AN ACT Relating to health care; amending RCW 70.39.010, 70.39.020, 70.39.030, 70.39.040, 70.39.100, 70.39.130, 70.39.140, 70.39.150, 70.38.025, 70.38.085, 70.38.105, 70.38.111, 70.38.115, 70.38.125, 70.38.135, 43.131.253, and 43.131.254; reenacting and amending RCW 70.39.050; adding a new chapter to Title 70 RCW; adding new sections to chapter 70.39 RCW; creating new sections; repealing RCW 70.39.070 and 70.39.160; and prescribing penalties.

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

Sec. 1. Section 2, chapter 5, Laws of 1973 1st ex. sess. as amended by section 1, chapter 288, Laws of 1984 and RCW 70.39.010 are each amended to read as follows:

The primary purpose of this chapter is to promote the economic delivery of high quality, necessary, and effective health care services to the people by establishing a hospital commission with authority over financial disclosure, budget, prospective rate approval, and other related matters, including authority to develop a hospital reimbursement control system, which will assure all purchasers of health care services ((~~that total hospital costs are reasonably related to total services,~~)) that costs do not exceed those that are necessary for prudently and reasonably managed hospitals((,)) and that hospital rates are reasonably related to aggregate costs((~~, and that such rates are set equitably among all purchasers of these services without undue discrimination~~)).

The legislature finds and declares that rising hospital costs are a vital concern to the people of this state because of the danger which is posed that hospital and health care services are fast becoming out of the economic reach of the majority of our population. It is further declared that health care is a right of the people and one of the primary purposes for which governments are established, and it is, therefore, essential that an effective cost control program be established. It is the legislative intent, in pursuance of this declared public policy, to provide for uniform measures on a state-wide basis to control hospital ((~~rates~~)) costs without the sacrifice of quality of service or reasonable access to necessary health care.

The legislature further finds and declares that: (1) There is an increased need for comprehensive public oversight of the costs of and expenditures for health care services; (2) no one should be denied access to necessary health care because of poverty or unemployment; (3) access to necessary health care in rural areas must be assured; (4) the ((~~hospital~~)) health care commission and the public need additional information to make better-informed decisions about health care costs and charges; (5) there is a need to encourage market penetration of alternative health care delivery systems that have internal incentives to control costs and stimulate market competition, and that some regulatory policies have impeded health care cost containment by unduly restricting competition; and (6) there is a need for more effective assessment of the impact of technology on the cost and delivery of health care services so that appropriate public policies may be adopted((~~; and (7) the hospital commission should be more representative of a diversity of public interests so that it can more effectively carry out its mission.~~

It is the intent of the 1984 amendments to this chapter to strengthen certain regulatory policies which have had limited success in containing hospital costs since this chapter was enacted, and to promote constructive competition among health care delivery systems)).

It is the intent of the legislature to promote appropriate use of health care resources so as to increase access to appropriate health care services and decrease costs for those services. The legislature understands that the rapidly increasing costs of health care are limiting access to care and are creating a severe financial burden on many people in the state. To promote effective health care cost containment the commission shall:

(a) Regulate hospital revenue;

(b) Administer the certificate of need program;

(d) Evaluate health services and utilize management services for outcome and effectiveness; and

(e) Promote standards of care which encourage necessary services and discourage unnecessary or ineffective services.

Sec. 2. Section 3, chapter 5, Laws of 1973 1st ex. sess. as amended by section 2, chapter 288, Laws of 1984 and RCW 70.39.020 are each amended to read as follows:

As used in this chapter:

(1) "Commission" means the ((~~hospital~~)) health care commission of the state of Washington as created by this chapter;

(2) "Consumer" means any person whose occupation is other than the administration of health activities or the providing of health services, who has no fiduciary obligation to a health facility or other health agency, and who has no material financial interest in the rendering of health services;

(3) "Hospital" means any health care institution which is required to qualify for a license under RCW 70.41.020(2); ((or)) as a psychiatric hospital under chapter 71.12 RCW; or as an alcohol treatment hospital under chapter 71.12 RCW, but shall not include beds utilized by a comprehensive cancer center for cancer research, or any health care institution conducted for those who rely primarily upon treatment by prayer or spiritual means in accordance with the creed or tenets of any church or denomination.

(4) "Diagnosis-related groups" is a classification system that groups hospital patients according to principal and secondary diagnosis, presence or absence of a surgical procedure, age, presence or absence of significant comorbidities or complications, and other relevant criteria, an example of which has been adopted as the basis for prospective payment under the federal medicare program by the social security amendments of 1983, Public Law 98-21.

(5) "Medical technology" means the drugs, devices, and medical or surgical procedures used in the delivery of health care, and the organizational or supportive systems within which such care is provided.

(6) "Technology assessment" means a comprehensive form of policy research that examines the medical, technical, economic, and social consequences of technological applications, including the indirect, unintended, or delayed medical, social, or economic impacts. In health care, such analysis must evaluate efficacy and safety as well as efficiency.

