VIRGINIA M.

APUZZO

HON. RICHARD J. BARTLETT JOHN M. BRICKMAN VERNON S. BRODERICK GEORGE F. CARPINELLO RICHARD D. EMERY

HON. HOWARD A. LEVINE JOHN T. MITCHELL

MARK G. PETERS

MEMBERS

BARRY GINSBERG EXECUTIVE DIRECTOR

MITRA HORMOZI

CHAIR

NEW YORK STATE COMMISSION ON PUBLIC INTEGRITY

PHONE: (518) 408-3976 FAX: (518) 408-3975

540 BROADWAY ALBANY, NEW YORK 12207 www.nyintegrity.org

March 25,2011

VIA ELECTRONIC MAIL and FIRST CLASS MAIL

Joanne Doroshow Executive Director

Center for Justice and Democracy 90 Broad Street, Suite 401

New York, NY 10004

RE: Complaint Regarding Four Members of the Medicaid Redesign Team

Dear Ms. Doroshow:

On behalf of the Commission on Public Integrity ("Commission"), I am responding to your March 8, 2011 letter in which the Center for Justice and Democracy ("CJD") asks the Commission to investigate whether four members of the Medicaid Redesign Team ("MRT" or "Team") - Michael J. Dowling, Kenneth E. Raske, Jeffrey A. Sachs and Daniel Sisto (collectively "the subjects") - violated the State Code of Ethics set forth in Public Officers Law §74.' This letter summarizes the reasons the Commission has determined that CJD's complaint fails to establish a basis on which the Commission could investigate the subjects for alleged ethics violations.

I The Commission has treated your letter as a verified complaint submitted pursuant to Executive Law

§94( 12)( a), although your attached verification does not appear to satisfy CPLR 302l. The gravamen of CJD' s complaint is that the subjects violated the Code of Ethics when they voted to approve a package of 79 proposals MRT unanimously recommended to Governor Cuomo. Specifically, cm alleges that the subjects "have a direct conflict of interests as their employers stand to directly benefit from Proposal 131," one of the proposals in the package MRT approved.

Ms. Joanne Doroshow Page 2

I. MEDICAID REDESIGN TEAM

A. Description

Soon after he took office, Governor Cuomo issued five executive orders establishing advisory bodies, including MRT? Facing a $10 billion deficit in the State's Fiscal Year 2011-2012 budget, Governor Cuomo directed MRT to develop proposals to reduce the State's share of Medicaid spending by $2.85 billion in the coming fiscal year.' The Governor appointed 25 voting MRT members including, as required by Executive Order No. 5: State officers or employees with relevant expertise; two members of the New York State Assembly, one recommended by the Speaker of the Assembly and one recommended by the Minority Leader of the Assembly; two members of the New York State Senate, one recommended by the Temporary President of the Senate and one recommended by the Minority Leader of the Senate; and stakeholders with expertise in areas such as health care delivery, health care insurance, health care workforce, economics, business and consumer rights."

The Governor designated Mr. Dowling, North Shore-LU Health Systems, and Dennis Rivera, SEIU Hea1thcare, as MRT's co-chairs.i Jason Helgerson, New York State Medicaid Director, serves as the Team's Executive Director.6 The other members of the Team and their affiliations are set forth in the Powerpoint presentation given at MRT's initial public

2 See Executive Order No.4, issued on January 5, 20 11 (establishing Spending and Government Efficiency ("SAGE") Commission); Executive Order No.5, issued on January 5,2011 (establishing MRT); Executive Order No. 6, issued on January 5, 2011 (establishing Mandate Relief Redesign Team); Executive Order No. 7, issued on February 9, 2011 (establishing Prison Closure Advisory Task Force); Executive Order No.8, issued on February 17, 2011 (establishing Removing Barriers to Minority and Women-Owned Business Enterprise Team). According to the Executive Orders, Governor Cuomo established these advisory bodies (a Commission, three teams and a task force) and appointed their members to provide him with guidance and advice. Some members were appointed on the nomination of other State officers, such as legislative leaders. The members are not paid for their service on these bodies, although some members serve in State positions for which they are compensated.

3 Since the State anticipates budget deficits to continue for several years, the Executive Order anticipates that MRT will continue to develop, evaluate and recommend Medicaid cost-saving proposals.

