Rick Scott's conflict of interest, part 2

From the Palm Beach Post

by Tracey Singer

As Florida Gov. Rick Scott reorganizes health agencies, cuts spending and pushes for new free-market health policies, his ownership of Solantic, the urgent care chain, increasingly poses conflict of interest questions.

Solantic co-founder Karen Bowling says Scott has taken steps to distance himself from the chain. He stopped regular business calls with her after he was elected.

"I don't talk to him anymore. Not since November. Really not much since April," Bowling said.

Scott left the privately held company's board of directors in January 2010, during his campaign.

But the most important step the governor must take to avoid a conflict of interest, some ethics experts say, is to divest his Solantic interests.

In January, Scott did transfer his Solantic stock - to his wife.

"The controlling investor in Solantic is the Frances Annette Scott Revocable Trust," Bowling said.

Solantic's new chairman, as of last month, is retired Columbia/HCA executive Charles Evans. Evans said he is the Scott trust's representative.

"I have no communication with them at all," Evans said.

Scott's efforts to distance himself appear to be designed to meet the letter of Florida ethics laws, if not the spirit.

They may not succeed if challenged, warned legal and ethics expert Marc Rodwin, a law professor at Suffolk University who is the author of several books on health care and conflicts of interest.

"Placing his ownership in the name of his wife is not an effective way to control for conflicts of interest and not generally accepted because they are personally related," Rodwin said.

Rodwin said Scott's blindness to Solantic's daily business decisions likewise does not relieve his conflict.

"His family still benefits from it," he said.

Ethics law poses issues

Soon after Scott was elected, three lawyers from his transition team paid visits to the Florida Commission on Ethics.

Those making the trips on Dec. 7, 10 and 16 included Enu Mainigi, a Washington corporate defense lawyer and partner with Williams and Connolly, who headed Scott's transition team; another Williams and Connolly partner, corporate structure specialist James Fuller; and Richard Coates, a Tallahassee ethics lawyer.

No written documents exist from those meetings, said Kerrie Stillman, spokeswoman for the Florida Commission on Ethics. She had no information about the conversations.

However, two key parts of Florida's ethics law could pose issues, Stillman said: One says a government official cannot work for or have a contractual relationship with an entity that does business (directly or indirectly) with, or is regulated by, their government agency.

The other prohibits government officials from having a job or contractual relationships that "present a continuing or recurring conflict."

Scott's Solantic ownership, through his wife's trust, would appear to push up against those laws in multiple ways:

Solantic is regulated by the state. The Agency for Health Care Administration licenses clinics. It also administers Medicaid, the insurance safety net for the poor. The Department of Health licenses doctors and nurses. The governor appoints both agencies' secretaries.

Solantic also is an indirect recipient of state Medicaid money. While Solantic doesn't accept Medicaid, it does accept private Medicaid HMOs, which contract with the state.

Wouldn't that make Solantic an indirect state contractor?

Not necessarily.

"Subcontractor type relationships generally fall outside of the 'doing business' prohibition," Stillman said.

Scott may also have protected himself by shifting his ownership to his wife.

The "doing business" prohibition applies only to government officials, not their spouses, Stillman said.

Contacted six times for this story, Scott's press office had no comment.

Additional clinics planned

Scott founded the Jacksonville-based urgent care chain in 2001, four years after he resigned as CEO of Columbia/HCA amid a federal billing fraud investigation. Columbia/HCA ultimately agreed to the nation's largest Medicare fraud settlement, a $1.7 billion criminal and civil penalty.

Although the company had admitted to criminal wrongdoing, Scott himself was never charged, and he has denied knowledge of the illegal activities.

Scott left Columbia/HCA with more than $5 million in severance and $300 million worth of stock and options. His wealth enabled him to provide Solantic's start-up capital, and to spend more than $70 million campaigning for governor.

