A request has been received from the Chief of the Department of Health and Mental Hygiene's Reimbursements Division as to whether and how §3-101 of the Public Ethics Law (Article 40A, §3-101, Annotated Code of Maryland, the Ethics Law) would apply in view of his negotiation and potential employment arrangements with Blue Cross and Blue Shield (Blue Cross). Having reviewed the circumstances of Requestor's dealings with Blue Cross, as well as the nature of his DHMH position, we advise that this provision of the Ethics Law would apply to bar any participation in matters relating to this entity.

The Requestor's Reimbursements Division is a unit of DHMH's Fiscal Services Administration. He is the Director of the Division and serves in a State Grade 18. His office functions basically as a collections office in support of the Department's various residential treatment facilities. These include psychiatric hospitals, chronic disease facilities and residential centers serving the developmentally disabled. Pursuant to Health Department statute and regulation, patients at these facilities are billed based on their ability to pay in accordance with a standard fee system which takes into account a variety of sources, including public assistance (Medicaid), Medicare, private insurance, retirement income, and Social Security. The Requestor indicates that private insurance is the primary source to be exhausted before other sources are sought.

The Reimbursement Division includes approximately 95 employees, with an Assistant Division Chief and 5 sections. These include two field offices, a delinquency unit, a general accounting section and a data processing unit. The general accounting section is the one that handles the standard billing process, and includes sub-units that are organized according to the source of the payments. Bills unpaid after 90 days may be referred to the Division's delinquency unit, and if still unpaid after 120 days to Central Collections (a unit in the State Department of Budget and Fiscal Planning) for collection. There apparently can be and are disputes with insurers as to what should be covered and how much should be paid, which may involve State facility personnel and the insurer, as well as Reimbursements Division staff. During the last fiscal year the unit collected a total of $79 million, including $52.5 million from Medicaid, $9.2 million from Medicare, $8.3 million from private insurance, and $8.5 million from patients and other responsible parties (including Social Security). Of the private insurance 40--50 percent represents payments by Blue Cross, and Blue Cross is also the federal intermediary for the Medicare program.

The Requestor's job as Division Chief is to monitor the system, supervising all unit personnel, and dealing with exceptions to the process. He is involved in the legislative process, works in developing regulations and works with other DHMH units that need his collections experience. His responsibilities include the duty to run the office to insure that all resources available to patients towards the cost of their medical care are utilized; to maintain cooperation with other agencies and organizations, both public and private, in order to maximize collections; to represent the State in matters relating to reimbursements before professional groups and legislative committees; and to determine the appropriate legal and administrative procedures to be utilized in recovering sums due the State.

Though much of the day-to-day operations of the Division are handled by section heads, the Requestor may be called upon to resolve problems brought to him by his staff or other parties. As an example, a situation arose in the past year involving the Blue Cross payment of bills from a residential facility that last year lost its Medicare/Medicaid certification. The Requestor took a lead role in interpreting the law and dealing with Blue Cross regarding whether payment would continue to be made to the Department or directly to the patient. The Requestor indicates that this type of situation where he gets so directly involved may arise once or twice a year. He advises that his staff, however, deals with Blue Cross all the time.

Also, the Director of the Fiscal Services Administration, the Requestor's supervisor, confirms his interaction with Blue Cross, and his involvement in developing regulations and legislative and other policy. Though he is very often not the final decision-maker, and the regulatory work tends to be within strict requirements of other agencies, the supervisor indicates that the Requestor has sufficient dealings with the entity that his nonparticipation in any matter involving it would cause problems.

The situation presented here arose as a result of employment discussions that took place between the Requestor and Blue Cross, particularly with the entity's current head of government relations. This individual was formerly the head of DHMH's Public Information Office, and the Requestor says he had worked with her as to legislative matters involving his unit of the Department. She left the Department early in 1987 and subsequently called him, and in the context of a general discussion of what she was doing with Blue Cross suggested that he consider taking a position with the company as her assistant. The opportunity was discussed in general with the job apparently described as primarily legislative.

The Requestor says that there was general discussion as to salary and starting date, but that no specific agreements were reached. He advises that he later called the individual to advise her that he had decided to accept the position and was planning to submit his resignation to the Department, and learned that as a result of a hiring freeze in the company, the potential position was "on hold." Apparently the current situation is that the individual has advised that she still wants him for the position, but that the time frame could be in the next three months or as long as ten months. The Requestor indicates the he does not feel committed to the position, but would prefer not to rule it out as an opportunity.

