FOI Advisory Opinion AO-01-13


January 7, 2013

Virginia Diamond, Esq.
Alexandria, Virginia

The staff of the Freedom of Information Advisory Council is authorized to issue advisory opinions. The ensuing staff advisory opinion is based solely upon the information presented in your electronic mail of November 8, 19 and 26, 2012 and your letter received December 6, 2012.

Dear Ms. Diamond:

You have asked whether certain audited financial statements provided to the Department of Medical Assistance Services (DMAS) are subject to disclosure under the Virginia Freedom of Information Act (FOIA). You stated that your client requested the audited financial statements of four nursing home providers that were submitted to DMAS as required by regulation. My understanding is that the regulation at issue, 12 VAC 30-90-70, requires providers to submit cost reports, including audited financial statements, balance sheets, and other financial records, in order to receive reimbursement from Medicaid. DMAS provided the requested records for three of the four nursing facilities, but denied the request for the fourth provider's records. It appears that the fourth provider had marked the records "proprietary and confidential," whereas the other three had not so marked their submissions. Your client protested the denial of her request as to the fourth provider's records. Over the course of several months, it appears that DMAS has continued to deny that portion of the request, but has cited three different exemptions as justification for the denial. Each of the cited exemptions will be considered in turn below. Additional facts will be presented as necessary.

The policy of FOIA expressed in § 2.2-3700 is to ensure the people of the Commonwealth ready access to public records in the custody of a public body or its officers and employees. To achieve that end, the policy further states that FOIA

shall be liberally construed to promote an increased awareness by all persons of governmental activities and afford every opportunity to citizens to witness the operations of government. Any exemption from public access to records or meetings shall be narrowly construed and no record shall be withheld or meeting closed to the public unless specifically made exempt pursuant to this chapter or other specific provision of law.

In regard to public records, this policy is given practical effect by the procedural requirements of § 2.2-3704. Subsection A of that section provides that [e]xcept as otherwise specifically provided by law, all public records shall be open to inspection and copying by any citizens of the Commonwealth during the regular office hours of the custodian of such records. Subdivisions B 1 and B 2 of the same section require that if records are withheld in whole or in part, then the custodian of records must respond in writing and cite, as to each category of withheld records, the specific Code section that authorizes the withholding of the records.

In this instance, DMAS cited three different Code sections at different times as exemptions for the audited financial statements you requested: first § 2.2-4342, then subdivision 8 of § 2.2-3705.6, and finally subdivision 3 of § 2.2-3705.6. The first Code section cited, § 2.2-4342, is a provision of the Virginia Public Procurement Act that concerns the release of records in a procurement transaction. Among other provisions, subsection F of § 2.2-4342 provides a mechanism to protect certain trade secrets and proprietary information in a procurement transaction:

Trade secrets or proprietary information submitted by a bidder, offeror or contractor in connection with a procurement transaction or prequalification application submitted pursuant to subsection B of § 2.2-4317 shall not be subject to the Virginia Freedom of Information Act (§ 2.2-3700 et seq.); however, the bidder, offeror or contractor shall (i) invoke the protections of this section prior to or upon submission of the data or other materials, (ii) identify the data or other materials to be protected, and (iii) state the reasons why protection is necessary.

Your client protested the use of this exemption, as the requested records were submitted as a matter of regulatory compliance in order to receive Medicaid reimbursement, not as records of a bidder, offeror, or contractor involved in a procurement transaction. Giving heed to the narrow construction rule quoted above, your client is correct that the audited financial records at issue would not be exempt from disclosure under § 2.2-4342.1 Based on the documents you provided, it appears that DMAS continued to deny your client's request but discontinued its reliance upon § 2.2-4342. DMAS did not explicitly state that it was doing so, but instead simply cited subdivision 8 of § 2.2-3705.6 as its next basis for denial.

