Commonwealth, Department of Public Welfare v. Eiseman

[J-28A-C-2015]
IN THE SUPREME COURT OF PENNSYLVANIA
EASTERN DISTRICT
SAYLOR, C.J., EAKIN, BAER, TODD, STEVENS, JJ.
COMMONWEALTH OF PENNSYLVANIA, : No. 45 EAP 2014
DEPARTMENT OF PUBLIC WELFARE, :
: Appeal from the Order of the
Appellee : Commonwealth Court entered on
: 2/19/14 at No. 1935 CD 2012 affirming
v. : in part and reversing in part the
: determination entered on 9/17/12 of the
JAMES EISEMAN, JR., AND THE PUBLIC : Office of Open Records at No. AP2011-
INTEREST LAW CENTER OF : 1098
PHILADELPHIA, :
:
Appellants : ARGUED: May 5, 2015
AETNA BETTER HEALTH, INC., HEALTH : No. 46 EAP 2014
PARTNERS OF PHILADELPHIA, INC., :
AND KEYSTONE MERCY HEALTH : Appeal from the Order of the
PLAN, : Commonwealth Court entered on
: 2/19/14 at No. 1949 CD 2012 affirming
Appellees : in part and reversing in part the
: determination entered on 9/17/12 of the
v. : Office of Open Records at No. AP2011-
: 1098
JAMES EISEMAN, JR., AND THE PUBLIC :
INTEREST LAW CENTER OF :
PHILADELPHIA, : ARGUED: May 5, 2015
:
Appellants :
:
UNITEDHEALTHCARE OF : No. 47 EAP 2014
PENNSYLVANIA, INC. D/B/A :
UNITEDHEALTHCARE COMMUNITY : Appeal from the Order of the
PLAN AND HEALTHAMERICA : Commonwealth Court entered on
PENNSYLVANIA INC. D/B/A : 2/19/14 at No. 1950 CD 2012 affirming
COVENTRYCARES, : in part and reversing in part the
: determination entered on 9/17/12 of the
Appellees : Office of Open Records at No. AP2011-
: 1098
v. :
:
JAMES EISEMAN, JR., AND THE PUBLIC : ARGUED: May 5, 2015
INTEREST LAW CENTER OF :
PHILADELPHIA, :
:
Appellants :
OPINION
MR. CHIEF JUSTICE SAYLOR DECIDED: October 27, 2015
These appeals, as well as a companion set, concern the extent of the public’s
statutory right of access to discrete information about the implementation of the Medical
Assistance Program.
In Pennsylvania, the Medical Assistance or Medicaid Program is administered by
the Commonwealth’s Department of Human Services, which, in the time period relevant
to the events underlying these appeals, was known as the Department of Public Welfare
(“DPW” or the “Department”). Funded jointly by the federal and state governments,
Medicaid directs public monies toward the provision of healthcare services to qualifying
individuals with low incomes and limited resources. See generally 42 U.S.C. §§1396 –
1396w-5; 62 P.S. §§441.1 – 449. In implementing one pillar of the delivery system in
the Commonwealth – via a program called HealthChoices -- DPW has negotiated and
contracted with various managed care organizations (“MCOs”) to render the essential
services available to enrollees. In the program’s Southeast Zone,1 five MCOs were
selected.2
1
This region is comprised of Berks, Chester, Delaware, Montgomery, and Philadelphia
Counties.
2
These are: Aetna Better Health, Inc., HealthAmerica Pennsylvania Inc. d/b/a
CoventryCares, Health Partners of Philadelphia, Inc., Vista Health Plan, Inc. through
Keystone Mercy Health Plan, and UnitedHealthcare of Pennsylvania, Inc. d/b/a United
HealthCare Community Plan.
[J-28A-C-2015] - 2
As is pertinent here, HealthChoices encompasses the provision of dental care to
low-income children, certain adults, and some persons with disabilities in Pennsylvania.
The five MCOs serving enrollees in the Southeast Zone engaged DPW-approved dental
subcontractors (“Subcontractors”) to fulfill the larger measure of the MCOs’ contractual
obligations. See generally Dental Benefit Providers, Inc. v. Eiseman, 86 A.3d 932, 937
(Pa. Cmwlth. 2014) (indicating that “[s]ubcontractors have built sophisticated networks
of providers, enabling them to provide services to enrollees in a cost-effective
manner.”). Subcontractors then contracted with and paid providers of dental health care
services to examine and treat Medicaid enrollees. In a few instances, however, MCOs
arranged for services directly with providers.
In June 2011, James Eiseman, Jr. and the Public Interest Law Center of
Philadelphia (“Requesters”) tendered requests to DPW seeking records revealing,
among other things, the rates that DPW paid to the MCOs for dental services in the
Southeast Zone (the “Capitation Rates”), and the amounts paid by MCOs to provide
dental services (the “MCO Rates”). These were submitted per the Right-to-Know Law.3
DPW denied the requests in relevant part. As is most germane to our present
consideration, with regard to the MCO Rates, the Department indicated that it had been
informed by each of the MCOs that the rates were “trade secrets and/or confidential
proprietary information” protected against disclosure. See 65 P.S. §67.708(b)(11)
(generally exempting from the requirement of public access a “record that constitutes or
reveals a trade secret or confidential proprietary information”). Significantly, the
Department did not deny that it possessed pertinent records; rather, it related that the
3
Act of Feb. 14, 2008, P.L. 6, No. 3 (as amended 65 P.S. §§67.101 – 67.3104) (the
“RTKL” or the “Law”).
