New York State
Ethics Commission


Advisory Opinion No. 94-18: Application of the post-employment restrictions of Public Officers Law §73(8) to a former Department of Social Services employee who seeks to perform certain services related to his former State responsibilities.

Introduction

The following advisory opinion is issued in response to a request by [a State employee], a former [ ] Director of the Department of Social Services "DSS", as to whether the post-employment provisions of Public Officers Law §73(8) prohibit him from using knowledge and methodologies developed while he was in State service to perform certain services for school districts outside of New York City as well as social service districts.

Pursuant to its authority under Executive Law §94(15), the Commission hereby concludes that Public Officers Law §73(8) would not be violated if [the requesting individual] were to perform the services described except that he may not perform such services with respect to a program on which he worked while in State service.

Background

As [ ] Director for the DSS [ ], [the requesting individual] was responsible, [ ].(1) To administer these programs, [the requesting individual] became an expert in all facets of the Medicaid program, including the distribution of local, state and federal funds. Because his post-employment services include extensive involvement with Medicaid providers, it is necessary to examine how those providers interact with DSS.

The Medicaid Program And Its Operation

Medicaid is a social service program funded with local, state and federal money. DSS is authorized by [statute] to be the single DSS responsible for administering the Medicaid program in New York State and to be the State representative with the federal Department of Health and Human Services ("HHS"). It is authorized to promulgate such regulations as may be necessary to implement Medicaid in New York. Its responsibilities include submitting to HHS, on a quarterly basis, estimates of Medicaid expenditures, adjustments thereto for the previous quarter's actual expenditures and in-detail audits of prior quarterly statements.

To process individual claims of providers under the Medicaid program and facilitate the flow of funds to these providers, DSS has entered into a contract with [DSS's contractor]. [DSS's contractor] has the responsibility of determining which Medicaid claims are to be paid and which are not.(2) Through use of [a computer system], the DSS computer unit directs [DSS's contractor] to consider specific criteria in making these determinations. In general, [DSS's contractor] checks three basic facts:

  1. Whether the recipient who received the services is eligible for Medicaid benefits (which is pre-determined by the local social service district);

  2. Whether the claimant is a participating provider; and

  3. Whether the claim is made for a reimbursable service. (Which services are Medicaid reimbursable is pre-determined at the federal level.)

[The computer system] has the responsibility of ensuring that [DSS's contractor's] employees translate the DSS-mandated directions into the computer's database so that each determination is made correctly and pursuant to law.

At the end of each business day, [the computer system] reports to the fiscal agent (a private bank) the total amount of money to be paid to Medicaid providers as determined by [DSS's contractor's] computer operations. The fiscal agent then issues the appropriate checks, payable to the providers. The State Comptroller and Division of the Budget review the disbursements and apply the figures to federal, state and local government accounts. In most cases, the federal government contributes 50% of the funds for payment of Medicaid claims, while New York State contributes 25% and the local government also contributes 25%. Legally and technically, DSS maintains administrative control (i.e., determining what facts [DSS's contractor] will use and monitoring [DSS's contractor's] implementation) over all transactions. However, each claim, from a provider's claim for reimbursement to the issuance of a Medicaid check, is handled via [DSS's contractor's] computer.

[The Requesting Individual's] Duties While At DSS

One of [the requesting individual's] primary responsibilities while employed at DSS was overseeing a program known as Medicaid maximization. This program seeks federal reimbursement under the Medicaid program when medical services are provided to Medicaid eligible individuals at public expense. When eligible providers seek payment for qualifying services, the federal government assumes 50% of the costs if payment is made under the Medicaid program, thereby saving the State from having to pay for the entire cost of the service.

In particular, [the requesting individual] worked on a project known as [ ] in the schools [ ] which sought to identify and enroll Medicaid eligible students in the New York City school system. It involved assisting New York City school personnel in applying for Medicaid benefits for such services as physical therapy, speech therapy, nursing, etc. In an interview with the Commission, [the requesting individual] stated that school districts, while eligible, often do not apply for Medicaid reimbursement on behalf of their students because school administrators do not have the necessary resources or expertise. When not paid for by Medicaid, such services are often funded from State or local tax revenue. Under the [ ] program, [the requesting individual] successfully identified Medicaid-eligible services and students, and, as a consequence, saved the State and the City significant revenue.