4 Executive Order No. 5, ~.2.

5 Mr. Dowling is President and CEO of North Shore LIJ Health Systems. "Redesigning The Medicaid Program," New York Medicaid Redesign Team, January 13,2011, at 4,

http://www.health.ny. gov/health care/medicaidlredesignldocs/20 11-0 1-13 redesign team presentation. pdf.

6 "Redesigning The Medicaid Program," supra at 4; Executive Order No. 5, ~.5.

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Ms. Joanne Doroshow Page 3

meeting and the Governor's public announcement ofMRT's establishment.' A quorum consists of, and all recommendations must be approved by, a majority of the total number of members appointed."

MR T is required to "attempt to engage and solicit the input of a broad and diverse range of groups, organizations and individuals.,,9 MRT's Executive Director is required to establish parameters for proposals and recommendations by stakeholders and interested parties. After consulting with Division of the Budget ("DOB"), whose director is an ex officio, non-voting member ofthe team.l'' the Executive Director is required to evaluate the feasibility of implementing proposals and, if so, the savings that might be realized. I I

The Team was required to begin work immediately and to submit its first report to the Governor on or before March 1,2011 concerning its findings and recommendations for consideration in the budget process for Fiscal Year 2011-12.12

B. MRT Actions

MRT has received over 4,000 proposals and ideas from a variety of sources. 13 The Department of Health ("DOH") asked the Team to rate a subset of proposals selected due to major fiscal or policy implications. MRT members rated the proposals on five indicators: quality, efficiency, overall impact, savings for year 1, and savings for years 2 and 3.14

7 Mr. Raske is President of the Greater New York Hospital Association. Mr. Sisto is President of the Healthcare Association of New York State. !d; see also "Governor Cuomo Issues Executive Order Creating Medicaid Redesign Team," Press Release, January 5,2011, http://www.governor.ny.gov/press/01052011medicaid. Dr. Sachs is a'principal of Sachs Consulting, which provides consulting services to hospitals, long term residential facilities, human service agencies, labor unions and others on issues involving public policy, strategic planning, reimbursement and crisis management. Id; http://www.jfkjrinstitute.cuny.eduinews/Sachs.Bio.201I.pdf.

8 Executive Order No. 5, ~.7.

9 !d., ~.8, 0.1 and 0.2.

10 Id., ~.6.

IIId.,~.3. 12 Id., ~.4.

13 New York Medicaid Redesign Team Meeting, February 24 and 25, 2011, presentation at 14. http://www.state. health.ny. gov/health care/medicaid/redesign! docs/20 11-02-24 presentation. pdf.

14 Id.at 16

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Ms. Joanne Doroshow Page 4

On February 24, 2011, MR T conducted a public meeting in Albany.i ' At the conclusion of the meeting, MRT approved a package of79 proposals, which Governor Cuomo accepted. MRT did not vote on the proposals individually.i'' The package consists of proposed program reforms, rate reductions and other measures that are projected to save New York nearly $1.7 billion. In addition, to stay within the overall Medicaid spending cap set by Governor Cuomo, to avoid other provider cuts, MR T staff "encouraged" providers to effectuate approximately $640 million of voluntary cost reductions.l

All twenty MR T members who voted approved the package of 79 proposals, including three ofthe four subjects. The fourth subject, Dr. Jeffrey A. Sachs, was not present and did not participate in the meeting or MR T' s vote on the packare. Three MR T members were absent from the meeting and four MRT members abstained.!

Of the package of 79 proposals approved by MRT, slightly more than half are included in Governor Cuomo's Executive Budget 30 day amendments, while the others are not included. Additionally, one proposal that is not part of the package MRT approved is included in the Governor's Executive Budget 30 day amendments.i"

C. Proposal 131

MR T' s inclusion of Proposal 131 among the 79 proposals in the package MR T recommended to Governor Cuomo is the basis of your complaint. Governor Cuomo included this proposal in the Executive Budget 30 day amendments.

Several persons authored Proposal 131, as follows: DOH; Hospital Association of New York; Nassau-Suffolk Hospital Council; New York Hospital Queens: Anne Weeks;

15 According to the Committee on Open Government, MRT is not required to comply with the Open Meetings Law, Public Officers Law Article 7. Nevertheless, the February 24 meeting, which lasted more than five and half hours, was open to the public and the MRT website contains a video recording of it, which Commission staff has reviewed. http;llwww.health.ny.gov/events/webcasts/archive/. According to the Committee on Open Government, no minutes of the meeting were required and, to staffs knowledge, none are available.