[J-28A-C-2015] - 3
MCOs had instructed that “DPW is not to disclose” the rates. Letter of DPW Open
Records Officer to James Eiseman, Jr., dated July 25, 2011, at 6.
Requesters lodged an appeal in the Office of Open Records (the “OOR”). See
65 P.S. §67.1101. See generally Bowling v. OOR, 621 Pa. 133, 141-42, 75 A.3d 453,
457-48 (2013) (describing the administrative tier of the appeals process under the
RTKL). The five MCOs intervened as direct-interest participants, see 65 P.S.
§67.1101(c), relying upon the trade-secrets/confidential-proprietary-information
exemptions.4
At an evidentiary hearing, the MCOs offered expert and lay testimony to support
the claimed exemptions. Additionally, the organizations adduced evidence that the
disclosure of rate information would lessen the value of their investment in negotiating
favorable rates.
The OOR, however, issued a final determination granting the relevant records
requests. Initially, the appeals officer observed that records in the possession of a
Commonwealth agency are presumed to be public, unless they qualify for an exemption
under the RTKL or other law or are protected by a privilege, judicial order, or decree.
See id. §67.305; accord Bowling, 621 Pa. at 140, 75 A.3d at 457. Furthermore, he
explained, the Law places the burden of proof upon a public body to demonstrate
exemptions. See 65 P.S. §67.708(a).
Of particular significance to his legal analysis, the appeals officer noted that the
trade-secrets/confidential-proprietary-information exception does not extend to one
statutorily-defined subset of public records, namely “financial records.” Id. §67.708(c)
(prescribing that “[t]he exceptions set forth in subsection (b) shall not apply to financial
4
The Law employs the concepts of “exceptions” and “exemptions” interchangeably.
See 65 P.S. §67.708.
[J-28A-C-2015] - 4
records,” subject to certain enumerated exceptions not applicable here). “Financial
records,” the appeals officer elaborated, include “[a]ny account, voucher, or contract
dealing with . . . the receipt or disbursement of funds by an agency; or . . . an agency’s
acquisition, use or disposal of services[.]” Id. §67.102. Since the Department’s
agreements with the MCOs (containing the Capitation Rates) dealt with “the
disbursement of billions of dollars in taxpayer funds for the acquisition of health
insurance for Medicaid participants,” the appeals officer concluded that they “cannot be
considered anything but a ‘financial record’ under the RTKL.” Final Determination in
Eiseman v. DPW, No. AP 2011-1098, slip op. at 15 (OOR Sept. 17, 2012).
In the alternative, the appeals officer also considered whether the rates of
payment to MCOs could be considered trade secrets or confidential proprietary
information. He explained that a “trade secret” is defined by the RTKL, as well as in
Pennsylvania’s Uniform Trade Secrets Act,5 as:
Information, including a formula, drawing, pattern,
compilation including a customer list, program, device,
method, technique or process that: . . . [d]erives independent
economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper
means by, other persons who can obtain economic value
from its disclosure or use; and . . . [i]s the subject of efforts
that are reasonable under the circumstances to maintain its
secrecy.
12 Pa.C.S. §5302; see 65 P.S. §67.102 (reflecting a materially identical formulation).
See generally Final Determination in Eiseman, No. AP 2011-1098, slip op. at 13 (“[The
Uniform Trade Secrets Act] provides injunctive relief and monetary damages to parties
who have been harmed by the misappropriation of trade secrets, while the RTKL
provides parties with protection from public disclosure by government agencies of
5
Act of Feb. 19, 2004, P.L. 143, No. 14 (as amended, 12 Pa.C.S. §§5301-5308).
[J-28A-C-2015] - 5
records which contain trade secrets.” (citations omitted)). The appeals officer also
related that the term “confidential proprietary information” is defined by the RTKL as
“[c]ommercial or financial information received by an agency: . . . which is privileged or
confidential; and . . . the disclosure of which would cause substantial harm to the
competitive position of the person who submitted the information.” 65 P.S. §67.102.
Although the appeals officer accepted that DPW and the MCOs treat the
Capitation Rates as confidential information, he indicated that it was “not clear that
[their] disclosure . . . would provide any economic value to the Department’s counter-
parties in future negotiations or would cause substantial competitive harm to the
Department.” Final Determination in Eiseman, No. AP 2011-1098, slip op. at 14.
Accordingly, the appeals officer determined that DPW and the MCOs had failed to meet
their burden of proof as to an exemption.
As to MCO Rates, the appeals officer relied substantially on Lukes v. DPW, 976
A.2d 609 (Pa. Cmwlth. 2009), to conclude that records containing such information also
were not exempt. See id. at 627 (“[A] party that voluntarily participates in a public
program and is receiving and disbursing public funds in furtherance of that program has
no legitimate basis to assert that these activities are private and should be shielded
from public scrutiny.”). Although Lukes had been decided under the Law’s predecessor,
the appeals officer highlighted this Court’s recent citation with approval to the decision.
