AN ACT Relating to health planning and resources development; amending RCW 18.120.040, 48.46.170, 70.39.120, 70.39.130, 70.39.150, 74.46.290, 74.46.410, 74.46.660, and 74.46.680; reenacting and amending RCW 70.37.050 and 70.39.070; repealing RCW 70.38.015, 70.38.025, 70.38.035, 70.38.045, 70.38.055, 70.38.065, 70.38.085, 70.38.095, 70.38.105, 70.38.111, 70.38.115, 70.38.125, 70.38.135, 70.38.145, 70.38.155, 70.38.156, 70.38.157, 70.38.905, 70.38.910, 70.38.911, 70.38.914, 70.38.915, 70.38.916, 70.38.920, and 70.126.050; providing an effective date; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The following acts or parts of acts are each repealed:

(1) Section 1, chapter 161, Laws of 1979 ex. sess., section 1, chapter 139, Laws of 1980, section 1, chapter 235, Laws of 1983 and RCW 70.38.015;

(2) Section 2, chapter 161, Laws of 1979 ex. sess., section 2, chapter 139, Laws of 1980, section 1, chapter 119, Laws of 1982, section 2, chapter 235, Laws of 1983, section 43, chapter 41, Laws of 1983 1st ex. sess. and RCW 70.38.025;

(3) Section 3, chapter 161, Laws of 1979 ex. sess., section 3, chapter 235, Laws of 1983 and RCW 70.38.035;

(4) Section 4, chapter 161, Laws of 1979 ex. sess., section 3, chapter 139, Laws of 1980, section 4, chapter 235, Laws of 1983 and RCW 70.38.045;

(5) Section 5, chapter 161, Laws of 1979 ex. sess., section 4, chapter 139, Laws of 1980 and RCW 70.38.055;

(6) Section 6, chapter 161, Laws of 1979 ex. sess., section 5, chapter 139, Laws of 1980, section 5, chapter 235, Laws of 1983 and RCW 70.38.065;

(7) Section 8, chapter 161, Laws of 1979 ex. sess., section 6, chapter 139, Laws of 1980, section 6, chapter 235, Laws of 1983 and RCW 70.38.085;

(8) Section 9, chapter 161, Laws of 1979 ex. sess. and RCW 70.38.095;

(9) Section 10, chapter 161, Laws of 1979 ex. sess., section 7, chapter 139, Laws of 1980, section 2, chapter 119, Laws of 1982, section 7, chapter 235, Laws of 1983, section 21, chapter 288, Laws of 1984 and RCW 70.38.105;

(10) Section 9, chapter 139, Laws of 1980, section 3, chapter 119, Laws of 1982 and RCW 70.38.111;

(11) Section 11, chapter 161, Laws of 1979 ex. sess., section 8, chapter 139, Laws of 1980, section 8, chapter 235, Laws of 1983, section 22, chapter 288, Laws of 1984 and RCW 70.38.115;

(12) Section 12, chapter 161, Laws of 1979 ex. sess., section 10, chapter 139, Laws of 1980, section 9, chapter 235, Laws of 1983 and RCW 70.38.125;

(13) Section 13, chapter 161, Laws of 1979 ex. sess., section 10, chapter 235, Laws of 1983 and RCW 70.38.135;

(14) Section 14, chapter 161, Laws of 1979 ex. sess. and RCW 70.38.145;

(15) Section 15, chapter 161, Laws of 1979 ex. sess. and RCW 70.38.155;

(16) Section 11, chapter 139, Laws of 1980 and RCW 70.38.156;

(17) Section 11, chapter 235, Laws of 1983 and RCW 70.38.157;

(18) Section 16, chapter 161, Laws of 1979 ex. sess., section 12, chapter 235, Laws of 1983 and RCW 70.38.905;

(19) Section 17, chapter 161, Laws of 1979 ex. sess., section 13, chapter 235, Laws of 1983 and RCW 70.38.910;

(20) Section 12, chapter 139, Laws of 1980 and RCW 70.38.911;

(21) Section 14, chapter 235, Laws of 1983 and RCW 70.38.914;

(22) Section 19, chapter 161, Laws of 1979 ex. sess. and RCW 70.38.915;

(23) Section 14, chapter 139, Laws of 1980 and RCW 70.38.916;

(24) Section 22, chapter 161, Laws of 1979 ex. sess. and RCW 70.38.920; and

(25) Section 9, chapter 249, Laws of 1983 and RCW 70.126.050.

