This article has been expanded to incorporate additional reporting.
As Gov. Tina Kotek’s first pick to lead the Oregon Health Authority prepares to step down on March 17 after just two months, a newly released record provided a hint of how complicated James Schroeder’s job was about to become.
On March 2, the same day that Schroeder submitted his resignation to Kotek citing a desire to focus on his family, the Oregon Government Ethics Commission sent him a formal advice letter saying his previous job constituted a conflict of interest and signaling that, for the remainder of 2023, steps would need to be taken to separate him from aspects of one of the biggest parts of his job: overseeing the Oregon Health Plan that provides care for about one in three Oregonians.
Schroeder met with commission staff multiple times before the letter was drafted, a health authority spokesperson confirmed. But acquaintances of Schroeder told The Lund Report that given his dedication to public service, the commission's legal concerns were unlikely to have played a major role in his decision.
Asked if the ethics advice played any role whatsoever in Schroeder’s decision to step down, the spokesperson replied that “Interim Director Schroeder’s resignation was based on the personal issues he cited at the time and these recommendations did not result in his decision to leave the Oregon Health Authority.”
That said, the opinion could complicate the job of finding a replacement for Schroeder — in-state, at least. Before accepting his state job, he had headed Health Share of Oregon, the regional insurer contracted by the health authority to serve low-income Oregon Health Plan members in Clackamas, Multnomah and Washington counties. It’s one of 16 such insurers, known as coordinated care organizations or CCOs.
The experience that made Schroeder so qualified for the job also meant problems due to a little known wrinkle in Oregon’s ethics law — one that only applies to the heads of certain state agencies. It meant that anytime he was expected to make a recommendation or take any action that could affect Health Share, he’d have to instead ask the governor’s office to make the decision or assign it to someone else. “You will be met with a conflict of interest any time you make a decision or recommendation, or take action, that would or could financially impact (positively or negatively) Health Share,” the letter said
Not only that, but any decision or action he took that led to a positive financial impact on Health Share could violate state ethics law as a “prohibited use of office” — even if the action affected all coordinated care organizations, not just Health Share.
Normally, leaving a job for state service doesn’t present such problems. But the implications of the ethics opinion for Schroeder were particularly significant — and it could make it less appealing to hire another coordinated care organization executive for the job, one health care insider said on condition of anonymity. "It seems like you just conflicted out the majority of people in the state competent enough to run the agency," they said.
In any event, the advice likely would have complicated Schroeder's duties, several lawyers with ethics-law expertise told The Lund Report.
“Under this guidance, in the year following employment with a CCO, the person would have to recuse themselves from decisions and actions affecting CCOs,” said Robert Steringer, a prominent ethics lawyer who works in the Portland office of Harrang Long PC.
And the issues extended beyond just decisions or actions. Even talking to lawmakers could get complicated.
“Based on the ethics guidance provided by the commission, if I had received income from a CCO in the prior year, I would think carefully before testifying to the Legislature about any issues relating to CCOs,” Steringer said.
Past Oregon Health Authority directors have been hired from health care providers without facing issues like Schroeder did. And normally, a former employer doesn't represent a conflict. Under state ethics law, it does so only for certain agency directors that have to file a statement of economic interest listing income from the previous calendar year.
Lawyers and government insiders interviewed by The Lund Report for this story expressed surprise at the commission's advice to Schroeder.
Some aspects of the advice Schroeder received seemed more solvable than others, they said. Medicaid decisions could be delegated to Medicaid Director Dana Hittle, for example. But, significantly, the prohibited use of office statute does not require any specific intent to benefit a business like Health Share that's considered affiliated with the official, and it applies even if the benefit enjoyed by Health Share is applied to all coordinated care organizations, not just Health Share, lawyers said.
In an interview shortly after taking the job, Schroeder said he would work through potential conflicts of interest and indicated that he would continue to work closely with coordinated care organizations, including Health Share.
“As far as how I work with Health Share, I have positive relationships with people there. And we need Health Share to be successful for all of the (initiatives) that we just talked about to be successful. So, I hope to continue to work collaboratively with them to achieve the goals that we talked about. At the same time, we need outcomes from them just like anybody else.”
On Feb. 15, he sent a letter to the state ethics commission saying he’d been directed to secure a letter stating he did not have any conflict of interest based on his past employment.
The letter, when it arrived, came to the opposite conclusion.
In the wake of Schroeder's resignation, Kotek announced a national search for his replacement.
A spokesperson for the governor’s office declined to say whether the ethics commission opinion was expected, and instead shared a statement.
“The Governor’s office encouraged Interim Director Schroeder to reach out for guidance from the Oregon Government Ethics Commission based on his range of professional experience. We do not believe this letter contributed to his not seeking the permanent position.”
The health authority spokesperson, Communications Director Robb Cowie, wrote that, “Any potential conflict of interest is evaluated based on the specific circumstances of the situation and is handled on a case-by-case basis. OHA has been led by people with expertise and experience in a range of health-related fields. The director is expected to have strong relationships with coordinated care organizations, providers, community-based organizations, local health departments and many other partners – and to live up to the highest ethical standards. Interim Director Schroeder’s actions in this situation were consistent with those expectations.”
Asked how the ethics finding might complicate other hires with similar backgrounds, Cowie added, “This ethics guidance was specific to Interim Director Schroeder’s prior role at Health Share... Again, each conflict of interest situation depends on the facts, issues and financial considerations involved. Recusal is an appropriate way for a director to continue to fulfill his or her broader duties in the agency, while avoiding more narrow conflicts in specific circumstances. We can’t speculate on any hypothetical cases beyond this guidance.”
You can reach Nick Budnick at [email protected] or at @NickBudnick on Twitter.
Interested in learning if this might mean that a local official moves to a state job where the state agency has some influence on the local government entity might have a similar problem. For instance, a county health director moves to a state health role that has influence over county health departments or a city police chief becomes a state agency official in a role with influence over local police agencies.
I don't think so. The statute prohibiting using your position to benefit you, family members or an associated business applies only to businesses, not agencies. More importantly, the conflict does not apply to most people leaving a job for the state if they are no longer receiving income from their old employer. The exception: heads of certain agencies, listed in ORS 244.050, because they file disclosures that list sources of income from the previous calendar year. Under Oregon law, those listed businesses count as conflicts until the following year.