Medicaid • Trade Secrets • Confidential Proprietary Information • Open Records

Commonwealth v. Eiseman, PICS Case No. 14-0327 (Pa. Commw. Feb. 19, 2014) Simpson, J. (44 pages).

The Office of Open Records ordered disclosure of rates set by contracts related to the DPW’s administration of the Medicaid program. DPW asserted the rates were exempt under the Pennsylvania Uniform Trade Secrets Act, which protects confidential proprietary information and trade secrets. Five managed care organizations submitted evidence as direct interest participants. The OOR ruled against the exemptions. OOR’s determination requiring disclosure of the capitation rates is affirmed and OOR’s determination as to the MCO rates is reversed.

In Southeast Pennsylvania DPW operates Medicaid through the HealthChoices program, contracting with five MCOs to provide services to program recipients. MCOs provide dental care by subcontracting. Four of the five MCOs use the same subcontractor. DPW does not negotiate rates for dental services or set parameters for such rates. A public interest law center requested documents relating to “any rate of payment” that DPW pays to provide Medicaid coverage to recipients in Southeastern Pennsylvania (capitation rates) and documents showing the amount DPW pays to provide dental services to Medicaid recipients under 21 years of age (MCO rates). DPW denied the request because the MCOs asserted that the records are exempt as confidential proprietary and trade secrets.

The requester appealed to OOR and OOR permitted the MCOs to participate and authorized a hearing. At the hearing the MCO witnesses emphasized the confidentiality of the MCO rates both in their maintenance and in confidentiality provisions of their upstream agreement with DPW and their downstream agreements with their subcontractors. The direct interest participants and the DPW appealed.

The MCOs variously argued that the OOR erred when it relied on Lukes, that capitation rates and the MCO rates are exempt under the Trade Secrets Act, that the MCO rates are protected confidential proprietary information under §708(b)(11) of the RTKL and that the Trade Secrets Act should be applied separately from the exception in § 708(b)(11). The DPW argued that OOR erred in failing to analyze the trade secrets exception in the RTKL separately from the Trade Secrets Act and ignored the potential economic value of the capitation rates. The requester argued that Lukes compelled disclosure, that the documents constitute financial records as defined in the RTKL and that the neither the Trade Secrets Act nor §708(b)(11) protected the rates at issue.

There was no dispute that the capitation rates were in DPW’s possession and that DPW had access to the MCO rates. The OOR correctly concluded that the capitation rates were financial records as defined by §102 of the RTKL. Section 708(c) of the RTKL provides that the exceptions in subsection 708(b) do not apply to financial records. Thus, information cannot be redacted from financial records based on the trade secrets and confidential proprietary exception in the RTKL. However, the OOR erred in addressing trade secrets as a RTKL exception only, while discounting the statutory basis for protection in the Trade Secrets Act. OOR also erred in relying on Lukes, due to the substantial differences between the current RTKL and the prior law. The OOR should have applied the Trade Secrets Act as a separate statutory defense.

To the extent that the capitation rates constituted trade secrets, that information could be redacted in accordance with the Trade Secrets Act. However, the record in this case clearly showed that no party proved that the capitation rates constituted trade secrets and no statute established their protected nature. The OOR decision as to the capitation rates was affirmed, although on different grounds.