10-ORD-115 | KOGC

Opinion

Opinion By: Jack Conway, Attorney General; James M. Herrick, Assistant Attorney General

Open Records Decision

The question presented in this appeal is whether University Health Care, Inc., d/b/a Passport Health Plan ("Passport"), violated the Open Records Act in the disposition of Courier-Journal reporter Tom Loftus' February 23, 2010, request for records relating to Passport employee compensation and executive meetings. The threshold issue is whether Passport is a "public agency" within the meaning of KRS 61.870(1)(h). For the reasons that follow, we conclude that Passport is a public agency and therefore failed to comply with the Open Records Act.

Passport is a non-profit entity licensed as a health maintenance organization. Since 1997, Passport has contracted with the Department for Medicaid Services ("DMS") to manage Medicaid services and claims in a sixteen-county region as part of the Kentucky Health Care Partnership Program, created by authority of 907 KAR 1:705, Section 2, pursuant to a Medicaid waiver under 42 U.S.C. 1315. Although the original purpose of the program was to privatize Medicaid claims handling statewide, that aim did not materialize and Passport is presently the only Medicaid managed-care organization in Kentucky.

In his request to Shannon R. Turner, Executive Vice President of Passport Health Plan, on February 23, 2010, Mr. Loftus asked for the following:

A listing of names and titles of all Passport employees with the current annual salary for each.

Copies of any Passport payroll/personnel policies that show whether these employees are entitled to incentives/bonuses paid in addition to their salaries, and copies of any policy capping the amount of such incentives/bonuses.

A listing of such incentives/bonuses, or any other form of bonus paid to any Passport employees, since Jan. 1, 2009.

Copies of minutes and agendas of each meeting of the Passport, or University Health Care Inc., executive committee or board of directors since July 1, 2008.

On March 10, 2010, 1 Shannon R. Turner responded to Mr. Loftus by (1) asserting that Passport was a non-profit organization not subject to the Open Records Act; (2) offering to review the agendas and minutes "for information and reports that may be public record that address your issues"; and (3) providing some partial information, but no records, about employee salaries and bonuses. The March 10 letter cited no provisions of the Open Records Act.

The Courier-Journal initiated this appeal on March 23, 2010. The newspaper's attorney, Jon L. Fleischaker, argues that Passport is a "public agency" subject to the Open Records Act pursuant to the definition in KRS 61.870(1)(h):

Any body which derives at least twenty-five percent (25%) of its funds expended by it in the Commonwealth of Kentucky from state or local authority funds[.]

Mr. Fleischaker asserts that "Passport derives virtually all of the funds it expends in Kentucky from state authority funds, in particular, Medicaid funds." Pursuant to 907 KAR 1:705, Section 6, Passport is financed by DMS as follows:

The department shall provide each partnership [ viz. Passport] a per month, per member capitation payment, ? whether or not the member receives services during the period covered by the payment.

"Capitation payment" is defined in 907 KAR 1:705, Section 1(2), as "the total per member, per month payment amount."

Mr. Fleischaker further alleges that "Passport exists only for the purpose of administering the Medicaid program on behalf of the Commonwealth"; i.e., "only for the purpose of conducting the state-funded operations." He therefore maintains that all of the records requested by the Courier-Journal are "public records" as defined by KRS 61.870(2) and should therefore be disclosed.

On March 31, 2010, attorney Wesley R. Butler responded to this appeal, making several arguments on behalf of Passport. He first argues that KRS 61.870(1)(h) is unconstitutional, citing a 2009 order from Division 13 of the Jefferson Circuit Court. As we previously observed in 10-ORD-062 and 10-ORD-092, a circuit court's order binds only the parties in a particular case and does not constitute controlling precedent. It is not the role of the Attorney General under KRS 61.880(2) to declare unconstitutional a statute he is charged with construing and applying. We therefore continue to interpret KRS 61.870(1)(h) in a manner consistent with our recent decisions.

Passport argues next that it is not a public agency because "the federal government supplies well over 75% of the funds received or expended by Passport within the Commonwealth." It is Passport's contention that Medicaid funds it receives under its contract with DMS are not "state or local authority funds" to the extent of the federal contribution. In so arguing, Passport relies principally on the Attorney General's decision in 02-ORD-98. That appeal was concerned with a contract with DMS under which the private corporation Permedion, Inc., performed Medicaid utilization review services for the Commonwealth. We stated then that since a previous decision of this office, 93-ORD-90, had excluded Medicaid funds from the calculation of "state or local authority funds," the federal contribution to those funds should be disregarded in determining whether Permedion was a public agency under KRS 61.870(1)(h). For the reasons that follow, we believe 02-ORD-98 represents a misapplication of 93-ORD-90 and is inconsistent with the reasoning used in open records decisions both before and since. Accordingly, 02-ORD-98 is overruled to the extent that it conflicts with our present decision.