Turning to the next exemption cited by DMAS, subdivision 8 of § 2.2-3705.6 provides an exemption from mandatory disclosure for [c]onfidential proprietary information furnished to the Board of Medical Assistance Services or the Medicaid Prior Authorization Advisory Committee pursuant to Article 4 (§ 32.1-331.12 et seq.) of Chapter 10 of Title 32.1. While it appears that DMAS subsequently discontinued its reliance on this exemption, it is worth addressing in order to clarify any potential confusion that may occur in the future. In a reply to your client, DMAS asserted that the limiting clause of this exemption - pursuant to Article 4 (§ 32.1-331.12 et seq.) of Chapter 10 of Title 32.1 - would only apply to records provided to the Medicaid Prior Authorization Advisory Committee (the Committee), and would not apply to the Board of Medical Assistance Services (the Board), based on construing the word "or" to divide the exemption into two distinct provisions. This construction would mean that the "or" in this exemption effectively creates two exemptions: (1) a general exemption for all [c]onfidential proprietary information furnished to the [Board], and (2) a more narrow exemption for[c]onfidential proprietary information furnished to ... the [Committee] pursuant to Article 4 (§ 32.1-331.12 et seq.) of Chapter 10 of Title 32.1. As previously opined by this office,2 according to rules of statutory construction, in the absence of a statutory definition, a statutory term is considered to have its ordinary meaning, given the context in which it is used.3 Generally, "or" is disjunctive, meaning that it presents two or more alternatives. Rules of statutory construction also state that whenever it is necessary to effectuate the obvious intention of the legislature, "or" may be construed to mean "and." However, this interpretation may only be applied where the context, other provisions of the statute, or former laws relating to the same subject indicates that such usage was the legislative intent.4 In this case, we must be guided by the principles of construction set forth in § 2.2-3700. Accepting the construction offered by DMAS would effectively provide a broad exemption for all proprietary records submitted to the Board, as well as a narrower exemption for records submitted to the Committee, by construing the limiting clause as applying only to records submitted to the Committee. In the alternative, the "or" could be construed as a conjunctive, in which case the limiting clause would apply to records submitted both to the Board as well as to the Committee. The latter interpretation is the narrower construction of the exemption, which comports with the guidance set forth in § 2.2-3700. The construction asserted by DMAS would give the exemption broader effect, further limiting access to public records, contrary to the policy and rules of construction of FOIA. Therefore we must recommend the narrower construction, applying the term "or" in the conjunctive so that the limiting clause applies to records submitted to the Board as well as to records submitted to the Committee.

Applying the narrower construction to this exemption, it would then only apply to confidential proprietary information furnished [either to the Board or to the Committee] pursuant to Article 4 (§ 32.1-331.12 et seq.) of Chapter 10 of Title 32.1. Article 4 of Chapter 10 of Title 32.1 of the Code establishes the Committee, sets forth its duties, and provides for the prior authorization of prescription drug products and coverage under the state plan. It appears that the Committee makes recommendations to the Board, and therefore either or both entities might have relevant records. Regarding records, subsection D of § 32.1-331.15 provides as follows:

Confidential proprietary information identified as such by a manufacturer or supplier in writing in advance and furnished to the Committee or the Board pursuant to this article shall not be subject to the disclosure requirements of the Virginia Freedom of Information Act (§ 2.2-3700 et seq.). The Board shall establish by regulation the means by which such confidential proprietary information shall be protected.

This appears to be the only relevant provision of Article 4 of Chapter 10 of Title 32.1 that corresponds to the exemption provided in subdivision 8 of § 2.2-3705.6. Again applying the narrow construction rule, it appears that this exemption therefore covers certain information provided by certain manufacturers or suppliers of prescription drugs to either the Committee, the Board, or both. It does not provide an exemption for audited financial records of a nursing home provider submitted to receive reimbursement under Medicaid as required by regulation. Based on a letter from DMAS' counsel, it appears that DMAS recognized that this exemption would not apply in this instance and no longer relies upon this exemption in denying your request for records.

Most recently, DMAS has asserted through counsel that the requested records are exempt pursuant to subdivision 3 of § 2.2-3705.6, which exempts from mandatory disclosure the following records:

Confidential proprietary records, voluntarily provided by private business pursuant to a promise of confidentiality from a public body, used by the public body for business, trade and tourism development or retention; and memoranda, working papers or other records related to businesses that are considering locating or expanding in Virginia, prepared by a public body, where competition or bargaining is involved and where, if such records are made public, the financial interest of the public body would be adversely affected.