See SWB Yankees LLC v. Wintermantel, 615 Pa. 640, 665 n.19, 45 A.3d 1029, 1044
n.19 (2012). The appeals officer also found that the MCOs had failed to establish that
they would suffer substantial harm if their rates were disclosed. See Final
Determination in Eiseman, No. AP 2011-1098, slip op. at 18.
In a divided opinion, the Commonwealth Court sustained the portion of the
OOR’s determination concerning Capitation Rates, as the members of an en banc panel
[J-28A-C-2015] - 6
unanimously agreed that contracts between DPW and the MCOs were financial records
under the Law. See DPW v. Eiseman (Eiseman I), 85 A.3d 1117, 1124 (Pa. Cmwlth.
2014) (en banc) (explaining that “[t]he Capitation Rates are records within DPW’s
possession that evidence its transaction of paying MCOs pursuant to the Medicaid
HealthChoices Program” and otherwise are financial records pursuant to the statutory
definition); accord id. at 1133 (McCullough, J., concurring and dissenting) (“I join the
Majority in its conclusion that the Capitation Rates negotiated between DPW and the
MCOs are subject to disclosure.”). Although the majority agreed with the OOR’s
conclusion that the statutory trade-secrets/confidential-proprietary-information exception
contained within the RTKL did not apply to financial records, it took the position that the
Uniform Trade Secrets Act implicated a distinct analysis.
The majority explained that the RTKL prescribes that: “Nothing in this act shall
supersede or modify the public or nonpublic nature of a record or document established
in Federal or State law, regulation or judicial order or decree.” 65 P.S. §67.306; cf. id.
§67.3101.1 (“If the provisions of this act regarding access to records conflict with any
other Federal or State law, the provisions of this act shall not apply.”). In light of this
provision, the majority opined that “Section 708(c) cannot dilute operation of another law
that provides an independent statutory bar to disclosure.” Eiseman I, 85 A.3d at 1124.
Ultimately, however, the majority found that the Capitation Rates did not qualify as trade
secrets, because DPW and the MCOs failed to explain how disclosure would impair
their economic value. See id. at 1126-27.
While the members of the en banc panel all agreed that the Law required
disclosure of the Capitation Rates, the viewpoints divided as concerns the MCO Rates.
According to the majority, these were not aspects of financial records, since the rates
are not contained in contracts “of a Commonwealth agency” and “do not involve
[J-28A-C-2015] - 7
disbursement of funds by a Commonwealth agency.” Id. at 1127 (“[T]he statute does
not use the phrase ‘disbursement of agency funds;’ rather, the definition refers to
disbursement of funds ‘by an agency.’” (emphasis in original)). In this regard, the
majority viewed the MCO Rates as pertaining not to disbursements by a governmental
entity, but disbursements by a contractor of the agency. See id. From the majority’s
perspective:
That MCOs disbursed funds they received from DPW to their
subcontractors does not render the MCOs mere conduits for
public funds. Based on the language of the current RTKL,
the funds lose their character as public funds once they
leave an agency’s hands and enter the private sector.
Eiseman I, 85 A.3d at 1127.
Having concluded that the MCO Rates were not contained within financial
records, the majority turned to the broader set of exceptions to disclosure attaching to
“public records,” which include the express trade-secrets/confidential-proprietary-
information exception. See 65 P.S. §67.708(b)(11). In this regard, the majority focused
most closely on the confidential-proprietary-information aspect, first concluding that the
MCO Rates were “confidential,” on account of contractual and other measures taken to
maintain secrecy. See Eiseman I, 85 A.3d at 1128. In terms of the “substantial harm to
the competitive position” criterion, 65 P.S. §67.102, the majority found that this factor
was established primarily based on expert testimony submitted by the MCOs regarding
“industry practice, the highly sensitive nature of the information, and potential for
substantial harm from its disclosure.” Eiseman I, 85 A.3d at 1130. Accordingly, the
majority concluded that the MCO Rates were protected from disclosure per the statutory
exception. In a brief passage, the majority also opined that the information qualified for
trade-secret status under the Uniform Trade Secrets Act. See id. at 1131.
[J-28A-C-2015] - 8
Throughout its opinion, the majority expressly departed from the intermediate
court’s previous analysis in Lukes, taking the position that Lukes lacked relevance,
given that the matter had been decided under the prior law. See id. at 1125, 1127.
Judge McCullough authored a concurring and dissenting opinion, in which she
took the majority to task for what she characterized as a “cursory” and inapt treatment of
Lukes. Eiseman I, 85 A.3d at 1136-37 (McCullough, J., concurring and dissenting)
(“[T]he Majority’s reliance upon its cited case law to abrogate Lukes on a completely
unrelated and separate point of law is misplaced.”). In her view, since the relevant
substantive terms, as between the previous and new open-records laws, could not be
distinguished by the majority (and, in fact, were materially identical), Lukes represented
governing authority and commanded adherence. See id. at 1134-35. According to
Judge McCullough, the majority also inappropriately glossed over material, functional
terms within the statutory definition of “financial records.” Along these lines, she
explained:
[T]he Majority’s interpretation . . . effectively renders the
words “any,” “dealing,” and “disbursement” superfluous and
without meaning, and also ignores the fact that the funds
originate with DPW . . .. [S]ection 102 of the RTKL is broad
enough to include public funds that trickle down through
contractor and subcontractor contracts (“any contract”)
because these contracts nevertheless “deal” with, or simply
pass along down the line, the “disbursement of funds by an
agency.”
