Attorney General's Opinion
Attorney General, Richard Blumenthal
October 14, 2005
Honorable Patricia Wilson-Coker
Commissioner
Department of Social Services
25 Sigourney Street
Hartford, CT 06106-5033
Dear Commissioner Wilson-Coker:
I write to advise you that you can and should release all information concerning provider rate reimbursement. You have the authority to disclose such provider rate reimbursement information that has been produced to you by Medicaid Managed Care Organizations (“MCOs”). You should reject assertions by the MCOs that the information must be kept confidential under the Freedom of Information Act (“FOIA”) and the terms of their contracts with the Department of Social Services (“DSS”).
As I first advised you in July, 2005, and have reiterated repeatedly to you and the Governor over the past three months, I strongly believe that non disclosure -- keeping such information secret -- ill serves the public interest and people of the State. The Governor since then has clearly and strongly adopted the position that I advocated to you. Concealing this information from the public inhibits and impedes open, accountable government -- especially important when $600 million in state funds are at stake -- and undermines the spirit and purpose of the Freedom of Information Act. I strongly urge you to release this information. There is no legal bar to disclosure. You have the legal authority to make this information public even if it qualifies for an exemption under FOIA, and you should do so.
Background
DSS is responsible for administering the Title XIX Medicaid program in Connecticut. 42 U.S.C. § 1396a (a)(5) (single state agency requirement); Conn. Gen. Stat. §§ 17b-2, 17b-260. In accordance with a federally approved “waiver,” several MCOs have assumed the responsibility for delivering covered medical services on behalf of assigned Medicaid recipients pursuant to contracts with DSS. The contracts contain a number of detailed requirements, and generally provide that the MCOs must provide services that are consistent with the requirements of state and federal law.
There is no requirement in the contracts that the MCOs pay their enrolled providers at any particular rate of reimbursement. I understand that the payment schedules of the MCOs may vary from each other and may even vary by provider within a particular MCO.
A FOIA request was made to the DSS for the production of documents pertaining to the rates of reimbursement that are paid by MCOs to provide for cardiac and gastroenterology services. DSS did not immediately produce the documents, initially indicating that it did not have the documents in its possession.1 After I expressed a strong policy preference for disclosure based on principles of open government and transparency in contracting, the Governor directed DSS to take all reasonable steps to obtain and to produce the requested documents. The MCOs ultimately provided DSS the rate documentation requested.
In providing the documents to DSS, each of the MCOs claimed that the rate information is confidential, proprietary information which is exempt from further disclosure under FOIA. All of the MCOs also asserted that DSS is required by Section 5.08 of the contracts between DSS and the MCOs to keep the information confidential and to resist disclosure before the FOIC. Additionally, the MCOs asserted that the rates of reimbursement constitute “trade secrets” within the meaning of the exemption from disclosure afforded by Conn. Gen. Stat. § 1-210 (b)(5)(A).2 At least one MCO claimed that the rate information is also exempt from disclosure as “commercial or financial information given in confidence, not required by statute.” Conn. Gen. Stat. § 1-201(b)(5)(5).
You have asked whether the MCO rate of payment information now in DSS’s possession constitutes confidential proprietary information pursuant to FOIA and, if it is, whether DSS is precluded from releasing it pursuant to FOIA or Section 5.08 of the contracts between DSS and the MCOs. I conclude that you have the authority to disclose the information, and urge that you do so.
Section 5.08 of the Contracts
The release of information concerning MCOs by DSS to third parties is addressed in Section 5.08 of the contracts between DSS and the MCOs.3 Subsection 5.08 a recites the agreement and acknowledgement of the parties that “due regard will be given for the protection of proprietary information contained in all applications and documents received.” That subsection, however, further acknowledges that “all materials associated with the contract” are subject to FOIA, that the MCOs may not merely state that information is proprietary but must instead provide “convincing explanations and rationale sufficient to justify each exemption” when they produce documents to DSS, and that “the final administrative authority to release or exempt any or all material so identified rests with DSS” (emphasis added). Accordingly, this subsection leaves it to DSS to determine if the MCOs demonstrated that a FOIA exemption applies to “proprietary information,” in which case “due regard” would be given for the protection of that information. Nevertheless, the final decision as to disclosure rests with DSS under this express contract provision, regardless of whether the document qualifies for a FOIA exemption.