Sec. 2. Section 59, chapter 279, Laws of 1984 and RCW 18.120.040 are each amended to read as follows:

Applicant groups shall submit a written report explaining the factors enumerated in RCW 18.120.030 to the legislative committees of reference, copies of which shall be sent to the ((~~state health coordinating council and the~~)) department of licensing for review and comment. ((The state health coordinating council, in addition to the duties specified in RCW 70.38.065, shall make recommendations based on the report submitted by applicant groups to the extent requested by the legislative committees.))

Sec. 3. Section 18, chapter 290, Laws of 1975 1st ex. sess. as amended by section 7, chapter 106, Laws of 1983 and RCW 48.46.170 are each amended to read as follows:

(1) Solicitation of enrolled participants by a health maintenance organization granted a certificate of registration, or its agents or representatives, shall not be construed to violate any provision of law relating to solicitation or advertising by health professionals.

(2) Any health maintenance organization authorized under this chapter shall not be deemed to be violating any law prohibiting the practice by unlicensed persons of podiatry, chiropractic, dental hygiene, opticianary, dentistry, optometry, osteopathy, pharmacy, medicine and surgery, physical therapy, nursing, or psychology: PROVIDED, That this subsection shall not be construed to expand a health professional's scope of practice or to allow employees of a health maintenance organization to practice as a health professional unless licensed.

(3) Nothing contained in this chapter shall alter any statutory obligation, or rule or regulation promulgated thereunder, in chapter ((~~70.38 or~~)) 70.39 RCW.

(4) Any health maintenance organization receiving a certificate of registration pursuant to this chapter shall be exempt from the provisions of chapter 48.05 RCW, but shall be subject to chapter 70.39 RCW.

Sec. 4. Section 5, chapter 147, Laws of 1974 ex. sess. as last amended by section 171, chapter 167, Laws of 1983 and by section 2, chapter 210, Laws of 1983 and RCW 70.37.050 are each reenacted and amended to read as follows:

The authority shall establish rules concerning its exercise of the powers authorized by this chapter. The authority shall receive from applicants requests for the providing of bonds for financing of health care facilities and shall investigate and determine the need and the feasibility of providing such bonds. Whenever the authority deems it necessary or advisable for the benefit of the public health to provide financing for a health care facility, it shall adopt a financing plan therefor and shall declare the estimated cost thereof, as near as may be, including as part of such cost funds necessary for the expenses incurred in the financing as well as in the construction or purchase or other acquisition or in connection with the rental or other payment for the use thereof, interest during construction, reserve funds and any funds necessary for initial start-up costs, and shall issue and sell its bonds for the purposes of carrying out the proposed financing plan((: PROVIDED, That if a certificate of need is required for the proposed project, no such financing plan shall be adopted until such certificate has been issued pursuant to chapter 70.38 RCW by the secretary of the department of social and health services)). The authority shall have power as a part of such plan to create a special fund or funds for the purpose of defraying the cost of such project and for other projects of the same participant subsequently or at the same time approved by it and for their maintenance, improvement, reconstruction, remodeling and rehabilitation, into which special fund or funds it shall obligate and bind the participant to set aside and pay from the gross revenues of the project or from other sources an amount sufficient to pay the principal and interest of the bonds being issued, reserves and other requirements of the special fund and to issue and sell bonds payable as to both principal and interest out of such fund or funds relating to the project or projects of such participant.

Such bonds shall bear such date or dates, mature at such time or times, be in such denominations, be in such form, either coupon or registered, or both, as provided in RCW 39.46.030, carry such registration privileges, be made transferable, exchangeable, and interchangeable, be payable in such medium of payment, at such place or places, be subject to such terms of redemption, bear such fixed or variable rate or rates of interest, and be sold in such manner, at such price, as the authority shall determine. Such bonds shall be executed by the chairman, by either its duly elected secretary or its executive director, and by the trustee if the authority determines to utilize a trustee for the bonds. Execution of the bonds may be by manual or facsimile signature: PROVIDED, That at least one signature placed thereon shall be manually subscribed. Any interest coupons appurtenant to the bonds shall be executed by facsimile or manual signature or signatures, as the authority shall determine.

Sec. 5. Section 8, chapter 5, Laws of 1973 1st ex. sess. as amended by section 17, chapter 125, Laws of 1984 and by section 7, chapter 288, Laws of 1984 and RCW 70.39.070 are each reenacted and amended to read as follows:

In order to assist the commission in carrying out its duties, the governor shall appoint a technical advisory committee, hereinafter referred to as "committee", which shall consist of ((~~seventeen~~)) sixteen members as follows:

(1) One member who shall be a certified public accountant licensed pursuant to chapter 18.04 RCW and who shall be knowledgeable in the financial affairs of hospitals.