In 93-ORD-90, we found that a radiology firm owned by a private physician was not a public agency merely because it received reimbursement for professional services to its patients through Medicare and Medicaid. With regard to KRS 61.870(1)(h), we stated:

In our view, the provision was intended to insure that bodies which receive 25% or more of their funding from state or local authority funds could be held publicly accountable for those funds. It was not intended to subject to public scrutiny the records of private physicians who receive state or federal funds as reimbursement for their services. Other mechanisms exist for holding these individuals accountable for the funds they receive. [Citation to Medicaid fraud statutes omitted.] If ? private physicians and hospitals were treated as "public agencies," subject to the Open Records Law, because they receive government funds as direct payment for services rendered to patients, they would be discouraged from serving senior citizens and the poor, who benefit from the Medicare and Medicaid programs. We therefore hold that Medicare and Medicaid funds do not constitute "state or local authority funds" in determining whether a body receives 25% or more of its funds from public coffers.

93-ORD-90, p. 6 (emphasis added). The rationale of 93-ORD-90 did not turn upon a distinction between state and federal funds, as in 02-ORD-98, but upon the fact that the Medicare and Medicaid funds were involved solely as direct reimbursement for professional services. 2 The decision did not even mention a distinction between state and federal funds.

Likewise, in 00-ORD-91, we ruled that an acute care hospital which received Medicare and Medicaid funds, but only for services rendered, was not a public agency. Again, no distinction was drawn between state and federal portions of those public funds, but rather the decision was based on the fact that those funds were merely fees for medical services rendered.

Meanwhile, a contrasting line of decisions continued to develop. We ruled in 97-ORD-65 that Kentucky River Community Care, Inc., which contracted with the Cabinet for Health Services to administer a community mental health and mental retardation services program for an eight-county region, was a public agency by virtue of the fact that it received 80 percent of its funds from state sources. 3

Subsequently, in 02-ORD-222, a similarly situated contractor unsuccessfully tried to draw an analogy between its state contract payments and the presence of Medicare and Medicaid funds in 93-ORD-90 and 00-ORD-91. Seven Counties Services, Inc., which operated Central State Hospital under a contract with the Department for Mental Health and Mental Retardation, derived 42 percent of its funding from that contract. Citing the earlier decisions, Seven Counties claimed that 82 percent of those state funds represented "expense reimbursement and payment for services rendered on a fee-for-service basis" and argued that any state funding should be discounted if it took the form of fees for services. This office rejected that argument on the grounds that Seven Counties received those funds pursuant to a contract with a state agency and that the Cabinet for Health Services had significant oversight responsibilities for the use of those funds pursuant to KRS Chapter 210. Citing provisions of that chapter, we stated:

[Seven Counties] is by no means the same as a private healthcare facility, but is instead a facility operating under a plan and budget approved by the Cabinet and the comprehensive scheme of legislation embodied in Chapter 210. Perhaps more importantly, these provisions demonstrate that the funds that are allocated to Seven Counties derive from its contractual agreement with the Cabinet at a fixed annual amount and under terms prescribed by the Cabinet. The monies it derives from the Cabinet do not represent claims payment or fees for services that can properly be analogized to Medicaid or Medicare claims submitted by private healthcare providers notwithstanding the manner in which Seven Counties elects to "draw down" the allocated funds, or its characterization of those funds as restricted and unrestricted.

02-ORD-222, p. 3. Thus we found that Seven Counties' arrangement was not a true fees-for-services situation, but merely an accounting method by which Seven Counties drew upon its state contractual payment.

In another analogous case, we found that a child care organization "licensed, regulated, and closely monitored by the Cabinet" was a public agency where it derived approximately 56 percent of its funds from the Commonwealth of Kentucky. 04-ORD-111, p. 4. Kentucky Baptist Homes for Children, Inc., had argued, citing 93-ORD-90, that it was "simply a state contractor which receives after-the-fact reimbursement from the state for services already rendered." Id. at 3. We found that it was not analogous to a private healthcare facility because it, like Seven Counties, was "operating under a plan and budget approved by the Cabinet and [a] comprehensive scheme of legislation," and the funds it received were "allocated to KBHC by virtue of its contractual agreement with the Cabinet at fixed rates in accordance with terms prescribed by the Cabinet." Id. at 5.