Within DSS, the Medicaid Division maintained overall control of the [ ] program. [The requesting individual] and his staff [ ] were directly responsible for supporting this division. According to [the requesting individual], the Medicaid Division and Division of the Budget - not [the requesting individual] and his staff - had final authority over all critical issues, such as rate setting, coverage and timing, and final design of the program. Nevertheless, [the requesting individual] stated that his office collected and collated data concerning potential Medicaid-eligible students in the New York City school district and services available to them, and that he "preaudited" bills.

While the [ ] program was implemented statewide, DSS was responsible for implementing the program only in the New York City school district. The State Education Department ("SED") was then and is now responsible for implementing the program in all school districts outside of New York City.(3)

[The Requesting Individual's] Post Employment Activities

Following the termination of his State service in [ ], [the requesting individual] created and became principal of [ ], a private consulting company that provides Medicaid billing and loss prevention services to school districts, hospitals and local social service districts. [The consulting company] promotes itself as "a professional organization that provides specialized assistance to state and local governments and providers of services." [The consulting company] literature indicates that it has developed "creative cost saving or cost shifting revenue approaches which involve relatively small as well as large opportunities such as the Federal program known as 'Disproportionate Share' or the multi-billion dollar financing of indigents in [ ]." And [the consulting company] literature clearly reflects the company's desire to capitalize on the former government experience of its employees:

The [consulting company] team consists of individuals who previously spearheaded management review and revenue maximization efforts in New York State, New York City, Connecticut, Massachusetts and Pennsylvania. . . .(Team members) developed cost allocation methodologies that have secured federal funding for administrative functions previously overlooked or erroneously considered to be ineligible for such support. . . . Methodologies developed included components to ensure maximum Federal Medicaid participation at the optimum rate for traditional Medicaid expenses such as skilled professional medical personnel and out-stationed hospital workers. In addition nontraditional costs in areas such as general assistance eligibility, and child protective medical related expenses have been restructured to capture federal Medicaid funds.

According to [the requesting individual], [the consulting company] offers to improve the Medicaid eligibility processes in medical facilities by, for example, sampling cases to detect Medicaid-eligible patients and instructing a facility on how to correct its billing. If the facility accepted the advice given and corrected its processes, it would submit all of its claims directly to [DSS's contractor], following the new billing policies. [The requesting individual] stated that he would have no contact with [DSS's contractor], [the computer system] or DSS, as standard procedures for the submission of bills, which have been in place for years, would continue without interruption or change. In the unlikely event that DSS needed more information, it would contact the hospital personnel responsible for billing.

[The requesting individual] stated that he also plans to provide consulting services to school districts outside of New York City and local social service districts in New York State, equipping them with the ability to discover more Medicaid-eligible individuals and services. He does not intend to provide such services to the New York City School District. Social Service Districts are responsible for determining the eligibility status of Medicaid applicants, but they do not function as service providers. Representatives of DSS have indicated that while these districts are State supervised, they are locally administered, usually on a county-wide basis. In practice, the State Commissioner of Social Services and his staff oversee the districts as they carry out their administrative responsibilities.

Applicable Law and Discussion

The post-employment activities of former State officers and employees are governed by Public Officers Law §73(8), which bars certain acts to prevent former employees from utilizing their "insider" knowledge of State agencies and specific projects for their own benefit or for that of a client. The subdivision sets the ground rules for what individuals may do with the knowledge, experience and contacts gained from public service after they terminate their State employment. It provides:

  1. No person who has served as a state officer or employee shall within a period of two years after the termination of such service or employment appear or practice before such state agency or receive compensation for any services rendered by such former officer or employee on behalf of any person, firm, corporation, or association in relation to any case, proceeding or application or other matter before such agency.

  2. No person who has served as a state officer or employee shall after the termination of such service or employment appear, practice, communicate or otherwise render services before any state agency or receive compensation for any such services rendered by such former officer or employee on behalf of any person, firm, corporation or other entity in relation to any case, proceeding, application or transaction with respect to which such person was directly concerned and in which he personally participated during the period of his service or employment, or which was under his or her active consideration. . . .