(2) Two members who shall be health care practitioners, one of whom shall be a physician, licensed under the laws of this state and who shall be knowledgeable in hospital administration.

(3) Six members who shall be representative of the interest of investor-owned, district, not-for-profit, osteopathic, university, and rural hospitals.

(4) One member who shall be representative of consumers of health care.

(5) One member who shall be the secretary of the department of social and health services, or the secretary's designee, to provide continuing liaison, data and support from those functions of the department which may affect the responsibilities of the commission and to represent the department as a purchaser of health care services.

(6) ((~~One member who shall be the executive director of the state health coordinating council established under RCW 70.38.055.~~

~~(7)~~)) One member of the commission, elected by the commission.

((~~(8)~~)) (7) One member who shall be representative of private employers.

((~~(9)~~)) (8) One member who shall be representative of commercial health insurers registered and doing business in the state under Title 48 RCW.

((~~(10)~~)) (9) One member who shall be representative of health care service contractors, as defined in RCW 48.44.010.

((~~(11)~~)) (10) One member who shall be representative of health maintenance organizations, as defined in RCW 48.46.030.

Except for the members designated in subsections (2), (3), ((~~(10)~~)) (9), and ((~~(11)~~)) (10) of this section, members of the committee shall not have any fiduciary obligation to any health care facility or any material financial interest in the provision of health care services.

With the exception of members designated in subsection((s)) (5) ((~~and (6)~~)) of this section, the members shall serve concurrently and shall have four-year terms. Any vacancy shall be filled by appointment by the governor and an appointee selected to fill such vacancy shall hold office for the balance of the term for which his predecessor was appointed. The committee shall elect from its members a chairman and a vice-chairman to serve concurrently with the chairman. The executive director of the commission shall act as executive secretary to the committee, and the commission shall otherwise offer such staff services and supplies as the committee may require to carry out its responsibilities.

The committee shall meet on call of the chairman of the commission, or on request of a majority of the commission. Members of the committee shall serve without compensation for their service as members but, except for those designated in subsection((s)) (5) ((~~and (6)~~)) of this section, shall be reimbursed for their expenses in the same manner as members of the commission.

Sec. 6. Section 13, chapter 5, Laws of 1973 1st ex. sess. as amended by section 12, chapter 288, Laws of 1984 and RCW 70.39.120 are each amended to read as follows:

(1) The commission shall from time to time undertake analyses and studies relating to the need for and delivery of health care services, the availability of such services, hospital rates, health care costs, and the financial status of any hospital or hospitals subject to the provisions of this chapter, and may publish and disseminate such information as it deems desirable in the public interest. ((It shall further publish information concerning the need for health care services identified by area-wide and state comprehensive health planning agencies under chapter 70.38 RCW and the extent to which such needs are being met.))

(2) The commission shall also prepare and file such summaries and compilations or other supplementary reports based on the information filed with the commission hereunder as will advance the purposes of this chapter.

(3) The commission shall furnish a copy of any report regarding any hospital to the chief executive officer of the hospital and the presiding officer of the hospital's governing body.

Sec. 7. Section 14, chapter 5, Laws of 1973 1st ex. sess. as last amended by section 13, chapter 288, Laws of 1984 and RCW 70.39.130 are each amended to read as follows:

The commission shall prepare and, prior to each legislative session beginning in January, transmit to the governor and to the legislature an annual report of commission operations and activities for the preceding fiscal year. This report shall include such findings and recommendations as the commission believes will further the legislative goal of cost containment in the delivery of good quality health care services, including cost-containment programs that have been or might be adopted, and issues of access to good quality care. The report shall also include data on the amount and proportion of charity care provided by each hospital. The commission's report for 1986, to be submitted in January 1987, shall include an analysis of the impacts of RCW 70.39.165 on (1) the use by indigent persons of health care settings other than hospitals and (2) the caseloads and costs associated with the limited casualty program for medical indigents under RCW 74.09.700. The department of social and health services ((~~and the health systems agencies established under chapter 70.38 RCW~~)) shall provide such information and assistance as the commission may reasonably require in preparing the report on the impact of RCW 70.39.165.

