CONFLICT OF INTEREST

HOSPITAL DISTRICT PHYSICIANS' COMPANY
OWNING INTEREST IN A BUSINESS CONTRACTING
WITH HOSPITAL DISTRICT

To:        Name withheld at person's request (Fort Myers)

SUMMARY:

Three doctors who own a limited liability company which has part ownership of a medical service group contracting with a hospital district will not have a prohibited conflict of interest under either Section 112.313(3) or 112.313(7)(a), Florida Statutes, should they accept employment with the hospital district. Because the contract predates the physicians' public employment, the prohibitions of Section 112.313(3) will not apply. Similarly, because the contract predates the physicians' public employment, Section 112.316, Florida Statutes, will exempt it from the application of Section 112.313(7)(a). Referenced are CEO 09-1, CEO 96-30, and CEO 83-7.

QUESTION:

Will a prohibited conflict of interest be created under Section 112.313(3) or Section 112.313(7)(a), Florida Statutes, if owners of a limited liability company which owns part of a company providing medical services for a hospital special district become employed by that same hospital district?

Under the circumstances presented, your question is answered in the negative.

Through your letter of inquiry and correspondence with our staff, we are advised that you seek an opinion on behalf of three practicing physicians. You indicate these doctors own the Hospitalist Group of Southwest Florida, a professional association organized as a limited liability company. In turn, the Hospitalist Group of Southwest Florida owns a 30.4% interest in Inpatient Specialists of Southwest Florida, LLC (ISSF).

You indicate that in July 2012, ISSF entered into a hospitalist agreement with Lee Memorial Health System (LMHS), which is a hospital special district and an "agency," as that term is defined in Section 112.312(2), Florida Statutes. You explain that under the hospitalist agreement, ISSF provides clinical care at LMHS.¹ The hospitalist agreement states the initial term of the agreement will be three years and, following the expiration of the initial term, it "shall thereafter renew and continue for successive one (1) year terms." You emphasize that the three physicians who own the Hospitalist Group of Southwest Florida do not provide any services on ISSF's behalf under the hospitalist agreement.

You indicate the three doctors are interested in executing employment agreements with LMHS in their personal capacities, making them employees of the hospital district (not independent contractors). You state they will provide pulmonary/critical care medicine, which you advise is distinguishable from the clinical care provided by ISSF under the hospitalist agreement.² In fact, you state the differences are such that if the three physicians are employed by the hospital, they will not be required to provide—as hospital employees—any of the services required under the hospitalist agreement and will have limited, if any, interaction with those who do provide such services. You also emphasize that any employment agreements between LMHS and the physicians will contain at least two prohibitions. First, the doctors will be prohibited from referring any patients to ISSF for further treatment before or after they become hospital employees. Second, they will be prohibited from attempting to either influence LMHS's treatment of ISSF, or modify the terms of the hospitalist agreement.

You inquire whether the three doctors will have a prohibited conflict of interest if they become employees of LMHS under the proposed employment agreements, given LMHS's contract with ISSF. The two relevant prohibitions within the Code of Ethics for Public Officers and Employees (Part III, Chapter 112, Florida Statutes) are Sections 112.313(3) and 112.313(7)(a), Florida Statutes.

Turning first to Section 112.313(3), the provision states:

DOING BUSINESS WITH ONE'S AGENCY.--No employee of an agency acting in his or her official capacity as a purchasing agent, or public officer acting in his or her official capacity, shall either directly or indirectly purchase, rent, or lease any realty, goods, or services for his or her own agency from any business entity of which the officer or employee or the officer's or employee's spouse or child is an officer, partner, director, or proprietor or in which such officer or employee or the officer's or employee's spouse or child, or any combination of them, has a material interest. Nor shall a public officer or employee, acting in a private capacity, rent, lease, or sell any realty, goods, or services to the officer's or employee's own agency, if he or she is a state officer or employee, or to any political subdivision or any agency thereof, if he or she is serving as an officer or employee of that political subdivision. The foregoing shall not apply to district offices maintained by legislators when such officers are located in the legislator's place of business or when such offices are on property wholly or partially owned by the legislator. This subsection shall not effect or be construed to prohibit contracts entered into prior to:

(a) October 1, 1975.

(b) Qualification for elective office.

(c) Appointment to public office.

(d) Beginning public employment.

Section 112.313(3) prohibits a public employee, acting in his private capacity, from selling services to the agency where he is employed. However, the statute contains an express exception—Section 112.313(3)(d)--that removes from the prohibition those contracts entered into before the individual begins public employment. See, generally, CEO 09-1 and CEO 96-30. As the hospitalist agreement here was executed in July 2012 and therefore predates the public employment of the three doctors, no prohibited conflict of interest pursuant to Section 112.313(3) will be created should LMHS employ the doctors during the term of the contract.³

We next turn to Section 112.313(7)(a), which provides:

CONFLICTING EMPLOYMENT OR CONTRACTUAL RELATIONSHIP.--No public officer or employee of an agency shall have or hold any employment or contractual relationship with any business entity or any agency which is subject to the regulation of, or is doing business with, an agency of which he or she is an officer or employee . . .; nor shall an officer or employee of an agency have or hold any employment or contractual relationship that will create a continuing or frequently recurring conflict between his or her private interest and the performance of his or her public duties or that would impede the full and faithful discharge of his or her public duties.

Regarding Section 112.313(7)(a), we have often found that it does not apply to contracts entered into prior to a person beginning public employment, based on the language of Section 112.316, Florida Statute, which provides:

CONSTRUCTION. -- It is not the intent of this part, nor shall it be construed, to prevent any officer or employee of a state agency or county, city, or other political subdivision of the state or any legislator or legislative employee from accepting other employment or following ay pursuit which does not interfere with the full and faithful discharge by such officer, employee, or legislator, or legislative employee of his or her duties to the state or the county, city, or other political subdivision of the state involved.

Our reasoning in so doing has been grounded in our recognition that in such situations, there could have been no temptation to compromise public duties regarding the contract because the person would not have held any public position at the time that the contract was entered into. See CEO 83-7. This has had the effect of mirroring our treatment of Section 112.313(7)(a), which does not expressly contain a "grandfather clause," to our use of the express "grandfather clause" in Section 112.313(3)(d), thereby recognizing the overall reality of a lack of conflict in the whole situation. We feel the situation before us is appropriate for the application of Section 112.316 to grandfather in the existing relationship.

Accordingly, under the facts presented, we find no prohibited conflict of interest will be created under Sections 112.313(3) or 112.313(7)(a) should the doctors accept the proposed employment with LMHS.

ORDERED by the State of Florida Commission on Ethics meeting in public session on June 6, 2014, and RENDERED this 11th day of June, 2014.

____________________________________

Morgan R. Bentley, Chairman

^[1] The materials submitted indicate hospitalists essentially function as primary care physicians and are assigned to various patients at a hospital. They form and implement a care plan for each patient and, because they only deal with inpatient needs, they work only within the hospital environment.

^[2] The materials submitted-as well as generally available online resources-indicate pulmonary/critical care, as opposed to hospitalist care, narrowly focuses upon the diagnosis and treatment of life-threatening conditions requiring organ support and invasive monitoring. While hospitalist care is an inpatient service, pulmonary/critical care is practiced both in the hospital and the outpatient environment.