98.08

OPINION NO. 98-08

Ethics Commission advice has been requested as to whether and how the employment prohibitions and the time of appointment exemption provisions of §15-502 of the Ethics Law (State Government Article, §15-502, Annotated Code of Maryland) apply to new consulting activities of a member of the Health Care Access and Cost Commission (the Member). We advise that this new employment activity means that the Member's consulting business would be inconsistent employment prohibited by this section of the Law, and that his Time of Appointment Exemption Disclosure Statements do not sufficiently address this type of work to allow application of the exemption to the changed circumstances.

The Health Care Access and Cost Review Commission (HCACC) was established in 1993 with the goal of ensuring accessible health care at an affordable price to Maryland citizens. The HCACC includes nine members appointed by the Governor and confirmed by the Senate. Six members must be "non-providers," defined as "individuals who do not have any connection with the management or policy of a health care provider or payor." The HCACC has a variety of statutory mandates, generally related to medical care data collection, cost containment, benefits programs, and payments systems. In its 1997 Annual Report, the agency defines its primary work as "bringing the power of information to consumers and other purchasers of health care services." One of its major functions is the establishment of a Standard Benefits Plan for small market carriers. Though there is no requirement that an insurer or HMO provider offer its services to the small group market, if an entity does get into this market, then it must offer the minimum menu of benefits that are included in the standard benefit plan developed by HCACC. According to the HCACC Executive Director, most Maryland HMO's do participate in this market in one way or another, and are therefore subject to the HCACC requirements.

The HMO organizations are also involved with HCACC through another of its major functions, the development of a medical care data base and issuance of the annual "report card." This report is developed through use of information collected from payers (including HMO's) and from a satisfaction survey of a representative number of HMO members. Data is collected from HMO's pursuant to HCACC regulations requiring the filing of HEDIS reports. According to the Executive Director, the resulting report provides comparative evaluative materials as to HMO's that is in large part quantitative, based on the information collected and analyzed. A third primary activity of HCACC is the collection of information on non-hospital transactions from insurance companies and HMO's (pursuant to regulations regarding medical care data base and data collections) for the development of an annual report on the cost of health care generally and its relationship to physicians and other health care.

A fourth aspect of the HCACC's mandate relates to development of a payment system that would establish a framework for payments between a health plan (such as an HMO) and providers (such as specialist physician, laboratory or hospital services). The Executive Director and the Member both indicate that HCACC has concluded that this aspect of its mandate should not be implemented. Though apparently legislation to eliminate this function did not pass in the 1998 session, HCACC continues not to anticipate implementation of the payment system part of its mandate.

The Member is a non-provider member of HCACC appointed when the agency was established in 1993. At the time of this original appointment, he had a substantial consulting business involving primarily hospital clients, and several out-of-State organizations. He reviewed his activities with the Ethics Commission staff and submitted Time of Appointment Exemption Disclosure Statements identifying his consulting clients. While most of them were either out-of-State or hospitals not subject to HCACC authority, he disclosed work for a few provider entities with activities possibly subject to HCACC, including two ambulatory surgery providers, an HMO and a health insurance payer. In connection with his recent reappointment, the Member submitted an Appointee Exemption Disclosure Statement for his consulting business identifying work with several hospitals and health systems, indicating, however, that "HCACC does not regulate hospitals, but I wish to disclose this as general information." He further disclosed affiliations by his adult children in the health care field.

Subsequent to submission of this exemption form, confirmation of his reappointment, and his being sworn in for his second term, the Member submitted this request for advice regarding anticipated new activity that is expected to include significant interaction with HMO providers in the State. He indicates that his son has formed a consulting business (the Consultant) that is seeking contracts with HMO's to provide a variety of consulting services. The Member says that he will continue to function as his own firm and will be a subcontractor to the Consultant. Though he does not anticipate being directly involved in marketing the Consultant's services to HMO's or otherwise seeking business on behalf of the business, he indicates that he would be identified in marketing materials as part of the Consultant's "team." His function for the Consultant will be to work on behalf of client HMO organizations in the development of payment relationships between the HMO's and hospital providers. According to the Member, this will entail working directly with an HMO to help in the collection, organization and analysis of data, to negotiate alternative rate systems between hospitals and the HMO's that would be referring member patients to the hospital.