Id. at 1136-37 (citation omitted).
Consistent with the reasoning and holding of Lukes, Judge McCullough also
stressed DPW’s delegation of a governmental function and disbursement of public
monies to the MCOs to fulfill that essential purpose. See id. at 1134-35. On this point,
she reasoned:
[J-28A-C-2015] - 9
[T]he public funds originate with DPW, and no matter how
many private entities the funds pass through, the funds end
up in the hands of those performing the actual dental
services and are the same funds that began with DPW. That
is, public funds are used to pay for public dental insurance.
Id. at 1133. Since the MCO Rates qualified as financial records, Judge McCullough
continued, the exemptions contained in Section 708(b) of the RTKL, including for trade
secrets and confidential proprietary information, did not apply. See 65 P.S. §67.708(c).
Finally, she asserted that the Uniform Trade Secrets Act does not serve as an
independent exemption to open-records disclosure, particularly given that the definitions
of “trade secret” in the Uniform Trade Secrets Act and the RTKL are materially identical.
See Eiseman I, 85 A.3d at 1138 (McCullough, J., concurring and dissenting). This
similarly, Judge McCullough explained, evinced a legislative intent to transpose the
effect of the Uniform Trade Secrets Act into Section 708(b)(11) of the RTKL. Thus, she
concluded, the import of Section 708(c) – in terms of explicitly withholding the trade-
secrets exception from any application to financial records -- trumped any independent
application of the Uniform Trade Secrets Act. Id. at 1138-39 (“Indeed, it would be
anomalous for our legislature to explicitly exclude trade secrets as an exception to
disclosure of financial records in section 708(c) of the RTKL, while simultaneously
implying that trade secrets are an exception requiring disclosure of the same financial
records in section 3101.1 of the RTKL.”).
Subsequent to the issuance of the Commonwealth Court’s opinion, DPW
disclosed the Capitation Rates to Requesters, and no party has further pursued a
challenge to such tender. Therefore, only the MCO Rates remain in issue before us.
In the present briefing, consistent with Judge McCullough’s concurring and
dissenting opinion, Requesters maintain that records documenting the MCO Rates are
financial records under the Law, including because they are contained within contracts
[J-28A-C-2015] - 10
“dealing with” the “disbursement of funds” and “acquisition, use or disposal of services”
by DPW. Brief for Appellants at 17, 28 (quoting 65 P.S. §67.102). Requesters highlight
that the disclosure requirements pertaining to financial records are the most expansive,
accord Eiseman I, 85 A.3d at 1133-34 (McCullough, J., concurring and dissenting)
(“From a requester’s standpoint, the most potent provisions of the RTKL are arguably
sections 102 and 708(c) pertaining to financial records.”), in light of the Legislature’s aim
of promoting confidence in government via transparency in fiscal matters.
Additionally, Requesters rely on the analysis contained in Lukes, which they
contend is even more salient under the new Law, given that that the enactment was
designed to provide greater, not lesser, openness. Cf. Bowling v. OOR, 621 Pa. 133,
140, 75 A.3d 453, 457 (2013) (“In 2008, the General Assembly enacted the RTKL,
which replaced the [Right to Know Act] and provided for significantly broadened access
to public records.”); Levy v. Senate of Pa., 619 Pa. 586, 618, 65 A.3d 361, 381 (2013)
(“[T]he enactment of the RTKL in 2008 was a dramatic expansion of the public’s access
to government documents.”). According to Requesters, “[i]t is impossible to square the
Commonwealth Court’s discarding of Lukes with the conclusion of SWB Yankees that
the RTKL expands access to public records and with [SWB Yankees’] favorable
treatment of Lukes.” Brief for Appellants at 20. Requesters also depict the majority
decision of the Commonwealth Court as a departure from a long line of decisions of this
Court, such as Sapp Roofing Co. v. Sheet Metal Workers’ International Association,
Local Union No. 12, 552 Pa. 105, 109, 713 A.2d 627, 629 (1998) (plurality) (holding that
payroll records of a private roofing contractor in the custody of a local agency were
public records, because they evidenced a disbursement by a governmental unit).6
6
Although Sapp Roofing was a plurality decision, three of the five Justices participating
in the decision agreed that the payroll records were public records for purposes of the
(continuedN)
[J-28A-C-2015] - 11
Requesters note that, in other geographic areas of the Commonwealth, DPW has
administered Medicaid as a fee-for-services program, rather than through managed
care organizations. They urge that “[t]he insertion of middlemen – MCOs and
subcontractors – between DPW and providers does not change the fact that DPW
receives and expends federal and state Medicaid moneys so that, ultimately, the child
can get his cavity treated.” Brief for Appellants at 26 (“The Commonwealth’s purpose is
not to issue payments to private insurance companies or to enrich providers, but to
ensure that specified members of society have access to healthcare.”); accord Pa.
Pharmacists Ass’n v. Houstoun, 283 F.3d 531, 538 (3d Cir. 2002) (en banc) (“It is . . .
apparent from the statutory language [in the Medicaid Act] that the intended
beneficiaries of [42 U.S.C. §1396a(a)(30)(A)] are recipients, not providers.”).
