Advisory Opinion No. 2013-18 Advisory Opinion No. 2013-18 Re: Reverend David F. Shire QUESTION PRESENTED The Petitioner, a member of the Health Services Council, a state appointed position, requests an advisory opinion regarding whether the Code of Ethics prohibits him from participating in the Health Services Council’s consideration of Care New England Health System’s application to merge with Memorial Hospital, given his various connections to Butler Hospital, a Care New England Health System operating unit. RESPONSE It is the opinion of the Rhode Island Ethics Commission that the Petitioner, a member of the Health Services Council, a state appointed position, is prohibited by the Code of Ethics from participating in the Health Services Council’s consideration of Care New England Health System’s application to merge with Memorial Hospital, given his various connections to Butler Hospital, a Care New England Health System operating unit. The Petitioner is a member of the Health Services Council (“HSC”), having served continuously since 2002. The HSC is a statutorily created board, within the Rhode Island Department of Health (“DOH”), composed of twenty-four (24) members appointed by the Governor and legislative leaders. R.I. Gen. Laws § 23-17-13. The HSC’s functions include reviewing applications with respect to changes in the owner or operator of a licensed health care facility. R.I. Gen. Laws § 23-17-14.4. The Petitioner represents that presently before the HSC is Care New England Health System’s (“CNE”) application to merge Memorial Hospital into its network of hospitals, which includes: Butler Hospital (“Butler”); Kent County Memorial Hospital (“Kent”) and Women & Infants Hospital (“Women & Infants”). Although the Petitioner represents that he has been recusing from matters involving Butler, he now seeks a formal advisory opinion to determine if any of his various connections with Butler, a CNE hospital, constitute a business association under the Code of Ethics. The Petitioner states that he served in a volunteer capacity as Butler’s Chaplain from 1994 until 2004 and served on Butler’s Ethics Committee and its Institutional Review Board. Currently, the Petitioner is an Individual Member of the Corporation of Butler. He is also part of Butler’s Independent Review Group (“IRG”) for a research program in Deep Brain Stimulation (“DBS”) for Obsessive Compulsive Disorder. He states that he reviews each applicant’s medical and psychiatric history according to pre-determined criteria for acceptance or rejection into the DBS study and is paid $50 per application reviewed. In addition, to his paid work for the DBS Study, the Petitioner also volunteers as the Lead Consent Monitor for the DBS study, meeting with patients and their families as they review the numerous pages of consent documents in order to assess the patients’ understanding of the procedure and how it will affect them. He states that he reviewed approximately eight (8) applications in 2012 and that he wishes to continue providing these services to Butler. Butler is a controlled operating unit of CNE, a non-profit holding company that provides centralized corporate services to the three (3) hospitals in its system: Butler, Kent and Women & Infants. CNE operates these three (3) hospitals under a unified governance structure whereby CNE is the sole corporate member of each hospital’s corporation and CNE’s Board of Directors serves as the Board of Directors for each individual hospital. The Petitioner informs that the Corporation of Butler has two classes of members: the Corporate Member, CNE, and approximately 200 Individual Members. In contrast to the CNE Board of Directors, which controls the financial objectives of Butler, he states that Butler’s Individual Members, like himself, hold ceremonial positions and have no voting rights at the Annual Meeting other than to elect other Individual Members. He further informs that the Individual Members are generally persons who have contributed professionally or philanthropically to Butler. In light of the above representations, the Petitioner seeks advice as to whether he can participate in the HSC’s consideration of CNE’s application to merge with Memorial Hospital, given that CNE has submitted extensive materials to the HSC and will appear before the HSC with regard to this application. Under the Code of Ethics, a public official must recuse himself from participation when his business associate or employer, or a person authorized by his business associate or employer, appears or presents evidence or arguments before his state or municipal agency. Commission Regulation 36-14-5002 (“Regulation 5002”); R.I. Gen. Laws § 36-14-5(f). The Code of Ethics also prohibits a public official from using his public office or confidential information received through his public office to obtain financial gain for himself, his family, his business associate, or any person by which he is employed or whom he represents. Section 36-14-5(d). Additionally, a public official may not participate in any