The questions presented by the Member are, first, whether his proposed affiliations and activities for the Consultant would be within the employment prohibition of §15-502 of the Ethics Law if he continues to serve as a member of HCACC, and second, whether the activity would, if covered, be exempted pursuant to previously submitted Time of Appointment Exemption Disclosure Statements. Section 15-502(b) prohibits officials and employees, including members of boards and commissions, from being employed by or having an interest in an entity that is subject to their authority or that of their agency (subsection (b)(1)), or from having any other employment that would impair their impartiality or independence of judgment (subsection (b)(2)). We recognize that the Member will be providing services to HMO's but will not be directly hired by them, and also that neither his own firm nor the Consultant is directly subject to HCACC authority. Apparently, also, the HCACC does not anticipate undertaking payment plan activities that would entail the same subject matter as the Member's work with HMO's on behalf of the Consultant. The Member will, however, clearly be providing services directly to HMO organizations that are within the authority of HCACC in a variety of ways, and we believe that these circumstances bring this situation within the employment prohibition of §15-502 of the Law.

In our view, the Ethics Law establishes a general standard, addressing affiliations with any entities subject to the agency's authority, without regard necessarily to the subject matter. In considering application of §15-502 to consulting situations, we have in the past advised that where provision of personal services is involved, an affiliation with an entity can be viewed as employment with the entity even when there is an intervening consulting or other entity. In this situation, though there are two intervening entities, the Member's firm and the Consultant, the situation clearly involves the provision of personal services to HMO's. These are entities that are generally subject to his agency's authority for reporting purposes, for compliance with the standard benefits plans, and for purposes of identifying an electronic clearinghouse claims network. Also, these entities are the subject of evaluation through the data collection and report card programs.

Under the circumstances, we must conclude that even if the Member is not viewed as having an employment relationship with the HMO's for purposes of the strict employment prohibition of subsection (b)(1), his involvement with them would come within the impairment prohibition of subsection (b)(2). We have considered many outside employment requests regarding consulting and private practice types of activities, generally advising that these types of activities are permitted, but within some constraints. These constraints include that the consulting may not involve interaction with entities subject to the agency's authority or populations served by the individual's agency. Thus, even though the Member's involvement with the HMO's may be through the Consultant and his own private consulting business, his activities would be within the impairment prohibition as previously implemented by the Ethics Commission. Taking into account the Law's mandate to construe its terms liberally and the appearance concerns expressed in the Law's purpose clause, we therefore advise that the Member's undertaking of this activity would be within the scope of §15-502, and prohibited unless exempted.

The remaining question is thus whether this activity can reasonably be viewed as having been disclosed in either of his Time of Appointment Exemption Disclosure Statements so as to be covered by the exemption of §15-502(c)(4) of the Law. This provision allows exemption from the employment and interest limitations in §15-502(b) as to employment or interests held at the time of appointment and publicly disclosed to the appointing authority, the Ethics Commission, and the Senate if confirmation is required. In considering the contents of the Member's two Time of Appointment Exemption Disclosure Statements in view of his proposed new activities, we must conclude that the disclosures do not address the type of activities currently being contemplated and therefore would not allow application of the exemption. The Member's most recent Statement is directed solely at his hospital work, and would not seem to address the potential for affiliations with other payer or provider entities such as HMO's. His prior disclosure, though broader in its reference to work for some entities that are likely within HCACC's authority, tends to reflect involvement with them as to out-of-State activities and activities unrelated to HCACC or its anticipated functions.

The general principle of the time of appointment exemption is the understanding that an appointing authority may make a substantive determination as to a conflict known at the time of appointment, that the individual's service is sufficiently important to warrant appointment notwithstanding a known existing conflict. In considering the scope of an exemption allowed under a time of appointment disclosure, the Commission has thus allowed exemption based on some general disclosures where it was reasonably possible from the disclosure and past activity to anticipate the type of activity at issue. In our view, the type of activity presently being planned entails significant involvement with entities subject to the agency's authority and impacted by its substantive activities, and would not have been reasonably expected from the types of work disclosed by the Member either in his recent Statement or originally.

We therefore advise the Member based on application of the Law and review of the information provided that his new consulting work with the Consultant is inconsistent with the employment limitations of §15-502 of the Ethics Law, and that the time of appointment exemption cannot be applied. His service with HCACC must therefore be concluded if this activity is pursued.

Charles O. Monk, II, Chairman,
    Mark C. Medairy, Jr.
    April E. Sepulveda

Date: October 23, 1998