16 http;llwww.nyhealth.gov/health care/medicaid/redesign/docs/approved proposals.pdf.

17 New York Medicaid Redesign Team Meeting, February 24 and 25, 2011, supra

18 "New York Medicaid Panel Backs Cuts," T. Kaplan, New York Times, February 24,2011;

19 http;llpublications.budget.state.nv.us/eBudgetll1211112 30DayAmendments.html.

Ms. Joanne Doroshow Page 5

New York Presbyterian Hospital; American College of Obstetricians and Gynecologists; and others who testified at MRT hearings.i"

Proposal 131 would: cap non-economic damages for medical malpractice awards; establish a Neurologically Impaired Infant Medical Indemnity Fund that will provide payment for medical expenses of eligible children as well as repayment of the State's Medicaid lien where applicable; and monitor the impact of the $3 million/3year [Agency for Healthcare Research and Quality] demonstration project that DOH is conducting along with the Unified Court System and Maimonides, Montefiore, Beth Israel, Mount Sinai and NY Presbyterian hospitals.i!

Implementation of Proposal 131 requires both administrative action and a statutory change.22 DOB estimates that, if implemented, Proposal 131 would save over $200 million in each of the next four fiscal years and would reduce medical malpractice premiums for both physicians and hospitals.v'

II. DISCUSSION

An unpaid member of a policymaking board or a board with at least one member appointed by the Governor is subject to the State Code of Ethics set forth in Public Officers Law §74. 24 Since Governor Cuomo appointed all ofMRT's members, they are required to comply with the State Code of Ethics.25

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Determining that MRT members are required to comply with the State Code of Ethics does not end the analysis. As the Ethics Commission noted in Advisory Opinion No. 98-07, "[i]n applying [the State Code of Ethics], the Commission will give recognition to the special nature of these boards .... [T]he Commission realizes that it cannot treat [members of advisory boards] as it does other officers and employees who exercise final decision making

20 http;llwww.health.ny.gov/health care/medicaidlredesignldocs/descriptions of recommendations.pdf.

21Id.

22Id.

23Id.

24 Ethics Commission Advisory Opinion No. 98-07. The Ethics Commission identified Public Officers Law §74(3)(d), (e), (t) and (h) as those Code of Ethics provisions most likely to apply to such individuals. The Commission follows Ethics Commission precedent pursuant to Executive Law §94(l).

25 MRT is not a policymaking board.

Ms. Joanne Doroshow Page 6

authority. Their different role in the functioning of government, limited to acting as unpaid advisors, must be recognized." 26

The Ethics Commission recognized in Advisory Opinion No. 98-07, as Governor Cuomo explicitly did in establishing MRT and appointing its members, that members of an advisory board may be asked to serve and provide advice precisely because of their status as "stakeholders," based on their business or professional affiliations.27 The Commission stated:

It seems clear from the structure of the Commission's membership that the legislative intent was to draw upon the knowledge and experience of various sectors of society by allocating seats on the Commission to members of the insurance, banking and financial services industries, as well as to consumers, academics and other interested parties. The obvious purpose was not to insulate the Commission from the views of private interests, but to provide a forum in which such views would be synthesized in the process of formulating the Commission's recommendations.

* * *

Section 74 is drafted to be flexible. For example, its operation here would not bar from membership on the Commission individuals employed in the industries under scrutiny since the Commission is clearly designed to include such people. It would, however, require all Commission members and employees to pursue the public interest in the Commission's work. The knowledge and experience which members bring from the various sectors enumerated in the creating statute must be devoted to the advancement of the public good and not the private interests from which the members come. In accepting a public office and the opportunity to shape public policy, the Commission members and employees assume an obligation to adhere to the standards of conduct which the public rightfully expects of those holding a public

26 The Ethics Commission issued Advisory Opinion No. 98-07 to address concerns far different from those raised by CJD's complaint. It had received a complaint that, while an advisory board was considering a matter that would have significantly affected a particular manufacturer, the manufacturer allegedly had given a significant gift of travel, lodging, hospitality and other entertainment to some board members. The Ethics Commission was understandably concerned about the acceptance of such gifts by advisory board members. Nevertheless, rather than initiating an investigation of the alleged gift violations, the Ethics Commission issued Advisory Opinion No. 98-07. Neither the Commission nor the Ethics Commission has conducted an ethics investigation of, let alone issued a Notice of Reasonable Cause alleging an ethics violation committed by, an unpaid or per diem advisory board member based only on his or her participation in the advisory board's proceedings.