Generally speaking, this exemption was enacted to promote economic development and retention. It has two distinct clauses separated by a semi-colon. The first addresses records voluntarily submitted to a public body by a private business, and the second concerns records prepared by the public body itself. In this instance we need only consider the first clause, as the records at issue were submitted by the nursing home provider, not prepared by DMAS. Considering the first clause, the question is then whether audited financial statements submitted by a nursing home provider to DMAS are [c]onfidential proprietary records, voluntarily provided by private business pursuant to a promise of confidentiality from a public body, used by the public body for business, trade and tourism development or retention. DMAS' counsel asserted in a letter that the records in question are confidential proprietary records that [the nursing home provider] provided to DMAS for business purposes pursuant to a promise of confidentiality. This language largely tracks the language of the exemption, and leaves only the question of whether the records are or were used by the public body for business, trade and tourism development or retention. It appears that DMAS asserts that the records were provided for business purposes and therefore would answer that question in the affirmative. However, that question would appear to be answered in the negative based on the facts you have presented: the records were submitted as required by regulation in order to receive Medicaid reimbursement, not used for business, trade, or tourism development or retention. Given the facts as you have described them, we must respectfully disagree with DMAS' assertion that these records are exempt pursuant to subdivision 3 of § 2.2-3705.6, as it appears the records were submitted as required for regulatory compliance, not for business development or retention. However, to the extent there is any factual dispute, only a court has the authority to resolve it.

Finally, I would note that while research did not reveal any published opinions directly on point, dicta from a prior Virginia Supreme Court case concerning the same type of records states that

According to the evidence, the State Health Department considers the cost report files...accessible to almost "everyone in the Division of Provider Reimbursement and any member of the public who requests access to them under the Freedom of Information Act." 5

[Quotations in original.] Considering this dicta and noting that DMAS released the same type of records from three other nursing home providers, it would appear that the real issue here is that the withheld records were marked "proprietary and confidential" by the provider who submitted them. As previously opined by this office, what matters for FOIA purposes is whether there is a legal exemption and whether the contents of the record in question are in fact subject to that exemption. Whether a record is marked "confidential" or "privileged" or otherwise does not make it exempt. A record is only exempt if there is an exemption specifically provided by law.6 Marking a record as "proprietary and confidential" may serve as notice that the record might be exempt, but absent a specific provision of law that allows the record to be withheld, it must be disclosed regardless of any such markings.

Thank you for contacting this office. I hope that I have been of assistance.


Maria J.K. Everett
Executive Director

1. Further, observe that - although not cited by DMAS in this case - subdivision 10 of § 2.2-3705.6 directly references the Virginia Public Procurement Act and exempts from mandatory disclosure [c]onfidential information designated as provided in subsection F of § 2.2-4342 as trade secrets or proprietary information by any person who has submitted to a public body an application for prequalification to bid on public construction projects in accordance with subsection B of § 2.2-4317. Similarly, subdivision 11 of § 2.2-3705.6 exempts certain records involved in procurement transactions under the Public-Private Transportation Act of 1995 (§ 56-556 et seq.) or the Public Private Education Facilities and Infrastructure Act of 2002 (§ 56-575.1 et seq.). In addition, subdivision 12 of § 2.2-3705.1 provides an exemption for certain records involved in the negotiation and award of specific contracts, but explicitly excludes records that are part of procurement transactions conducted pursuant to the Virginia Public Procurement Act. Considering all of these provisions together it is clear that the General Assembly has provided distinct exemptions for these various types of contractual and procurement records, each of which applies to specific types of transactions, and none of which would apply to the audited financial statements under consideration here.
2. Freedom of Information Advisory Opinion 12 (2002).
3. Commonwealth Department of Taxation v. Orange-Madison Coop. Farm Service, 220 VA 655, 261 S.E. 2d 532 (1980), 1991 Op. Atty. Gen. Va. 140, 1988 Op. Atty. Gen. Va. 413, 1986-1987 Op. Atty. Gen. Va. 174; see generally Norman J. Singer, Statutes and Statutory Construction, 6th ed., §46:01.
4. See South East Pub. Service Corp. v. Commonwealth, 165 VA 116, 181 S.E. 448 (1935), Industrial Dev. Auth. v. LaFrance Cleaners & Laundry Corp., 216 VA 277, 217 S.E. 2d 879 (1975), Patterson v. Commonwealth, 216 VA 306, 218 S.E. 2d 435 (1975).
5. Commonwealth v. Edwards, 235 Va. 499, 508, 370 S.E.2d 296, 301 (1988).
6. Freedom of Information Advisory Opinion 04 (2011).