92.12

OPINION NO. 92-12

Advice has been requested as to whether four State employees, one from the Income Maintenance Administration, Department of Human Resources (DHR), and the other three from the Developmental Disabilities Administration, Department of Health & Mental Hygiene (DHMH), may establish a private business and provide adult day care services to the elderly. We advise, based on the facts as presented as well as the representation of the two Departments involved, that this business is allowable only if it does not accept medical assistance reimbursement or other funding through the DHMH, and as long as the activity does not present any operational or conflict issues as it develops.

The DHR employee involved in this request works as the Director of Research and Analysis in the Office of Program Support in DHR's Income Maintenance Administration (IMA). His duties involve direction and supervision of the development and production of IMA internal and external management reports using a knowledge of program policy to integrate reporting needs in the agency's computer systems. He also plans, implements and supervises IMA office automation. The other three individuals involved in this request work at the DHMH Developmental Disabilities Administration (DDA) at the Great Oaks Center. A major administration with the DHMH, DDA is responsible to plan, develop and direct a Statewide program for mentally retarded and developmentally disabled persons and their families. Great Oaks Center is a residential facility that provides a full range of comprehensive and diversified services and programs, including respite care and day care programs for nonresidents.

One of the DDA employees involved in this request is a music therapist who works as a case manager in one of Great Oaks' buildings, while a second is a Ph.D. psychologist who provides psychological program services to residents of another Great Oaks building. These two individuals do not have supervisory relationships with each other or apparently with the direct care staff that they work with in their buildings. The third DDA employee involved in this request is a Unit Director at Great Oaks responsible for 24-hour supervision of staff in four treatment buildings at Great Oaks. He supervises direct care workers in the facility's buildings to ensure the provision of day-to-day services to residents as to both staff and physical environment. These individuals indicate that though they interact with each other, they do not have supervisory relationships with one another. The first two work in different buildings. The third supervises residential staff. He does not direct the activities or exercise supervisory responsibilities over the other two, though he may work with them in directing residential staff who implement programs developed by them.

These individuals advise that the current undertaking grew out of a discussion at a social gathering. An entity (hereafter, the Corporation) was incorporated. The business involved a cash investment by each participant and it is anticipated that all will be involved in directing the policy and management of the entity. The Corporation was organized with two primary goals: 1) to provide and staff a day care facility providing services to the elderly, and 2) to develop a community-based training, seminar and consulting service in this field (described as "umbrella services"). As to the first goal of the Corporation, the group indicates that it hopes to develop a day care facility in cooperation with a local government or other entity interested in establishing such a facility in their jurisdiction. They would anticipate recruiting a fifth participant who would have the day-to-day operational and management responsibility for the facility.

A second aspect of the Corporation's activity would be the "umbrella" services, that would be offered to existing (non-DDA) adult and senior community care providers. The services could include, for example, life adjustment groups, family support directed meetings, individual supportive psychotherapy, health and nutrition education workshops, individual and small group music therapy, gentle exercise groups, and a variety of arts and crafts activities. These services would be directly marketed by members of the Corporation, by personally contacting existing care providers. Payment for services would be on a contractual basis between the Corporation and the community-based elderly care provider. The services would be offered by the members of the Corporation involved in this request, or by other qualified individuals selected by and contracted to the Corporation.

Adult day care programs such as those to be operated by or served by the Corporation are subject to the authority of and receive significant funding from DHMH. The Division of Aging within the Department's Medical Care Policy Administration develops regulations that substantially control the establishment and operation of day care centers. These regulations define administrative requirements, set forth established program component requirements and health requirements, and define physical plant requirements. Actual licensing under the regulations, as well as annual monitoring and complaint response, is handled either by the local health department (if the facility is not connected with a hospital or nursing home) or by the DHMH Licensing and Certification Division (for health care facility affiliates).

The DHMH is also a primary funding source for these types of facilities, in its provision of payments or subsidies for individual client participants. There has in the past been general funding under the senior care program, available to qualified elderly on a sliding fee scale through certain centers (about half of the 80 currently licensed). An entity such as the Corporation would be included in this program only if funds were available and it competed in a procurement action for new funds. Individuals participating in adult day care may also be funded through State Medical Assistance funds. The Corporation would participate in this funding by applying to the agency for a Medicaid provider number, which requires compliance with additional health-related requirements over and above the licensing requirements imposed by the Division of Aging. There is also a bond bill program managed by the Department's Office of Planning and local grant funding through the senior care program.