Sec. 8. Section 16, chapter 5, Laws of 1973 1st ex. sess. as last amended by section 18, chapter 288, Laws of 1984, and RCW 70.39.150 are each amended to read as follows:

To properly carry out its authority the commission shall:

(1) Compile and maintain all relevant financial, accounting, and patient discharge data in order to have available the statistical information necessary to properly conduct rate review and approval. Such data shall include necessary operating expenses, appropriate expenses incurred for charity care and for rendering services to patients who do not pay, all properly incurred interest charges, and reasonable depreciation expenses based on the expected useful life of the property and equipment involved. The commission shall define and prescribe by rule and regulation the types and classes of charges which cannot be changed except as provided by the procedure contained in RCW 70.39.160 and it shall also obtain from each such hospital a current rate schedule as well as any subsequent amendments or modifications of that schedule as it may require. So far as possible, the commission shall compile and maintain the same patient discharge data with respect to all patients as that required under the federal medicare program and the uniform billing procedures applicable to third-party payers.

(2) Permit any hospital subject to the provisions of this chapter to charge reasonable rates which will permit the hospital to render necessary, effective, and efficient service in the public interest.

(3) Take into account, in the determination of reasonable rates under this section, that it is its obligation to assure access to necessary, effective, economically viable, and efficient hospital health care capability throughout the state, rather than the solvency or profitability of any individual hospital subject to this chapter except where the insolvency of a hospital would seriously threaten the access of the rural public to basic health care services.

(4) ((Take into account, in the determination of reasonable rates under this section for each hospital, the recommendations of appropriate area-wide and state comprehensive health planning agencies to ensure compliance with Washington comprehensive health planning law, chapter 70.38 RCW.

~~(5)~~)) Permit any hospital, whether proprietary, district, public, or not-for-profit, to retain the excess of its revenues, if any, that exceed the actual cost of providing services, generated as a result of cost-effective practices, if the hospital charges do not exceed rates permitted by the commission.

((~~(6)~~)) (5) On or before October 1 of each year, after notice and public hearing, and in full consideration of the intent and purpose of this chapter as expressed in RCW 70.39.010, adopt a target dollar amount of total state-wide hospital revenue for the ensuing calendar year. To set the target amount, the commission shall develop a standard methodology that considers such factors as changes in the economy, affordability of hospital care, cost of hospital-purchased goods, numbers and age of the population, technology, and severity of illness of hospital patients. The commission shall endeavor, in establishing rates, to assure that total hospital revenues do not exceed the target amount for the applicable year.

Sec. 9. Section 29, chapter 177, Laws of 1980 and RCW 74.46.290 are each amended to read as follows:

((~~(1)~~)) Interest expense and loan origination fees relating to construction of a facility incurred during the period of construction shall be capitalized and amortized over the life of the facility pursuant to RCW 74.46.360. The period of construction shall extend from the date of the construction loan to the date the facility is put into service for patient care.

((~~(2) For the purposes of this chapter, the period provided for in subsection (1) of this section shall not exceed the project certificate of need time period pursuant to RCW 70.38.125.~~))

Sec. 10. Section 41, chapter 177, Laws of 1980 as amended by section 17, chapter 67, Laws of 1983 1st ex. sess. and RCW 74.46.410 are each amended to read as follows:

(1) Costs will be unallowable if they are not documented, necessary, ordinary, and related to the provision of care services to authorized patients.

(2) Unallowable costs include, but are not limited to, the following:

(a) Costs of items or services not covered by the medical care program. Costs of such items or services will be unallowable even if they are indirectly reimbursed by the department as the result of an authorized reduction in patient contribution;

(b) Costs of services and items provided to recipients which are covered by the department's medical care program but not included in care services established by the department under this chapter;

(c) Costs associated with a capital expenditure subject to section 1122 approval (part 100, Title 42 C.F.R.) if the department found it was not consistent with applicable standards, criteria, or plans. If the department was not given timely notice of a proposed capital expenditure, all associated costs will be unallowable up to the date they are determined to be reimbursable under applicable federal regulations;

(d) ((~~Costs associated with a construction or acquisition project requiring certificate of need approval pursuant to chapter 70.38 RCW if such approval was not obtained;~~

~~(e)~~)) Interest costs other than those provided by RCW 74.46.290 on and after the effective date of RCW 74.46.530;

((~~(f)~~)) (e) Salaries or other compensation of owners, officers, directors, stockholders, and others associated with the contractor or home office, except compensation paid for service related to patient care;

((~~(g)~~)) (f) Costs in excess of limits or in violation of principles set forth in this chapter;

((~~(h)~~)) (g) Costs resulting from transactions or the application of accounting methods which circumvent the principles of the cost-related reimbursement system set forth in this chapter;

((~~(i)~~)) (h) Costs applicable to services, facilities, and supplies furnished by a related organization in excess of the lower of the cost to the related organization or the price of comparable services, facilities, or supplies purchased elsewhere;