In terms of the trade-secrets issue, Requesters maintain that Section 708(c) of
the RTKL reflects a policy judgment, on the part of the General Assembly, that
openness of records related to public-funds expenditures is so important to the
promotion of confidence in government that the trade-secrets and confidential-
proprietary-information exceptions must yield to disclosure. The Commonwealth
Court’s decision, they assert, nullifies this salutary aim. Requesters reject as perverse
the notion that the Uniform Trade Secrets Act may be interposed independently of
Section 708(c), particularly given the express displacement of the self-contained trade-
secrets protection within the four corners of the Law itself.
As a policy matter, Requesters urge that the Commonwealth Court’s decision
thwarts essential public access to a wide range of records documenting the
administration of vital and costly public programs through private contractors. In an
(Ncontinued)
former open-records law. See Sapp Roofing, 552 Pa. at 109, 713 A.2d at 629; id. at
112, 713 A.2d at 630 (Zappala, J., concurring).
[J-28A-C-2015] - 12
amicus submission, Daniel Polsky, PhD, of the University of Pennsylvania elaborates
extensively on the salient policy considerations. See, e.g., Brief for Amicus Daniel
Polsky, PhD, at 9-10 (positing that restrictions on access to negotiated rate information
pertaining to the administration of the Medicaid program diminishes government
accountability by impeding an essential exploration of whether access to and quality of
care is being compromised by the payment regime); accord Brief for Appellants at 14
(“Shielding from public view how nearly one third of the General Fund budget flows from
DPW to providers substantially undermines [the Law’s] goal.”).
The MCOs, on the other hand, take a different position concerning the relevant
policies. From their point of view,
[f]ar from being mere conduits of public funds, the MCOs act
as risk-bearing entities, responsible for providing all covered
medical services, including dental services, to their
members. Whether those services can be delivered at more
or less cost to the MCO directly impacts the bottom-line of
the MCO, not the finances of the Commonwealth.
Brief for Appellees Health Partners of Philadelphia, Inc., et al., at 15. According to the
MCOs, public dissemination of otherwise confidential contractual payment rates would
discourage private entities from doing business with the Commonwealth, thus limiting
that option for securing goods and services necessary to public service. Such access
would not serve the purpose of governmental transparency laws, they argue, since the
contracts involved concern negotiations and relationships among private, rather than
governmental, entities. According to the MCOs and their amici, preserving secrecy for
the MCO Rates promotes investment, innovation and competition; maintains lower
Medicaid costs; and affords Medicaid enrollees broader provider choices. See, e.g.,
Brief for Amicus America’s Health Ins. Plans at 14-23; Brief for Amicus the Pa. Coalition
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of Med. Assistance Managed Care Orgs. at 6-16 (elaborating extensively on policy
considerations attending disclosure or non-disclosure of the MCO Rates).
One faction of the MCOs -- UnitedHealthcare of Pennsylvania, HealthAmerica
Pennsylvania Inc., and Aetna Better Health, Inc. -- urge that this Court’s review should
be closely confined to the question of whether the MCO Rates constitute confidential
proprietary information. See, e.g., Brief for Appellees UnitedHealthcare, et al., at 15
(“This Court should affirm because the record supports the Commonwealth Court’s
finding below: that the rates paid by the private contractor health plans to the dental
sub-contractors constitute ‘confidential proprietary information’ under the Right-to-Know
Law.”). They assert that the record amply supports the Commonwealth Court’s
determination on this score and characterize Requesters’ arguments concerning the
financial-records aspect as collateral and technical in nature. See id. at 23-24. These
MCOs also posit that the Commonwealth Court “struck a fair balance” by requiring that
government-paid rates must be disclosed under the RTKL, but that the rates which
private health plans pay to Subcontractors need not be disclosed. Id. at 11-12 (“The
court below enforced the public’s right to know what the government has paid for a
program, while simultaneously preserving the health plans’ abilities to compete in the
marketplace by shielding their confidential competitive information from harmful
disclosure.”). According to this group, there simply is no nexus between public access
to the MCO Rates and government transparency, and Requesters’ efforts to obtain
additional information represent “meddling” and “pry[ing] into the protected files of the
health plans.” Id. at 12-13.
All of the MCOs, as well as dental-services subcontractor Dentaquest LLC,
suggest that “financial records,” under the Law, subsume “only those showing the
agency’s own disbursements.” See id. at 25 (emphasis in original). Furthermore, they
[J-28A-C-2015] - 14
contend, in effect, that the MCO Rates are simply too remote from Department
contracts and disbursements to qualify as records “dealing with” such contracts and
disbursements. See 65 P.S. §67.102.7
In terms of the confidential-proprietary-information exception, the MCOs stress
the protection of confidentiality expressed in their subcontracts. Furthermore, they
elaborate upon the ample lay and expert witness testimony evidencing that the MCO
Rates have been kept secret and that the plans would be harmed by public disclosure.
See, e.g., Brief for Appellees UnitedHealthcare, et al., at 19 (“[T]he health plan
executives provided extensive testimony respecting the confidential nature and
treatment of the rates they pay the sub-contractors, including testimony that: the
information is accorded such treatment in the contracts with the plans’ sub-contractors;
access to the rates is limited to a ‘need to know’ basis; security measures are in place
to protect the rates; and internal and external disclosure is prevented.”).