Subsection 5.08. b acknowledges DSS’s need for certain types of information that “may constitute information that is proprietary to the MCO.” This subsection provides that proprietary information subject to this subsection need only be produced by the MCOs when necessary “to monitor contract compliance or to fulfill Part II sections 3.33 and 3.33.” It further provides in the last sentence of 5.08. b. that:
DSS agrees not to disclose publicly and to protect from public disclosure any proprietary or trade secret information provided to DSS by the MCO and/or its Affiliates’under this contract to the extent that such proprietary information is exempted from public disclosure under Section 1-213 [sic – 1-210] of the Connecticut Freedom of Information Act.
Accordingly, Section 5.08. b of the contract acknowledges that certain types of information may constitute information that is “proprietary to the MCOs,” including “paid claims information” and “systems, procedures and methodologies and practices used by the MCOs … in connection with the underwriting, claims processing, claims payment and utilization monitoring.”
Although the last sentence of subsection 5.08.b appears to be an agreement by DSS not to disclose trade secret information to the extent the information would be exempted from disclosure by the terms of the FOIA statute, that apparent agreement is qualified by subsection 5.08.a, which gives DSS the ultimate authority and discretion to release information supplied to DSS by the MCOs. In accordance with accepted rules of interpretation, all of the provisions of section 5.08 must be read together harmoniously, giving effect to all of its provisions if at all possible. Connecticut Light and Power Co. v. Texas-Ohio Power, Inc., 243 Conn. 635, 708 A. 2d 202 (1998). Section 5.08 can be read harmoniously, giving effect to all of its provisions, if it is interpreted as restating the Connecticut FOIA, requiring DSS to determine, in good faith, whether information produced by the MCOs is exempt from disclosure under FOIA as trade secrets, yet giving DSS the ultimate authority to disclose information that is exempt from disclosure under FOIA based on its determination whether the public interest in disclosure outweighs the MCOs’ interest in secrecy. Any other reading of the statute would nullify the expressly retained authority of DSS to release material even if it may fall within a FOIA exemption.
Under the FOIA, exemptions are permissive, not mandatory. Public agencies, therefore, retain the right to determine whether and when to assert an exemption, depending on policy determinations of the need for confidentiality. In the matter at hand, you have the authority under the law and Section 5.08 of the contracts to release the requested information even if you conclude that it qualifies for an exemption under FOIA.
The Claimed FOIA Exemptions
Since you have the authority to disclose the requested information even if you conclude that an exemption to FOIA applies, we will deal only briefly with the claimed exemptions. Their application in this case requires a factual determination by DSS and application of the requirements of FOIA. We will provide you with the applicable standards for each claimed exemption. In making such a determination, however, it should always be borne in mind that the Act “makes disclosure of public records the statutory norm” and exceptions to full disclosure are “narrowly construed” with the burden of proving the applicability of an exception resting on the party claiming it. Director, Department of Information Technology of Town of Greenwich v. FOIC, 274 Conn. 179 (2005). Proving the applicability of an exemption requires “more than conclusory language, generalized allegations or mere arguments of counsel. Rather, a sufficiently detailed record must reflect the reasons why an exemption applies to the materials requested.” New Haven v. FOIC, 205 Conn. 767, 776 (1988).
1. The Trade Secret Exemption under FOIA
Conn. Gen. Stat. § 1-210(b)(5)(A) exempts public records that constitute “trade secrets” from disclosure under FOIA. “Trade secrets” are defined in the Act as follows:
Trade secrets, which for purposes of the Freedom of Information Act, are defined as information, including formulas, patterns, compilations, programs, devices, methods, techniques, processes, drawings, cost data, or customer lists that (i) derive independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means to other persons who can obtain economic value from its disclosure or use, and (ii) are the subject of efforts that are reasonable under the circumstances to maintain secrecy.
Town and Country House and Home Services, Inc. 154 Conn. 314, 189 A. 2d 390 (1963), sets forth the factors generally considered in determining whether a document qualifies as a trade secret. Citing the Restatement, 4 Torts, § 757, the Court stated:
Some of the factors to be considered in determining whether given information is a trade secret are (1) the extent to which the information is known outside the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of measures taken by the employer to guard the secrecy of the information; (4) the value of the information to the employer and to his competitors; (5) the amount of effort or money expended by the employer in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. Restatement, 4 Torts § 757, comment b.
Id. at 318-19
See also Department of Public Utilities v. Freedom of Information Commission, 55 Conn. App 527, 529-39 (1999) (citing Town and Country House and Homes Services, Inc., 150 Conn. 314, 318-19, 189 A.2d 390 (1963), and rejecting a claim that cost and pricing data constituted proprietary “trade secret” information due to the absence of evidence of steps being taken to preserve the confidentiality of the information); Director, Department of Information Technology of the Town of Greenwich v. Freedom of Information Commission, 274 Conn. 179, 874 A.2d 785 (2005), (holding that a town’s computerized compilation of data does not constitute “trade secrets” when the information merely constitutes data that otherwise could be obtained by making a series of requests to various town departments).
