. His responsibilities include, for example, preapproval of cosmetic surgery, evaluation of acute and chronic kidney disease hospitalization, and review of decisions to recommend or deny transfer of a patient to an out-of-State facility. The Doctor indicates that he may review the medical records of a case and possibly consult with other physicians in making a determination. Some letters and responses are actually sent by him, while others are reviewed or issued by DHMH supervisors. The Department has various mechanisms for appeal of these types of determinations.

The Doctor is a medical practitioner who has an individual provider contract with DHMH, and is reimbursed in accordance with the invoice system established by DHMH. He describes his practice as a general family practice involving most medical situations except surgery. He states that he holds private office hours four days a week and indicates that Medicaid payments account for $1,700, only a small fraction of his annual office income; he does not treat Medicaid patients in the hospital. According to the Doctor, he sees medical assistance patients on the same basis as his other patients, using special forms for prescriptions and invoices. The Doctor says his rates vary depending on the length of a visit and that Medicaid reimburses for the invoiced amount as long as it is within the Medicaid limit of $18. His usual Medicaid office visit is invoiced for $10. He indicates that he maintains records of his medical assistance transactions as required by agency regulations. He states that he is not aware of any across-the-board auditing program, noting that contacts are made and records reviewed only where the invoices raise questions. He says he has never had any questions raised about his medical assistance invoices and has never had any contacts with the compliance unit in this regard.

The Director of MACA's Health Services Review Division indicates that for purely medical determinations the Division relies on its medical professionals such as the Doctor, though administrative staff may be involved in reviewing such matters. Administrative and policy decisions are made by non-medical administrators based on input from medical professionals. The Director indicates that there is significant interaction among the professional staff in the various units within the Division. He says that there are about 100 employees in the Division, very few of whom are part-time. He also states that those that do have private practices generally do not do medical assistance work. With regard to the Doctor in particular, the Director sees the limited extent of his Medicaid involvement as key. Given the size of the program, the Director states that detailed reviews of physician providers tend to be limited to those having significant amounts of Medicaid work. He believes it would be unlikely that the Division would ever do a detailed review of a practitioner with involvement as small as the one involved here.

This request raises both employment and interest issues under §3-103(a)(1)(i) of the Public Ethics Law (Article 40A, §3-103(a)(1)(i), Annotated Code of Maryland, the Ethics Law), which prohibits an employee from having a financial interest in or being employed by an entity that contracts with his agency. We have consistently held that ownership and operation of a sole proprietorship business results in both an interest and employment relationship with the entity.1 Since the Doctor receives in excess of $1,000 annually from his practice, he would appear to have a financial interest in it as that term is defined in §1-201(m) of the Ethics Law and for purposes of §3-103(a)(1)(i). Also, we have concluded in another case involving a medical practitioner that the provider agreements between practitioners and DHMH result in a contractual relationship for purposes of §3-103(a)(1)(i). (Opinion No. 82-46.) The Doctor's practice therefore involves a financial interest and employment relationship that would be prohibited by §3-103(a)(1)(i) unless the exceptions authorized by the introductory language to the section can be applied. This language provides that the prohibition applies "except as permitted by regulations of the Commission where such interest is disclosed or where such employment does not create a conflict of interest or appearance of conflict...."

Commission regulations implementing this exception are set forth in COMAR 19A.02.01 and 19A.02.02. The approach of the regulations is to establish guideposts for determining whether the relationships between an employee's agency's functions and his private affiliations are so remote that a conflict or appearance of conflict is unlikely. The regulations deal, for example, with whether the employee's duties significantly impact on the private entity, whether he is in the unit of his agency or has supervisory relationships with individuals that impact on the private entity, whether he has private management responsibilities relating to private entity's compliance with agency regulations, and whether his private compensation is directly funded by agency contract. The regulations also provide for Commission determination that the general circumstances of the situation do not raise a potential conflict of interest or appearance of conflict. In some circumstances, where a relationship exists, exception may still be allowed, if the employing agency advises that the credibility of the agency mission will not be impaired.

This situation presents several issues under these regulatory criteria. Though the Doctor does not do audits of individual practices such as his own, he is in the unit (MACA) that is responsible for auditing his Medicaid practice, and is directly supervised by other officials who exercise agency authority in the Medicaid compliance program. Moreover, as the sole proprietor/owner of his practice, the Doctor would be the person substantively responsible for compliance with agency requirements, and his Medicaid payments would constitute compensation directly from his State agency. In view of these issues, we have requested the views of the DHMH regarding this situation. The Secretary has indicated that the view of the Medical Care Programs Administration is that the practice could continue, but only based on the Doctor's assurances of significant limitations. These include, for example, his having taken no new patients in recent months, and limiting the charge per patient as well as total annual income from Medicaid sources.

We agree as to the necessity of these limitations. In fact, considering the number of issues raised under the regulations, and that the agency's favorable view is based on such substantial contingencies, our conclusion is that this activity may not, as a general matter, be excepted under the regulations. We do not wish to imply that provider contracts between DHMH and agency professionals in private practice are necessarily barred in all cases. We are concerned, however, at the strong potential for appearance of conflict where an agency employee who has a provider contract serves in the unit that is charged with independent compliance responsibilities for the program. Our general conclusion is thus that the Medicaid practice of this particular employee would be inconsistent with §3-103(a) (1)(i), and that this bar may not, as a general matter, be overcome by our exception regulations. We therefore advise the Doctor that he should, in addition to various assurances provided to his agency, begin to phase out his Medicaid practice entirely. This would include his continuing his policy of accepting no new patients in the program, and also discontinuing existing patients as soon as possible.2

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

Date: March 28, 1984

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1 See Opinions No. 82-16, No. 82-8, No. 82-3, and No. 81-45. Except as otherwise expressly cited to the Maryland Register, Opinion citations are to Commission Opinions published in COMAR Title 19A.

2 We recognize, however, the need for a reasonable time to allow patients to find another physician without adverse consequences to their medical welfare. The Doctor may consult Commission staff as to further guidance required in his phasing out of his Medicaid practice.