Adult day care services may also be provided as a result of actions taken in the Department of Human Resources. This agency manages two key programs, the Adult Protective Services program and the Project Home program. The latter program is similar to DHMH's senior care program, and may involve development of a plan for the acquisition of services designed to enable an elder person to remain in their home. Project Home staff indicate, however, that where day care is a part of such a plan it is funded through the Medical Assistance program rather than out of DHR funds. Also, elderly persons who are being served by the Adult Protective Services Program administered by the Social Services Administration, through the local departments of social services, may also be referred to adult day care programs. In these situations funding may be provided by the Adult Protective Services Program, though Medical Assistance and private insurance or third party payments are also significant funding sources.

Section 3-103(a) of the Public Ethics Law (Article 40A, §3-103(a), Annotated Code of Maryland, the Ethics Law) prohibits an official or employee from being employed by or having a financial interest in an entity that is subject to their authority or that of their agency or that has contractual dealings with it (subsection (a)(1)(i)). It further bars (in subsection (a)(1)(ii)) any other employment that would impair the individual's impartiality or independence of judgment. Based on the funding, regulatory and referral relationships between these two agencies and adult day care operations, we believe that §3-103(a) would apply to bar this activity unless an exception is allowed. The exception authority in §3-103(a) provides that the prohibition applies except where, in accordance with Commission regulations (and as to financial interests, after disclosure), it is determined that the activity would not present a conflict of interest or the appearance of conflict.

The Commission's exception regulations (published at COMAR 19A.02) define the criteria designed to determine if the relationships between the private activity and the person's agency programs and duties are sufficiently remote that a conflict or appearance of conflict would be unlikely. These criteria include consideration of whether the employee has any involvement with the outside entity in the context of their official duties, as well as review of the nature of the employee's private functions. Particularly, the regulations address concerns presented when employees receive private compensation from agency contracts, when agency funding represents a significant economic value for the private entity, and where the employee has management and operational responsibilities for negotiating and complying with agency contracts or agency regulations.

In applying the criteria to this situation if State funding is received, we believe that issues are presented with the pursuit of this activity as proposed, particularly as to the employees of the DHMH. We have been advised, however, by the Requestors, that they can and will operate without State funding. The activity would thus consist of provision of (non-DDA) adult day care services to clients not directly funded by DHMH, as well as "umbrella" services provided to other (non-DDA) entities regulated by the DHMH and also possibly funded by the Department, either through the grant programs discussed above, or the medical assistance payments. The question is whether exception can be allowed despite the continued regulatory and referral relationships and recognizing that the "umbrella" services would be provided to other adult care providers involved in agency programs (other than those funded by the DDA).

In applying the exception criteria to this issue, we have considered the view and information provided by the agencies. In particular, as to the DHR employee, the Department of Human Resources advises that the individual employee does not have duties relating in any way to the Department's involvement in adult day care. It also, significantly, notes that though adult day care is a part of a total program service provided by the Department in its social services and other units, the Department is not a significant funding source for these kinds of services. Based on this representation we believe that an exception can be allowed to permit the DHR employee to affiliate with the Corporation.

As to the DHMH employees, the Department of Health and Mental Hygiene has also indicated that the adult day care program is not one that presents significant regulatory issues and that interaction by the employees with agency regulators in other units of the agency is likely to be so limited as not to present conflict of interest issues for the agency. Based on this information, we conclude that the DDA employees can affiliate with the Corporation to provide direct day care services, where there is no direct funding by the Department of the Corporation or its activities. The "umbrella" services, though they are not well defined at this point, seem to be program and training activities that adult day care services are required to have by the regulations, and which may be costs eligible for payment through the State funding. We also believe that exception can be applied to allow provision of these kinds of services by the Corporation to non-DDA providers, as long as the financial relationships are strictly between the Corporation and the provider. For example, the Corporation should not be identified as the vendor to the DHMH or be involved in situations where funding for services it provides must be specifically reviewed and approved by the DHMH.

Our conclusion that this activity is permissible in the absence of direct DHMH involvement in funding relies strongly on the agency advice that this is not a controversial program and that significant interaction between the Corporation and the Department's regulatory units would not be expected. We assume that this is and continues to be the case. If problems develop or issues arise regarding the operation of an adult day care center or provision of services to other regulated providers, then the exception allowed here would no longer apply to permit this activity by DHMH employees. Also, though the DDA employees do not have supervisory relationships, they all work together at the same facility. They should understand that allowance of this affiliation assumes that no Corporation business will be conducted in any way at their State agency or using agency time, materials or equipment (see §3-104 of the Ethics Law), and should also not further involve other employees of Great Oaks in providing services in this program. Finally, if there is a change in the nature of the Requestors' State employment that would raise issues as to potential conflicts, then further guidance should be requested.

William J. Evans, Chairman
   Shirley P. Hill
   Mark C. Medairy, Jr.
   Robert C. Rice, Ph.D.
   Mary M. Thompson

Date: December 1, 1992