Two of the MCOs, joined by subcontractor Dentaquest LLC, lead with the
proposition that records reflecting the MCO Rates -- including agreements between
MCOs and Subcontractors -- are not “public records” at all, because they are not in the
Department’s possession. See 65 P.S. §67.102 (defining a “public record” as one “of a
Commonwealth or local agency”). These appellees also take the position that, even if
records revealing the MCO Rates are deemed to be public, they are not “financial
records,” and, to the degree which they may be deemed to be financial records, the
Uniform Trade Secrets Act applies in any event to protect them from public disclosure.
7
In point of fact, the briefs submitted by the MCOs avoid developed treatment of the
statute’s broad “dealing with” nexus defining financial records. See, e.g., Brief for
Appellees UnitedHealthcare of Pa., et al. at 25 (asserting that the Legislature defined
financial records as those “showing the agency’s own disbursements” (emphasis
adjusted)).
[J-28A-C-2015] - 15
DPW also now asserts that it simply does not possess records reflecting the
MCO Rates. Therefore, the Department requests that, if this Court concludes that the
Law requires disclosure, we should direct the MCOs to supply the records to
Requesters. Otherwise, DPW relies upon the content of the MCOs’ briefs in support of
its own position favoring affirmance.
Our present review turns on matters of statutory construction, over which our
review is plenary. Additionally, we are obliged to liberally construe the Law to effectuate
its salutary purpose of promoting “access to official government information in order to
prohibit secrets, scrutinize actions of public officials, and make public officials
accountable for their actions.” Levy, 619 Pa. at 619, 65 A.3d at 381 (quoting Allegheny
Cnty. Dep’t of Admin. Servs. v. A Second Chance, Inc., 13 A.3d 1025, 1034 (Pa.
Cmwlth. 2011)).
At the outset of our review, we find that the assertion that DPW neither
possesses nor controls records reflecting the MCO Rates (and, thus, they are not
“records of an agency”) is not well taken. The Department did not claim non-possession
in its response to the initial open-records requests, and it was agreed by all at the
hearing stage that the only issue was whether disclosure exceptions applied. See, e.g.,
N.T., May 21, 2012, at 16-17 (reflecting DPW’s advancement of the trade-secrets
exception as the basis for denial of the request for records subsuming the MCO Rates);
id. at 18, 21 (memorializing the remarks of counsel for the MCOs that the hearing
involved “a very narrow issue” and “narrow questions” concerning the applicability of the
trade-secrets/confidential-proprietary-information exception). Furthermore, it is
undisputed that managed care organizations are required to submit subcontracts
delegating their healthcare-related responsibilities to DPW for the agency’s advance
written approval, per the Department’s standard written contract. See, e.g.,
[J-28A-C-2015] - 16
HealthChoices Physical Health Agreement at 87 (version effective July 1, 2010). This is
unsurprising, of course, since the undertaking entails the allocation of a vital
governmental function.
In light of this course of development, we granted discretionary review to
consider the Commonwealth Court’s conclusions relative to the financial-records issue
and trade-secrets/confidential-proprietary-information exceptions. See DPW v.
Eiseman, ___ Pa. ___, 106 A.3d 610 (2014) (per curiam). To the extent that the
Department may encounter difficulties flowing from our present focus on those
questions, these would appear to be substantially of its own making. The Legislature
designed the RTKL to afford reasonable and efficient access to public information; it
contravenes this salutary purpose for the Department to advance shifting positions in
opposing disclosure; and, accordingly, we will confine our review and mandate to the
matters upon which appeal was allowed.
As to those issues, first, we agree with Requesters, the OOR appeals officer, and
Judge McCullough that documents required to be submitted to DPW reflecting the MCO
Rates are “financial records” under the Law. See 65 P.S. §67.102. In this regard, while
DPW and the MCOs would prefer to emphasize the definitional language associating
contracts and disbursements with a government agency, accord supra note 7, the
statute plainly reaches more broadly via its prescription that “financial records”
encompass records “dealing with” disbursements of public money and services
acquisitions by agencies. See 65 P.S. §67.102; cf. N. Hills News Record v. Town of
McCandless, 555 Pa. 51, 55, 722 A.2d 1037, 1039 (1999) (explaining that language
within the former open-record’s law’s definition of “public record” – which the Legislature
reposited in the definition of “financial record” under the new Law – reaches some range
[J-28A-C-2015] - 17
of records beyond accounts, vouchers, or contracts, subsuming records which “bear a
sufficient connection” to such fiscally-related categories).8
The MCOs’ position that “[t]his dispute does not relate to [i.e., “deal with”] any
payments actually made by the Pennsylvania government,” Brief for Appellees
UnitedHealthCare, et al., at 4, greatly understates the relationship between government
contracts with managed care organizations and the subcontracts by which such entities
chose to fulfill their contractual undertakings with the Commonwealth. In other words,
subcontracts containing MCO Rates plainly “deal with” DPW’s disbursement of billions
of dollars of public monies to provide access to essential healthcare to vulnerable
populations, as well as the Department’s acquisition of services to meet its own
obligations under federal and state law (albeit through middlemen). See 65 P.S.
§67.102.