27 The business and professional affiliations of the subjects are publicly known and disclosed. CJD does not allege that the subjects violated the Code of Ethics by failing to disclose the relationships that CJD alleges give rise to their unlawful conflict of interests.

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Ms. Joanne Doroshow Page 7

trust. Those standards are expressed in section 74 of the Public Officers Law and, in our opinion, are applicable to the Commission.28

Under the circumstances presented in this instance, the substantial conflicts the State Code of Ethics is intended to avoid or, at least, minimize are not present for at least three reasons.

First, MRT members did not make binding decisions and did not have authority to take final actions. Rather, they provided advice, in the form of a package of 79 proposals, to the Governor. The Governor was not required or expected to adopt all of the proposals MR T approved and, in fact, has not done so. As discussed above, the Governor has adopted just more than half of the proposals MRT recommended and has put forward at least one proposal that MRT did not endorse. Proposal 131, the focus of the complaint, requires both legislative and administrative action to be implemented. Thus, even its inclusion in Governor Cuomo's Executive Budget 30 day amendments does not ensure that Proposal 131 will be adopted and implemented. Under such circumstances, the State Code of Ethics is not implicated by a

MR T member's vote to approve a package of 79 proposals that included Proposal 131.

Second, MRT is comprised of a group of individuals whose interests are not aligned with one another with respect to all of the proposals MRT considered, let alone approved. MRT members did not have an opportunity to vote on any proposal, including Proposal 131, individually. Rather they voted to approve a package that included Proposal 131 and those MRT members who participated in the vote on the package unanimously approved it. Under these circumstances, there is a minimal risk that any particular member could or did vote to approve the package of 79 proposals to serve his or her self-interest or the interest of an institution with whom he or she is affiliated. Rather, they voted to approve a package of 79 proposals of general applicability, which the Code of Ethics as construed in Advisory

Opinion No. 98-07 permitted them to do.29 ,

28 Advisory Opinion No. 98-07, quoting Attorney General Formal Opinion No. 83-F20. Advisory Opinion No. 01-02 applied Advisory Opinion No. 98-07 and demonstrates the nuanced, fact-specific analysis that must be undertaken when considering the application of the State Code of Ethics to an unpaid or per diem advisory board member, who may have ties to one or more persons that may be affected by the advisory board's decisions and recommendations. The Ethics Commission determined that §74 affected three different groups of members of an advisory council that provided input regarding grant applications from colleges and universities in different ways.

29Dr. Sachs was not present at the meeting at which MRT approved the package of79 proposals of which Proposal 131 is a part and, thus, did not vote to approve the package. Thus, Dr. Sachs effectively recused himself from the MRT's vote on the package of proposals at issue. This is an additional basis upon which the Commission will forego an investigation of the allegations against him. Cf Advisory Opinion No. 10-03.

Ms. Joanne Doroshow Page 8

Third, MRT employed an open, public and transparent process, including disclosure of members' business and professional affiliations and interests and opportunities for public input. The proposals were made public and were evaluated, not only by MRT members but also by DOH and DOB, based on pre-established, objective criteria. The meeting at which MRT approved the package of proposals was open to the public and a video recording of it is available on MRT's website.

III. CONCLUSION

As set forth above, there is not a basis at this time to initiate an investigation to determine whether the subjects violated the State Code of Ethics when they participated in MRT's proceedings, particularly when three of the four subjects voted to recommend a package of 79 proposals to Governor Cuomo. Unless additional information is brought to the Commission's attention, the Commission will conduct no further investigation regarding CJD's complaint.

Very truly yours,

B~~~')

Executive Director and General Counsel

cc: Michael J. Dowling, President/Chief Executive Officer, North Shore-LIJ Health

System

Mark F. Glazer, Esq., Counsel for Jeffrey A. Sachs, D.D.S.

Daniel Sisto, President, Healthcare Association of New York State

Susan C. Waltman, Esq., Executive Vice President/General Counsel, Greater New York Hospital Association (counsel for Kenneth E. Raske, President, GNYHA) (All copies sent via electronic mail and first class mail.)

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