Bowling, an ex-Columbia/HCA marketing executive and former news anchor, said she and Scott first explored urgent care centers while at Columbia/HCA.

"How do you apply retail concepts to urgent care?" Bowling said. Bowling believed the duo could create the Starbucks or Dunkin' Donuts of health care, and Scott thought she was right.

"He is all about giving people chances," she said. "Rick is just great to talk to. He doesn't think you have to have done something before to do something well."

Solantic created fast-food style price boards in their lobby, with a very simple, three-tiered price list that hid no surprises.

Scott said in 2006 that Solantic would expand to at least 1,000 locations and become a publicly traded company.

In 2007, New York-based private equity firm Welsh, Carson, Anderson & Stowe pledged a $100 million stake in the business .

Welsh Carson partner Thomas Scully, a Bush-era administrator of the Centers for Medicare and Medicaid Services, took a seat on Solantic's board alongside Scott.

Today the company has 32 clinics, down from 34. Two Walmart-based clinics have closed.

"Four hundred square feet just did not provide enough volume," Bowling said.

A clinic at Orlando's airport, meanwhile, is going strong, handling the airport's workers compensation business.

In Palm Beach County, Solantic has two clinics. One, a joint venture with Bethesda Memorial Hospital, is on Congress Avenue in Boynton Beach, in front of a Super Target. The other, a joint venture with Tenet, owner of St. Mary's and Good Samaritan medical centers, is on Okeechobee Road. Bowling wants to add more.

"The goal is to open between seven and 12 this year, focused in Central and South Florida," Bowling said.

Much of Solantic's business comes from people who pay cash. They may be people with high-deductible insurance or no insurance. Some of those patients receive care from the seven public clinics in Palm Beach County now operated by the Florida Department of Health.

Policy can dictate profit

From the moment he was elected, Scott has said government has no business providing primary care.

His budget proposal eliminated state support for the clinics. The county's health department director warns that may leave 30,000 adults without a medical home.

Scott's decisions as governor are likely to affect Solantic in other, perhaps more significant ways.

Scott's budget would curb growth in Medicaid spending, the state-federal safety net insurance program, by requiring most recipients to join private HMOs. Solantic accepts Medicaid HMO reimbursements, but not state Medicaid, so adding clients could broaden the clinics' customer base.

But the greatest benefit for Solantic could come from Scott and other Republican governors' lobbying efforts in Washington.

They want the Obama administration to give states waivers from the Affordable Care Act, and provide them with a massive block grant to expand health coverage in the way they deem best for their states. Money slated to go to business' health insurance tax credits and lower income consumers' insurance subsidies could pay for the grants - to the tune of billions.

Obama has said he's willing to give the states waivers on a speeded-up timetable. His administration Thursday published new rules on how states could get that waiver.

Scott's health policy adviser Michael Cannon, an economist with the Cato Institute in Washington, favors giving consumers health vouchers that they would use either as cash for direct-pay medical care or to buy insurance.

The possible effect on Solantic and similar clinics could be huge, said Rodwin, the legal ethics expert.

"You have a major owner-operator of a set of clinics on the state level, and a major policy figure on a state level, making major changes that affect whether that kind of business will thrive or not, what their competition will be, and really reforming the whole health sector," Rodwin said. "That's in my view a very dangerous role."

It will be up to the Florida Commission on Ethics to decide whether Scott has a conflict of interest.

The commission has nine members. Five are gubernatorial appointees. None is a Scott appointee, but there is one vacancy that Scott may soon fill. Others will open this summer.

Bowling said Floridians can count on Scott to do the right thing. His push to privatize government-provided health is born of deep personal conviction, not out of any designs to benefit Solantic, she said.

"I know him so well. Do I think he would ever make a decision because it would help us? Absolutely not," she said. "He didn't work so hard to become governor to do that."

http://www.palmbeachpost.com/money/gov-scott-shifting-clinics-to-his-wife-raises-1317326.html?page=4