According to the MCOs, reliance on the above rationale to conclude that MCO
Rates are contained within “financial records” yields disclosure of private-contractor
records without rational limitation. See, e.g., Brief for Appellees UnitedHealthcare, et
8
In opining that the MCO Rates are not contained within “financial records” for
purposes of the Law, the dissent focuses exclusively on the fragment of the statutory
definition denoting “disbursement of funds by an agency.” Dissenting Opinion, slip op.
at 1 (quoting, indirectly, 65 P.S. §67.102). As explained above, however, the definition
of “financial records” does not pertain solely to agency disbursements per se, but rather,
it extends by its terms to accounts, vouchers and contracts “dealing with . . .
disbursement of funds by an agency.” 65 P.S. §67.102 (emphasis added). In statutory
interpretation, courts are obliged to give effect to all of the provisions of a statute. See 1
Pa.C.S. §1921(a) (emphasis added).
Notably, along these lines, the dissenting opinion does not suggest that key documents
such as dental-services subcontracts which must be submitted to and approved by
DPW do not “deal[] with” the large-scale disbursements of public monies being
channeled through the MCOs and Subcontractors attendant to the performance of
delegated healthcare responsibilities. 65 P.S. §67.102 (emphasis added).
[J-28A-C-2015] - 18
al., at 27 (“[U]nder [Requesters’] reading of the statute, all a requestor [sic] would need
to do to defeat any of [the] exemptions would be to establish some connection, however
remote, to ‘public funds.’” (emphasis added)); Brief for Appellees Health Partners of
Philadelphia, Inc., et al., at 16-17 (“The fundamental flaw in [Requesters’] arguments is
their reliance on the purported existence of a broad right of public access . . . to all
documents having any connection whatsoever with the carrying out of any
governmental function, regardless of their remoteness from a government agency[.]”
(emphasis added)). We differ with this criticism for several reasons.
First, not all private-contractor documents must be submitted to a government
agency for approval. It is this initial requirement which separates subcontracts
containing the MCO Rates from third-party records (to which a distinct legal analysis
applies, see 65 P.S. §67.506(d)).9 Cf. Sapp Roofing, 552 Pa. at 109, 713 A.2d at 629(discussing the open-records treatment of payroll records of a private contractor which
were required to be submitted to the government).10 Along these lines, the MCOs’
9
This is not to say that the MCO subcontracts would not qualify for public disclosure as
third-party records under Section 506(d) of the Law. See generally Reply Brief for
Appellants at 25 (taking the position that, [e]ven if DPW lacked actual possession, the
records would be public records of DPW under Section 506(d)(1) of the RTKL, 65 P.S.
§67.506(d)(1)”). Our point here is only that the submission-and-approval requirement
for subcontracts renders the documents agency financial records, even exclusive of
Section 506(d)(1), which, in any event, is outside the scope of the questions upon which
appeal was allowed. See Eiseman, ___ Pa. ___, 106 A.3d 610.
10
It can hardly be disputed that the subcontracts would qualify as “records of an
agency” under Sapp Roofing, because they are plainly an essential component of an
agency decision, i.e., approval of the subcontract. See Sapp Roofing, 552 Pa. at 109,
713 A.2d at 629 (“Pursuant to the Right to Know Act, to be available for inspection, the
records must be both public records and records of a state agency.” (emphasis added)).
Parenthetically, contrasting with the approach under the Right to Know Act, the RTKL
decouples the “of an agency” criterion from the statute’s main operative provision for
access. Compare 65 P.S. §66.2 (“Every public record of an agency shall, at reasonable
(continuedN)
[J-28A-C-2015] - 19
argumentation is laden with the implication that DPW does not possess the
subcontracts in issue, whereas our analysis presumes that the Department does have
possession (since the standard contract requires submission of those contracts, and
neither DPW nor the MCOs asserted non-possession as this litigation evolved as a
basis for denying the relevant open-records requests).
Second, since the Legislature did not choose to address disclosure of records
pertaining to Medicaid disbursements on specific terms, it has fallen to the courts to
provide necessary clarification incrementally through the decisional law process. Cf.
SWB Yankees, 615 Pa. at 662-64, 45 A.3d at 1042-43 (elaborating upon the task of
construing a new statutory regime and making an inroad into development in a discrete
setting). It is not a satisfactory solution, in our view, to disregard the policy of liberal
interpretation of a remedial statute in favor of a bright-line rule which, while facilitating
ease of application, is plainly under-inclusive given the governing statute’s utilization of
language establishing a broader nexus.
(Ncontinued)
times, be open for examination and inspection by any citizen of the Commonwealth of
Pennsylvania.”) (repealed), with id. §67.701(a) (prescribing that “[u]nless otherwise
provided by law, a public record, legislative record or financial record shall be
accessible for inspection and duplication in accordance with this act,” without reference
to whether the record is “of an agency”). Notably, the Law’s definition of “public record”
contains an of-an-agency delimiter, see id. §67.102, but the definition of “financial
record” – which is specifically and independently referenced in the Law’s core access
provision (i.e. Section 701) – does not include such element, see id.
It is not necessary to the resolution of these appeals to consider whether this omission
from the definition of “financial record” may have been by intention or oversight. In any
event, it is worth noting that Section 506(d)(2) of the RTKL places a limitation on
mandatory disclosure of third-party records, or at least those in possession of a third
party which has contracted with an agency. See id. §67.506(d)(2).