We note at this point that in our open records decisions citing and interpreting the rule in 93-ORD-90, as well as 93-ORD-90 itself, it is apparent that all Medicaid dollars were implicitly regarded as state funds, with the sole exception of 02-ORD-98. Likewise, with the exception of 02-ORD-98, we have always considered the important distinction under 93-ORD-90 to be fees-for-services versus a contract with a state agency, not federal versus state dollars.

Quite recently, in 10-ORD-092, this office directly addressed the issue of when monies of federal origin become state funds for the purpose of applying KRS 61.870(1)(h). That decision dealt with the Kentucky Consumer Advocate Network ("KYCAN"), an entity that derived 70 percent of its funding from a contract with the Department for Behavioral Health, which contract in turn was funded by a federal block grant. We concluded that the block grant money used by KYCAN constituted state funds for KRS 61.870(1)(h) purposes because "said funds are deposited in the State Treasury upon receipt, cannot be expended until appropriated by the General Assembly per Section 230 of the Kentucky Constitution, and undergo continuing state oversight by the LRC per KRS Chapter 45 and the Department pursuant to its contract with KYCAN." 10-ORD-092, p. 10. A copy of 10-ORD-092 is attached hereto and its analysis is incorporated herein by reference.

In regard to Passport's situation, we are aware of no statute pursuant to which federal Medicaid funds would not be deposited in the State Treasury upon receipt. Cf. KRS 41.070(1) ("[u]nless otherwise expressly provided by law, no receipts from any source of state money or money for which the state is responsible shall be held, used, or deposited" other than in the State Treasury) (emphasis added). Nor has Passport disputed the fact that federal Medicaid dollars are part of an appropriation by the General Assembly in each biennial budget bill. See, e.g., 2008 HB 406, Part I-H-3 (appropriating over three billion dollars in federal Medicaid funds for each year of the current fiscal biennium). Under the standard enunciated in 10-ORD-092, this leaves only the question of continuing state oversight.

The General Assembly has declared in the statutes governing Medicaid "that it is an essential function, duty, and responsibility of the state government to provide medical care to its indigent citizenry." KRS 205.520(2) . Pursuant to KRS 6.940(1), the legislative Medicaid Oversight and Advisory Committee has therefore been established to "provide oversight on the implementation of Medicaid within the Commonwealth including access to services, utilization of services, quality of services, and cost containment." Additionally, Passport's attorney acknowledges in its response to this appeal that "Passport is overseen by a variety of government agencies having jurisdiction over Passport's operations, including DMS, ? the Kentucky Department of Insurance, ? the Kentucky Cabinet for Health and Family Services Office of Inspector General, [and] the Attorney General's MCFU pursuant to KRS § 205.8451 et seq. ? Passport willingly accepts an extraordinary level of accountability as a condition of its operations in Kentucky."

The Cabinet for Health and Family Services, in the administrative regulation authorizing its contract with Passport, has imposed detailed requirements concerning Passport's composition, licensure, fiscal solvency, and manner of governance, including a mandate that it "[m]ake available all books, records, and information related to member services and financial transactions of the partnership for review, inspection, auditing, and photocopying by authorized federal and state agency reviewers and auditors." 907 KAR 1:705, Section 5(8)(c). Furthermore, section 4.29 of Passport's contract declares that any of those records so provided to state agencies "shall be subject to public disclosure [if they] would otherwise be subject to public release if a state government agency was [sic] providing this service." Under section 4.20 of the contract, the Cabinet "retains the right to withhold payment if [Passport] does not comply with CHFS programmatic and fiscal reporting and monitoring requirements." We believe this constitutes more than sufficient state oversight of federal Medicaid funds to meet the standard of 10-ORD-092. Accordingly, we find that Passport is a "public agency" under KRS 61.870(1)(h).

Having so determined, we must address the other arguments Passport presents for nondisclosure of the requested records. As a threshold matter, Passport contends that the records requested by the Courier-Journal are not "public records" within the meaning of the Act. KRS 61.872(1) provides that "[a]ll public records shall be open for inspection by any person." As defined in KRS 61.870(2), "public record" means:

all books, papers, maps, photographs, cards, tapes, discs, diskettes, recordings, software, or other documentation regardless of physical form or characteristics, which are prepared, owned, used, in the possession of or retained by a public agency. "Public record" shall not include any records owned or maintained by or for a body referred to in subsection (1)(h) of this section that are not related to functions, activities, programs, or operations funded by state or local authority.

(Emphasis added.) Passport claims that the minutes and agendas for its executive committee and board of directors "contain information that relates to 'functions, activities, programs, or operations' unrelated to its contract with DMS" because "Passport operates a Medicare Advantage line of business that does not receive any state funds."