2. Commercial or Financial Information Given in Confidence Exemption
Conn. Gen. Stat. § 1-210(b)(5)(B) further exempts “commercial or financial information given in confidence, not required by statute.” The Connecticut appellate courts have not construed the scope of this exemption. However, it has been construed by two Connecticut trial courts. See Holbrook, Commissioner of Environmental Protection v. Freedom of Information Commission, 1997 Conn. Super. LEXIS 926 (1997)(holding that information pertaining to the volume and dollar value of shellfish harvested under an assurance of confidentiality qualified for exemption); Chief of Staff, Office of the Mayor, City of Hartford v. Connecticut Freedom of Information Commission, 1999 Conn. Super. LEXIS 2209 (insufficient evidence that information was submitted subject to an understanding of confidentiality to qualify for exemption).
Connecticut case law recognizes that the state FOIA can be construed by reference to case law arising under the federal Freedom of Information Act, upon which our law is modeled. Board of Trustees of Woodstock Academy v. Freedom of Information Commission, 181 Conn. 544, 436 A. 2d 222 (1980). The federal case law construing the analogous federal exemption indicates that documents are likely to be protected under this exemption if disclosure would “impair the government’s ability to obtain necessary information in the future” or “cause substantial harm to the competitive position of the person from whom the information was obtained.” National Parks and Conservation Association v. Morton 162 <st2:country-region>U.S.</st2:country-region> App. D.C. 223, 498 F. 2d 769, 771 (D.C. Cir. 1974);4 see also Critical Mass v. Nuclear Regulatory Commission, 975 F. 2d 8712, 877 (1st Cir 1992).
Under the FOIA, you would have to first determine the accuracy of the information provided, and then decide whether disclosure would “impair” the government’s ability to obtain information in the future” or “cause substantial harm to the competitive position” of the MCO supplying the information.
3. The Explanations and Rationales of the MCOs
Three out of the four MCOs also assert that their explanations as to why their rate information is confidential themselves constitute proprietary trade secret information, and have requested DSS to redact the text of such explanations in any further release of the documents to the public. We can see no basis for a determination that the explanations put forth by the MCOs in support of their claims for trade secret exemption would themselves constitute “information, including formulas, patterns, compilations, programs, devices, methods, techniques, processes, drawings, cost data, or customer lists that (1) derive independent economic value … from not being generally known (to third parties) … and (ii) are the subject of efforts … to maintain secrecy.” The explanations are not at all similar to the illustrative listing of the type of information that may constitute “trade secrets” under the statute. Conn. Gen. Stat. § 1-210(b)(5)(A). Furthermore, the explanations are clearly arguments of counsel in support of a claim for an exemption, not information that has independent economic value and is used in the operation of the business of the MCOs. With the exception of any rate information contained within the explanations, the asserted justifications for the exemptions, therefore, should be released, without redaction, because they are “public records” that are not exempt from disclosure under FOIC.
Conclusion
The critical public interest in openness and transparency in state contracting-- especially involving more than $600 million of state funds -- compels the release of these documents, as I urged in July, 2005. There is no legal bar to disclosure. You have the authority to make public the information requested as to the rates of reimbursement paid to medical providers for Medicaid recipients under the terms of the contracts between DSS and the MCOs and relevant FOIA law, whether or not the information qualifies for the exemptions claimed. I repeat and underscore my longstanding advice to disclose this information to the public.5
Very truly yours,
RICHARD BLUMENTHAL
1 DSS was of the opinion that it was not required under FOIA to produce MCO documents it did not have because the MCOs are not performing “governmental functions” as that term is defined for purposes of FOI. See, Conn. Gen. Stat. § 1-200(11) (definition of “governmental function”). DSS subsequently dropped its reliance on the governmental function exemption, although the issue remains relevant to the extent that the complainants allege that the MCOs did not produce all of the documentation they requested. That dispute is pending before a FOI hearing officer in Kari Hartwig v. Commissioner, Department of Social Services, No. FIC 2005-025.
2 Several of the MCOs also claim that their explanations in support of their claims for exemption are themselves exempt from disclosure.
3 As you are aware, this office did not review the DSS/MCO contracts, having authorized you to execute those contracts without our review as to form.
4 The Second Circuit adopted the National Parks test in Nadler v. Federal Deposit Insurance Corp., 92 F. 3d 93, 95 (2nd Cir. 1996).
5 The MCOs have the option, if they disagree, to seek a court order preventing disclosure.
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