Subdivision (a) bars former State officers and employees for two years after termination of employment from appearing or practicing before their former agency or receiving compensation for any services rendered in relation to any case, proceeding, application or other matter before such agency. Subdivision (b) permanently prohibits former State officers and employees from participating for compensation in cases, proceedings, applications or transactions in which they were directly concerned and personally participated while in State service.

The sweeping reforms made by the 1987 Ethics in Government Act are intended to restore the public's trust and confidence in government through the prevention of corruption, favoritism, undue influence and abuses of official position. A major step taken in the direction of restoring the public's trust in government was enactment of the revolving door provision, quoted above. Through that provision, the Governor and the Legislature sought to prohibit persons employed by the State of New York from capitalizing on their inside knowledge and associations after leaving State government at the expense of the State or those with whom such individual is in competition. While the two-year prohibition precludes appearances before one's former agency, the lifetime prohibition proscribes compensated appearances anywhere, when such appearances are made in connection with cases, proceedings, applications or transactions in which a former State employee was directly concerned and personally participated or which he or she actively considered while in State service.

The Commission has previously stated that the post-employment provisions:

can be said to reflect the same intent expressed by Congress when it enacted the federal restrictions--that former officers should not be permitted. . .to utilize information on specific cases gained during government service for their own benefit and that of private clients. [Advisory Opinion No. 89-7, p.4]

The Commission also stated that the purpose of post-employment restrictions is:

to preclude the possibility that a former State employee may leverage his or her knowledge, experience and contacts gained in State service to his or her advantage or that of a client, thereby securing unwarranted privileges, consideration or action. [Advisory Opinion No. 90-11 pp. 6-8; see also Advisory Opinion Nos. 91-2, 91-6]

The Two-Year Bar As Applied To [The Requesting Individual]

In order to determine whether [the requesting individual] is in violation of the two-year bar, the Commission must first analyze whether [the requesting individual] proposes to appear or render services on matters before his former agency. An appearance can be in person or by a submission made to the agency. Therefore, the Commission must consider whether [the requesting individual] knows or can reasonably foresee that his workproduct will be reviewed by DSS.

[The requesting individual] proposes to assist entities in developing programs to enhance their ability to collect Medicaid reimbursement for eligible services. Those that he will advise - social service districts, hospitals and school districts - will eventually submit billings to [DSS's contractor]. As noted earlier, [DSS's contractor] maintains a high level of independence over the Medicaid claim process on a day-to-day basis, and, in fact, through its computer, makes all of the decisions as to whether or not claims will be paid.

In Advisory Opinion 90-3, the Commission held that former State employees are permitted by §73(8) to provide services of a general nature to persons who and entities that appear before their former agency. In that opinion, a former employee proposed to provide general advice to an entity applying for funding from his former agency. In that capacity, he was responsible for preparing a general report describing the process for applying for funding as well as advising on agency selection procedures and State and local requirements. The Commission found that the former employee, while communicating quite specific information about his former agency, was not in violation of the two-year bar because he was not involved with the actual applications. Although the information he gave enabled applicants to prepare their proposals more effectively, the Commission held that the individual's services were "so removed from the prohibited act of working on a matter actually before an agency" that his activities were not barred.(4)

Likewise, [the requesting individual] will not engage in preparing or submitting applications for Medicaid reimbursement on behalf of his clients. He will be educating his clients on the Medicaid application process and assisting them in improving the quality and quantity of their applications. He will not have the opportunity to influence his former colleagues charged with making discretionary decisions over Medicaid disbursements.

Given the independent nature of [DSS's contractor] in making Medicaid payment disbursement decisions and given the broad-based nature of [the requesting individual's] assistance to providers, the Commission concludes that [the requesting individual's] services would not constitute appearances or the rendering of services on matters before his former agency. There is no violation of the two-year bar.

