Request By:
Mr. Paris E. Hopkins
Deputy Secretary
Department for Human Resources
275 E. Main
Frankfort, Kentucky 40601
Opinion
Opinion By: Steven L. Beshear, Attorney General; Joseph L. Famularo, Deputy Attorney General
This is in response to your letter of December 7 in which you raise the following question:
"The Cabinet for Human Resources would like to request the opinion of your office on whether or not there is a conflict of interest under state or federal law where an official of the Division of Licensing and Regulation of the Cabinet for Human Resources is married to a person associated with an intermediate care facility; and, if so, whether the official should be transferred from the Division of Licensing and Regulation? "
As background material, you relate that the Division of Licensing and Regulation is responsible for recommending that intermediate care facilities be certified for medicaid reimbursement and is further responsible for carrying out the contract between the Secretary of the U.S. Department of Health and Human Services and the Commonwealth with regard to the certification for payment under medicare for the certain health facilities. In addition, the Division of Licensing and Regulation, through its licensing and certification branch and field operation branches, survey health facilities including intermediate care facilities, and based upon said survey initiates Part I of the medicare, medicaid certification transmittal form which is sent to the Division of Medical Assistance within the Cabinet which then determines whether the facility is eligible to participate in the state medical assistance program.
You also submit certain documents relating to the referred to program which includes a portion of the federal regulation pertaining to conflicts of interest prohibiting any employee or officer of the participating agency from being interested in any contract supported by federal funds. It even provides that a conflict of interest would arise when any member of the officer's or employee's immediate family has a financial or other interest in the firm selected for the award. The state statute governing conflict of interest questions pertaining to state agencies would be KRS 45A.340.
As far as we can determine from the supporting information furnished by you, the individual in question holds the position of manager of the administrative support branch of the state agency in question which is basically responsible for not only providing administrative support to the Division of Licensing and Regulation, but the initiation of investigations of all complaints or grievances filed against a care facility. This entails the monitoring of such facilities and the conduct of licensure hearings with reference thereto. We also understand, per phone, that the manager's spouse is the administrator of one of the intermediate care facilities.
From the evidence furnished, it would appear that the state conflict of interest statute, KRS 45A.340, would not be applicable to the question raised since it applies to matters involving procurement, and the Division for Licensing and Regulation is not involved in the awarding of any type of contract to an intermediate care facility.
It is much less clear whether the federal regulation pertaining to conflicts of interest applies here. Such regulation would appear to be broader in its application than KRS 45A.340, since it applies not only to the selection and awarding of a contract but also to the "administration of a contract supported by federal funds. " The documents supplied to us include an agreement between the Kentucky Department for Human Resources, Bureau for Social Insurance, Division for Medical Assistance and the Intermediate Care Facility for participation in the Kentucky Medical Assistance Program. It is certainly arguable that the functions of the Division for Licensing and Regulation could be considered as part of the "administration" of this contract.
However, in the final analysis, a determination of whether the federal regulation on conflicts of interest has been violated should be submitted to the proper federal authority for its consideration, since that is the level of government which enforces said regulation. In addition, in absence of a possible statutory conflict, the question of a common-law conflict could develop, particularly in the area of investigating grievance complaints and the conduct of hearings involving the intermediate care facility administered by the branch manager's spouse. Such a conflict would develop if the particular intermediate care facility was involved in an investigation of alleged complaints against it, in which case we believe as a matter of public policy the branch manager should either be transferred to another position or ordered not to participate in any way in the investigation of the facility. The same rule would apply to any other involvement that the manager might have in the facility by virtue of his duties.
As a residual question, you seek information as to how close a family relationship would possibly involve a conflict of interest situation. In this respect, it is noted that the federal regulation merely refers to the individual's immediate family. The state statute does not refer to any relationship as applied to state agencies. There is, however, a definition of the term "immediate family" required to be applied by local governments operating under the Kentucky Procurement Code as such may relate to a possible conflict of interest under KRS 45A.455. This definition is found under KRS 45A.445(6) which defines "immediate family" as meaning a spouse, children, grandchildren, parents, grandparents, brother, sister and such other relatives as may be designated by the local public agency, which leaves the local agency the authority to adopt regulations regarding family relationship to whatever degree it desires. Thus, the Division could utilize this statutory definition by regulation. As you will note, this definition does not include aunt, uncle or in-law.