Section 3-101 of the Ethics Law prohibits an official or employee from participating in any matter, except in the exercise of an administrative or ministerial duty which does not affect the disposition or decision with respect to that matter, if he has an interest in the matter or if it involves as party any business entity with which he is negotiating or has any arrangement concerning prospective employment. Evaluation of this situation in view of this provision involves consideration of several different aspects of this prohibition. The first is the question of what constitutes negotiating or having an arrangement regarding employment for purposes of this section.

We have considered this issue in our Opinion No. 82-19, which involved an agency head who had had "serious" discussions with a regulated entity. Recognizing that there are possible one-sided contacts that do not constitute negotiation, we advised that the situation there did come within the prohibition. We concluded that this prohibition applies where the circumstances go beyond preliminary contacts to involve "two-way communications and discussions that could result in interests and motivation of an official toward a private entity that would interfere with his objectivity in dealing with the potential employer in his official capacity." In our view of the situation here the Requestor's dealings with Blue Cross would come within this criterion, and his continued interest in this employment opportunity constitutes an arrangement regarding prospective employment for purposes of this section, despite the apparently uncertain way that things now stand. We therefore advise the Requestor and his agency that this provision would apply to bar his participation in matters involving Blue Cross.

The extent of the application of this prohibition depends on the particular circumstances of his unit's dealings with Blue Cross, and how they relate to the concepts of "participation" and "matter." We considered application of these terms in an early Opinion regarding this provision (No. 80-17). In that Opinion we generally determined to follow the approach to these terms in the predecessor provision (the Code of Ethics), concluding that "matter" includes a proceeding, application, submission, request for ruling, or other determination, contract claim, case or other such particular matter. We also considered there the question of what constitutes participation, again relying on the approach taken under the pre-existing Code of Ethics. We have thus in subsequent Opinions and informal advice treated the term "participate" as including participating as an official or employee in any proceeding, decision, determination, finding, ruling, order, grant, payment, award, license, contract, transaction, sanction or approval, or the denial thereof, or failure to act with respect thereto, personally and substantially through approval, disapproval, decision, recommendation, the rendering of advice, investigation or otherwise.

In our view, the proper application of these terms to the situation of the Requestor's duties as described to us would appear to seriously limit his functioning in his position as long as he continues to retain this potential position as a future employment option. This is especially so given the fact that individuals who are supervised by him relate on a day-to-day basis with Blue Cross, and given the significance of the entity as a reimbursement source. There has been some suggestion that he could defer these types of direct questions to another official, but in our view this would not seem to be acceptable as a long-range solution from the practical standpoint. Moreover, it seems to us that in this operation as described it would be very difficult to monitor a nonparticipation policy on any long-term basis, or to predict with any reliability what if any matters might eventually become sufficiently problemsome to require management intervention and therefore reassignment to another person.

Section 3-101 of the Ethics Law does not as a general matter absolutely prohibit private relationships, nor does it prohibit employees from seeking or negotiating for new employment. Rather, it restricts the conduct of employees in their State job when it would impact on a potential private employer. As long as these restrictions do not interfere with the ability of the agency to function, or put the agency to any significant burden in defending the integrity of the agency function, we do not believe that this provision would require transfer from the position or resignation. However, we advise the agency in this case that it should review and monitor this situation very carefully, and should consider establishing clear and defined guidelines or requirements in order to ensure that the matter is resolved quickly.1

M. Peter Moser, Chairman
    William J. Evans
   *Reverend John Wesley Holland
    Betty B. Nelson
    Barbara M. Steckel

Date: December 1, 1987

* Rev. John Wesley Holland was a member of the Commission and participated in the consideration and decision regarding this request. He died prior to formal issuance of the Opinion.


1 We also advise the Requestor of the application to him of the post-employment provisions of §3-103(b) of the Ethics Law, which limit his activities as a former employee on behalf of a party other than the State as to matters in which he participated significantly as a State employee. If he decides to leave State employment he should evaluate his work with DHMH and what he would plan to do with his new employer and should seek additional guidance as to any issues presented.