The Lifetime Bar As Applied To [The Requesting Individual]

The Commission must decide whether [the requesting individual's] rendering consulting services to school districts outside of New York City, hospitals and social service districts is prohibited by the lifetime bar contained in Public Officers Law §73(8). As noted above, this provision bars a former employee from rendering services in relation to any case, proceeding, application or transaction with respect to which such person was directly concerned and in which he or she personally participated during the period of his or her State service or which was under his or her active consideration during that period. While [the requesting individual] was directly concerned and personally participated in developing a program to maximize Medicaid funds to the New York City school system, he has informed the Commission that his company will not approach the New York City Board of Education or any other entity with which he worked to maximize Medicaid funding while in State service. The question for the Commission, therefore, is whether the methodology developed by [the requesting individual] while he was employed by the State constitutes the same transaction in which he will be engaged as a consultant.

The Commission considered whether a methodology should be treated as a "transaction" in Advisory Opinion No. 94-9. In that situation, a former employee who had developed a management evaluation technique while in State service was permitted to utilize that technique while acting as a consultant to his former agency. The Commission found that the former employee could use the methodology in his post employment work, saying that "the development of a non-confidential methodology by a State employee should not act as a lifetime barred transaction and prevent the employee from applying that methodology to other uses after he or she leaves State service." However, the Commission distinguished the general use of the methodology from its application to the specific programs on which the former employee had worked. It held that the lifetime bar precluded the former employee's work on these programs, and that he could not, as a consultant, apply the methodology to them. The same methodology applied to the same program was the same transaction.

In the present case, the Commission must compare [the requesting individual's] efforts while in State service to maximize federal Medicaid revenue in the New York City school system with his efforts with respect to other school districts. While arguably the same population will be affected (students), the New York City school system is quite distinct from districts outside the City. In New York City, the school population is over one million, and 45% of its students are Medicaid eligible. Outside New York City, the school populations are considerably smaller. In addition, the New York City school system is unique in that it is coterminous with the local social service district. The budget and the budget of the local social service district are both funded by appropriations mandated by the City Council, while upstate school funds are raised separately from municipal funds through school taxes. Because of this identity of districts and funding, the local social service district has accurate data on all New York City school age children. Consequently, DSS became the State agency to administer the Medicaid maximization project in New York City. This is contrasted with all other systems in the State. Since upstate school districts are not coterminous with the local social service districts, the information on school age children possessed by the local social service districts cannot be correlated easily. Thus, for upstate school districts, the Medicaid maximization program is directed by the State Education Department rather than DSS.

The Commission understands that confidential information is not involved and that the techniques developed by [the requesting individual] are not "protected" from use or development by others. Therefore, it is the view of the Commission that [the requesting individual's] use of the Medicaid maximization methodology is permissible as long as he does not apply it to the programs on which he worked while employed at DSS. [The requesting individual] is permitted, therefore, to apply his expertise in Medicaid maximization to school districts other than to the New York City school district or any other school district with which he may have been similarly involved while employed. Since he did not, during his tenure at DSS, apply the Medicaid maximization methodology to any hospitals or social service districts, he may also apply it in such situations.

Conclusion

The purpose of the "revolving door" restrictions contained in Public Officers Law §73(8) is to preclude the possibility that a former State employee may use insider knowledge, experience or contacts gained as a result of State service to his or her advantage or to the advantage of a client. The lifetime bar prohibits a former employee from rendering services with respect to cases, proceedings, applications or transactions with which the individual was directly concerned and personally participated during the time of State employment. [The requesting individual] is, therefore, not prohibited from offering Medicaid reimbursement maximization consulting services to school districts outside of New York City, or to hospitals or social service districts.

This opinion, until and unless amended or revoked, is binding on the Commission in any subsequent proceeding concerning the person who requested it and who acted in good faith, unless material facts were omitted or misstated by the person in the request for opinion or related supporting documentation.

All concur:

Joseph M. Bress, Chair

Barbara A. Black
Angelo A. Costanza
Robert E. Eggenschiller
Donald A. Odell Members

Dated: September 26, 1994


Endnotes

1. Job description provided by [the requesting individual].

2. [The State agency and the private company] entered into a contract in [ ] which terminated [ ]. The contract was extended on [ ], and is due to expire [ ].

3. This arrangement was confirmed by State Education Department personnel.

4. See Advisory Opinion 90-3, p. 6.



URL: http://www.nysl.nysed.gov/edocs/ethics/94-18.htm