((~~(j)~~)) (i) Bad debts of non-Title XIX recipients. Bad debts of Title XIX recipients are allowable if the debt is related to covered services, it arises from the recipient's required contribution toward the cost of care, the provider can establish that reasonable collection efforts were made, the debt was actually uncollectible when claimed as worthless, and sound business judgment established that there was no likelihood of recovery at any time in the future;

((~~(k)~~)) (j) Charity and courtesy allowances;

((~~(l)~~)) (k) Cash, assessments, or other contributions, excluding dues, to charitable organizations, professional organizations, trade associations, or political parties, and costs incurred to improve community or public relations;

((~~(m)~~)) (l) Vending machine expenses;

((~~(n)~~)) (m) Expenses for barber or beautician services not included in routine care;

((~~(o)~~)) (n) Funeral and burial expenses;

((~~(p)~~)) (o) Costs of gift shop operations and inventory;

((~~(q)~~)) (p) Personal items such as cosmetics, smoking materials, newspapers and magazines, and clothing, except those used in patient activity programs;

((~~(r)~~)) (q) Fund-raising expenses, except those directly related to the patient activity program;

((~~(s)~~)) (r) Penalties and fines;

((~~(t)~~)) (s) Expenses related to telephones, televisions, radios, and similar appliances in patients' private accommodations;

((~~(u)~~)) (t) Federal, state, and other income taxes;

((~~(v)~~)) (u) Costs of special care services except where authorized by the department;

((~~(w)~~)) (v) Expenses of key-man insurance and other insurance or retirement plans not made available to all employees;

((~~(x)~~)) (w) Expenses of profit-sharing plans;

((~~(y)~~)) (x) Expenses related to the purchase and/or use of private or commercial airplanes which are in excess of what a prudent contractor would expend for the ordinary and economic provision of such a transportation need related to patient care;

((~~(z)~~)) (y) Personal expenses and allowances of owners or relatives;

((~~(aa)~~)) (z) All expenses of maintaining professional licenses or membership in professional organizations and association dues or that portion of association dues attributable to membership in national organizations;

((~~(bb)~~)) (aa) Costs related to agreements not to compete;

((~~(cc)~~)) (bb) Amortization of goodwill;

((~~(dd)~~)) (cc) Expenses related to vehicles which are in excess of what a prudent contractor would expend for the ordinary and economic provision of transportation needs related to patient care;

((~~(ee)~~)) (dd) Legal and consultant fees in connection with a fair hearing against the department where a decision is rendered in favor of the department or where otherwise the determination of the department stands;

((~~(ff)~~)) (ee) Legal and consultant fees of a contractor or contractors in connection with a lawsuit against the department;

((~~(gg)~~)) (ff) Lease acquisition costs and other intangibles not related to patient care;

((~~(hh)~~)) (gg) All rental or lease costs other than those provided in RCW 74.46.300 on and after the effective date of RCW 74.46.510 and 74.46.530.

Sec. 11. Section 66, chapter 177, Laws of 1980 and RCW 74.46.660 are each amended to read as follows:

In order to participate in the prospective cost-related reimbursement system established by this chapter, the person or legal organization responsible for operation of a facility shall:

(1) Obtain a ((~~state certificate of need and/or~~)) federal capital expenditure review (section 1122) approval pursuant to ((~~chapter 70.38 RCW and~~)) Part 100, Title 42 CFR where required;

(2) Hold the appropriate current license;

(3) Hold current Title XIX certification;

(4) Hold a current contract to provide services under this chapter; and

(5) Comply with all provisions of the contract and all application regulations, including but not limited to the provisions of this chapter.

Sec. 12. Section 68, chapter 177, Laws of 1980 and RCW 74.46.680 are each amended to read as follows:

(1) On the effective date of a change of ownership the department's contract with the old owner shall be terminated. The old owner shall give the department thirty days' written notice of such termination. When ((~~certificate of need and/or~~)) section 1122 approval is required pursuant to ((~~chapter 70.38 RCW and~~)) Part 100, Title 42 CFR, for the new owner to acquire the facility, and the new owner wishes to continue to provide service to recipients without interruption, ((~~certificate of need and/or~~)) section 1122 approval shall be obtained before the old owner submits a notice of termination.

(2) If the new owner desires to participate in the cost-related reimbursement system, it shall meet the conditions specified in RCW 74.46.660 and shall submit a projected budget in accordance with RCW 74.46.670 no later than sixty days before the date of the change of ownership. The facility contract with the new owner shall be effective as of the date of the change of ownership.

NEW SECTION. Sec. 13. This act is necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect July 1, 1985.