matter in which he has an interest, financial or otherwise, that is in substantial conflict with the proper discharge of his duties or employment in the public interest. Section 36-14-5(a). A substantial conflict of interest exists if an official has reason to believe or expect that he, any person within his family, a business associate or an employer will derive a direct monetary gain or suffer a direct monetary loss by reason of his official activity. Section 36-14-7(a). A business associate is defined as “a person joined together with another person to achieve a common financial objective.” Section 36-14-2(3). A person is defined as “an individual or a business entity.” Section 36-14-2(7). The Commission has previously stated that persons are “business associates” of the entities for which they serve as either officers or members of the Board of Directors, or in some other leadership position that permits them to affect the financial objectives of the organization. See e.g. A.O. 2012-9. Furthermore, the Commission has found a business association to exist, and required recusal, where there is an ongoing business relationship between a public official and an organization, and it is reasonably foreseeable that the organization will be directly financially impacted by the public official’s actions. A.O. 2006-27 (opining, inter alia, that a public official serving on both the Gloucester and Foster-Glocester Regional School Committees was a business associate of a company for whom he provided subcontracting work and was required to recuse from School Committee matters where it was reasonably foreseeable that his business associate would be directly financially impacted by his official action); A.O. 2004-11 (opining that a Town of Lincoln School Building Commission member, who also owned a carpentry business, was a business associate of any person or entity with which he was engaged as a subcontractor and that the business associate relationship existed while the services were provided, until the petitioner was paid and no further subcontracting work was anticipated); A.O. 99-11 (concluding that a Glen Farm Authority member, who was also an electrician, was a business associate of a company that he performed services for and was required to recuse from the Authority’s consideration of his business associate’s lease). In contrast, in Advisory Opinion 2012-26, the Commission opined that a HSC member was not required to recuse from participation in the HSC’s review of Westerly Hospital’s 2012 application for a psychiatric service, notwithstanding that he previously worked as an independent consultant for Butler, a potential competitor as the state’s only psychiatric hospital, on a similar application filed by Westerly Hospital in 2006. This conclusion was based upon the petitioner’s representations that his consulting services for Butler had concluded in 2007, he was paid in full for all services rendered and he would not seek or accept any similar consulting work for the duration of his tenure on the HSC. In the instant matter, the Petitioner has the following relationships with Butler: he is an Individual member of the Corporation of Butler; and, for the DBS study, he volunteers as Lead Consent Monitor and is paid to review the applications of potential participants. The Petitioner’s status as an Individual Member of the Corporation of Butler does not constitute a “business associate” relationship under the Code of Ethics because he is not a member of the Board of Directors and he does not have the authority to affect the financial objectives of the hospital. However, we conclude that the Petitioner’s ongoing provision of services as a paid independent contractor, reviewing patient applications for the DBS study, constitutes a “business associate” relationship with Butler, a controlled operating unit of CNE, under the Code of Ethics. Based upon the above representations, the Petitioner is a “business associate” of Butler, a controlled operating unit of CNE, for the duration of the provision of these services, until he is paid for all services rendered and no future business relationship is anticipated. Therefore, he is required to recuse from the HSC’s review of CNE’s application to merge with Memorial Hospital because it is reasonably foreseeable that the HSC’s decision will have a financial impact on CNE and all of its affiliated hospitals, including Butler. For all of these reasons, it is the opinion of the Rhode Island Ethics Commission that the Petitioner is prohibited by the Code of Ethics from participating in the HSC’s consideration of CNE’s application to merge with Memorial Hospital, given his various connections to Butler, a CNE controlled operating unit. Notice of recusal shall be filed with the Ethics Commission in accordance with § 36-14-6. Code Citations: § 36-14-2(3) § 36-14-2(7) § 36-14-5(a) § 36-14-5(d) § 36-14-5(f) § 36-14-6 § 36-14-7(a) Related Advisory Opinions: A.O. 2012-26 A.O. 2012-09 A.O. 2006-27 A.O. 2004-11 A.O. 99-11 A.O. 97-9 Keywords: Business Associate Recusal