SENATE BILL REPORT

ESSB 5887

BYSenate Committee on Human Services & Corrections (originally sponsored by  Senators Wojahn, Kiskaddon, Moore, Patterson and Barr)

Providing for a moratorium on rate regulation by the hospital commission.

Senate Committee on Human Services & Corrections

Senate Hearing Date(s):February 24, 1987; March 3, 1987

Majority Report:  That Substitute Senate Bill No. 5887 be substituted therefor, and the substitute bill do pass.

      Signed by Senators Wojahn, Chairman; Stratton, Vice Chairman; Anderson, Deccio, Kreidler, Tanner.

Senate Staff:Scott Plack (786-7409)

                  March 19, 1987

AS PASSED SENATE, MARCH 17, 1987

BACKGROUND:

The Washington State Hospital Commission was established in 1973 to regulate hospital costs by assuring a reasonable relationship between hospital charges and costs.  The Commission reviews and prospectively approves requests for hospital budget and rate changes as well as any amendments to budget requests.  It also conducts a year-end review of each hospital's financial performance to determine conformance to the Commission's approved rates.

The Hospital Commission was reauthorized in 1984 after a sunset review.  Statutory changes were made to promote constructive competition in the hospital industry as a cost containment strategy.  This was accomplished by permitting hospitals to negotiate contracts containing price discounts with purchasers.  At the same time regulatory policies were strengthened to control hospital cost increases.

Because of the regulation inherent in the Medicare and Medicaid programs, and because of the disproportionate administrative expense of budget review and rate approval for small hospitals some question the need for continued rate regulation of rural hospitals.

SUMMARY:

There is a two-year moratorium on rate regulation of rural hospitals by the Hospital Commission.  The moratorium shall become effective for hospital fiscal years beginning after June 30, 1987.  The rural hospitals are required to file budgets, patient discharge and other data required by the Hospital Commission of hospitals which continue to be subject to rate approval.  Rural hospitals are defined as all hospitals in the state except those in Snohomish, King, Kitsap, Pierce, Thurston, Clark and Spokane counties or other areas within a twenty-mile radius of an urban area with a population which exceeds 30,000 persons.

Fiscal Note:      requested

Effective Date:The bill contains an emergency clause and takes effect immediately.

Senate Committee - Testified: David Ford, Blue Cross; Joan Gaumer, Blue Cross; Dave Broderick, Washington State Hospital Association; Dave Smith, Washington State Hospital Association