To the extent that any portions of the Passport minutes and agendas requested by the Courier-Journal are unrelated to state-funded business, we agree that they would be outside the definition of "public record" and need not be disclosed. However, to the extent they are related to functions, activities, programs, or operations funded by its contract with DMS, those minutes and agendas are public records and must be disclosed, subject to the exceptions in KRS 61.878. With regard to the salaries and bonuses paid to Passport employees, and Passport's policies regarding such bonuses, any records responsive to that portion of the request are likewise public records subject to disclosure insofar as those salaries and bonuses are derived from state funds or the policies relate to matters funded by state money. 02-ORD-222, p. 7; 04-ORD-111, p. 6.

We next address the exceptions raised by Passport pursuant to KRS 61.878(1)(c)2 and 61.878(1)(j). As a preliminary matter, we note that Passport's initial response to Mr. Loftus did not state these specific exceptions or explain how they applied to the records withheld, as is required by KRS 61.880(1). In light of our finding that Passport is a public agency, this failure constituted a procedural violation of the Open Records Act, although that violation may have been mitigated by Passport's good-faith reliance upon our prior decision in 02-ORD-98.

Passport now argues as follows concerning the minutes and agendas of meetings of its executive committee and board of directors:

[T]he records requested relate to confidential information that would damage Passport's ability to negotiate with other health care providers in performance of its contractual obligations. As a managed care organization Passport seeks to negotiate health care reimbursements with health care entities. Discretion in these negotiations is critical to assure that federal and state funds are utilized in the most effective method. Because Passport's executive committee and board of director necessarily discuss negotiations, policy issues and strategy development in its operations, the disclosure of minutes and agendas would interfere with Passport's ability to fulfill its contractual obligations with DMS.

Moreover, the records requested ? contain information that would damage or inhibit Passport's ability to negotiate its annual contract with DMS. Passport's executive committee and board of directors engage in negotiation policy development and strategy discussions relating to its contract with DMS. Clearly, the disclosure of Passport's minutes and agendas concerning its operations involves confidential and proprietary information protected from disclosure by KRS § 62.878(1)(c)(2) [sic] and preliminary recommendations in which opinions are expressed or policies formulated as protected pursuant to KRS § 61.878(1)(j).

KRS 61.878(1)(c)2 provides:

Upon and after July 15, 1992, records confidentially disclosed to an agency or required by an agency to be disclosed to it, generally recognized as confidential or proprietary, which are compiled and maintained:

a. In conjunction with an application for or the administration of a loan or grant;

b. In conjunction with an application for or the administration of assessments, incentives, inducements, and tax credits as described in KRS Chapter 154;

c. In conjunction with the regulation of commercial enterprise, including mineral exploration records, unpatented, secret commercially valuable plans, appliances, formulae, or processes, which are used for the making, preparing, compounding, treating, or processing of articles or materials which are trade commodities obtained from a person; or

d. For the grant or review of a license to do business.

Passport does not specify which of these four subsections it believes applies to its minutes and agendas. It is not necessary for us to speculate, however, because the minutes and agendas for the meetings of Passport's own governing bodies do not meet the threshold requirement for KRS 61.878(1)(c)2 of being "records confidentially disclosed to an agency or required by an agency to be disclosed to it." In 01-ORD-153 (copy attached), we concluded that a public agency's own records did not fit that category. Rather, KRS 61.878(1)(c) is designed to protect records of private entities that have been disclosed to the public agency in question. In this case, Passport is the public agency. Therefore, its own meeting minutes and agendas are merely "in the nature of operational ? records created by [Passport] in the normal course of business" and thus ineligible for the protection of KRS 61.878(1)(c). 01-ORD-153, p. 5. 4

As for the presence of material in the minutes and agendas that may constitute "[p]reliminary recommendations, and preliminary memoranda in which opinions are expressed or policies formulated or recommended," we recognize that the exception in KRS 61.878(1)(j) may be applicable to the extent of such material. 5 Not having seen the records in question, we can express no opinion as to whether any material falls into that category. We remind Passport of its obligation under KRS 61.878(4) to redact the minutes and agendas, rather than withhold them in their entirety, so as to "separate the excepted and make the nonexcepted material available for examination."

A party aggrieved by this decision may appeal it by initiating action in the appropriate circuit court pursuant to KRS 61.880(5) and KRS 61.882. Pursuant to KRS 61.880(3), the Attorney General should be notified of any action in circuit court, but should not be named as a party in that action or in any subsequent proceedings.

Jon L. Fleischaker, Esq.Wesley R. Butler, Esq.Shannon R. Turner

Footnotes

Footnotes

1 Because we find that Passport is a " public agency" as defined in KRS 61.870(1), we conclude that the response was untimely under KRS 61.880(1) if Passport received Mr. Loftus' request more than three business days prior to March 10, 2010.