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We recognize that the policy considerations involved here are deeply mixed,
given the potential cost efficiencies which may be available to the government through
access to the managed care industry, as well as the substantial proof of impact of MCO-
Rate disclosure upon that industry’s business practices. Indeed, given the significance
of the Medicaid program including its vast budgetary impact, the law would certainly
benefit from a directed assessment by the General Assembly, bringing to bear its
superior policymaking resources to determine the appropriate parameters of open-
records disclosure in the Medicaid arena,11 rather than continuing to channel the inquiry
through highly-generalized open-records provisions. Nevertheless, in the absence of
such a legislative evaluation, we are simply unable to conclude that records which must
be submitted to a government agency for approval, and which embody a delegation
(albeit a downstream delegation) of a governmental function of the agency, are not
records “dealing with” the agency’s monetary disbursements and services acquisitions.
See 65 P.S. §67.102.
With regard to such financial records, it is essentially undisputed that Section
708(c) renders the Law’s own internal trade-secrets/confidential-proprietary-information
exception inapplicable. See 65 P.S. §67.708(c) (establishing, as a general rule, that
“[t]he exceptions set forth in subsection (b),” including the trade-secrets/confidential-
proprietary-information exception, “shall not apply to financial records”). Accordingly,
the sole remaining issue is whether the Uniform Trade Secrets Act protects the financial
records containing the MCO Rates from disclosure.
11
See generally Official Comm. of Unsecured Creditors of Allegheny Health Educ. &
Research Found. v. PriceWaterhouseCoopers, LLP, 605 Pa. 269, 301–02 & n.27, 989
A.2d 313, 332–33 & n.27 (2010) (referencing the General Assembly's capabilities for
information-gathering, debate, and deliberation and explaining that, “[u]nlike the
legislative process, the adjudicatory process is structured to cast a narrow focus on
matters framed by litigants before the Court in a highly directed fashion”).
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Initially, we observe that contractual payment rates are not a close fit with the
concept of a “trade secret,” as it is substantially debatable whether such rates are in the
nature of a “formula, drawing, pattern, compilation including a customer list, program,
device, method, technique or process.” See 12 P.S. §5302. Perhaps for this reason,
the majority of the MCOs do not advance the trade-secrets theory, but rather, confine
their position to the more comfortable proposition that the rates are confidential
proprietary information.12
In any event, we agree with Judge McCullough that the Law’s self-contained
trade-secrets exception supplants the more general application of the Uniform Trade
Secrets Act based, inter alia, on the principle of statutory construction that more specific
provisions control over general ones. See 1 Pa.C.S. §1933 (prescribing that a special
provision in a statute “shall prevail and shall be construed as an exception to the
general provision, unless the general provision shall be enacted later and it shall be the
manifest intention of the General Assembly that such general provision shall prevail.”).
In this regard, it seems unlikely that the Legislature would have specifically withheld
trade-secrets protection relative to financial records within the four corners of the Law
on the theory that such protection persists under another statutory regime. Rather, if
the General Assembly wished for dissemination to be withheld, it would have been a
straightforward matter to provide for redaction of trade-secrets information in Section
708(c) of the Law, as was done in relation to eight of the other openness exceptions
which are otherwise withheld from financial records. See 65 P.S. §67.708(c). Although
12
As noted, however, confidential proprietary information within financial records is
subject to public disclosure under the Law. See 65 P.S. §67.708(c). Further, the MCOs
have not identified any independent statutory scheme which might otherwise protect
“confidential proprietary information” as such.
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the RTKL does generally recognize the primacy of other laws, see 65 P.S. §§67.306,
67.3101.1, it is our considered judgment that the Law’s own express and specific
treatment of trade secrets should control in this instance. Accord 1 Pa.C.S. §1933.13
In terms of the discussion of the Lukes decision, we do not find it useful to
consider the downstream point at which public funding transforms into private monies.
Rather, our focus remains upon our conclusion that records which were required to be
submitted to and approved by DPW, and which reflect the central means of
implementing a core departmental function, are records “dealing with” DPW’s
disbursement of public monies and its responsibility to afford access to healthcare
services in furtherance of the public interest. Cf. SWB Yankees, 615 Pa. at 665 n.19,
45 A.3d at 1044 n.19 (“Particularly in the context of a government agency’s wholesale
delegation of its own core governmental function to another entity, we find that a
reasonably broad perspective concerning what comprises transactions and activities of
the agency should be applied.”).
The order of the Commonwealth Court is reversed relative to the MCO Rates,
and the matter is remanded for further proceedings consistent with this opinion.
Mr. Justice Baer, Madame Justice Todd and Mr. Justice Stevens join the opinion.
Mr. Justice Eakin files a dissenting opinion.
13
Moreover, if we were to hold that Sections 306 and 3101.1 of the Law prevented
dissemination of public records containing trade secrets, via application of the Uniform
Trade Secrets Act, the trade-secrets aspect of the exception in Section 67.708(b)(11)
would be rendered into a mere redundancy. Such a holding, however, would
contravene the presumption that the Legislature does not fashion statutory prescriptions
as surplusage. See 1 Pa.C.S. §1921(a); Commonwealth v. Ostrosky, 589 Pa. 437, 450,
909 A.2d 1224, 1232 (2006).
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