(7) "Charity care" means necessary hospital health care rendered to indigent persons, to the extent that the persons are unable to pay for the care or to pay deductibles or co-insurance amounts required by a third-party payer, as determined by the commission.

(8) ((~~"Rate" means the maximum revenue which a hospital may receive for each unit of service, as determined by the commission.~~

~~(9)~~)) "Comprehensive cancer center" means an institution and its research programs as recognized by the National Cancer Institute prior to April 20, 1983.

((~~(10)~~)) (9) "Region" means one of the health service areas established pursuant to RCW 70.38.085, except that King county shall be considered a separate region for the purposes of this chapter.

(10) "Net revenue" means the sum of hospital charges, ambulatory services charges, and ancillary service charges, less contractual allowances.

(11) "Market basket index" means the revised market basket index used to measure the inflation in hospital input prices as employed on January 1, 1988, by the secretary of the United States department of health and human services for medicare reimbursement. If the measure ceases to be calculated in this manner, the inflation index shall be the index approved by rule adopted by the commission. The method used in determining the index approved by rule shall be substantially the same as the method employed on January 1, 1988, for determining the inflation in hospital input prices by the secretary of the United States department of health and human services for purposes of medicare reimbursement.

(12) "Maximum allowable rate of increase" or "MARI" means the maximum rate at which a hospital is normally expected to increase its average gross revenues per adjusted admission for a given period. The commission, using the most recent audited actual experience for each hospital, shall calculate the MARI for each hospital as follows: The projected rate of increase in the market basket index shall be divided by a number which is determined by subtracting the sum of one-half of the proportion of medicare reimbursement plus the proportion of medicaid reimbursement and the proportion of charity care charges from the number one. Four percentage points shall be added to this quotient in 1990. Three percentage points shall be added to this quotient in 1991. Thereafter, two percentage points shall be added to this quotient. The formula to be employed by the commission to calculate the MARI shall take the following form:

NHIPI

MARI = (-----------------------------) + X

1-[(Me x .5) + Md + Cc]

!ixwhere:

MARI = maximum allowable rate of increase applied to net revenue.

NHIPI = national hospital input price index, which shall be the projected rate of change in the market basket index.

Me = proportion of medicare reimbursement to net revenue.

Md = proportion of medicaid reimbursement to net revenue.

Cc = proportion of charity care charges to net revenue.

X = four percentage points in 1990, three percentage points in 1991, and two percentage points in 1992 and two percentage points every year thereafter.

(13) "Operating expenses" mean the sum of daily hospital service expenses, ambulatory service expenses, ancillary expenses, and other operation expenses.

(14) "Rate of return" shall be defined by the commission in rule.

(15) "Rural hospital" means a hospital:

(a) In an area that is:

(i) Not within a twenty-mile radius of an urban area exceeding thirty thousand people; and

(ii) Not in Bellingham, Aberdeen-Hoquiam, Longview-Kelso, Wenatchee, Yakima, Sunnyside, Richland-Pasco-Kennewick, or Walla Walla; or

(b) That elects to be considered rural if (i) the hospital is located in a class one through nine county, (ii) the hospital is located in a city or town having fewer than twenty-five thousand people, (iii) the hospital has fewer than one hundred acute care beds, and (iv) the total annual hospital revenues are less than ten million dollars.

Sec. 3. Section 4, chapter 5, Laws of 1973 1st ex. sess. as amended by section 3, chapter 288, Laws of 1984 and RCW 70.39.030 are each amended to read as follows:

(1) There is hereby created a ((~~hospital~~)) health care commission, which shall be a separate and independent commission of the state. The commission shall be composed of ((~~nine~~)) three members appointed by the governor ((~~as follows:~~

~~(a)~~)). The three members ((~~representing~~)) shall represent consumers of health care services, at least one of whom represents the interests of low-income persons((;

~~(b) One member representing private employers;~~

~~(c) One member representing labor;~~

(d) One member representing hospitals, but in cases in which rates for an osteopathic hospital are to be considered, the representative of osteopathic hospitals on the technical advisory committee shall replace the hospital representative on the commission;

~~(e) One member representing health care professionals licensed under Title 18 RCW;~~

~~(f) One member representing commercial health insurers or health care service contractors; and~~

(g) The secretary of social and health services, representing the interests of the state as a major purchaser of health care services. The secretary may delegate a permanent designee in the secretary's absence.

~~(2) Except for the members designated in subsection (1) (d) and (e) of this section,~~)). Members shall not have any fiduciary obligation to any health care facility or any material financial interest in the provision of health care services.

Sec. 4. Section 5, chapter 5, Laws of 1973 1st ex. sess. as last amended by section 4, chapter 288, Laws of 1984 and RCW 70.39.040 are each amended to read as follows:

((~~Except for the secretary of social and health services or the secretary's designee,~~)) Members of the commission shall serve for four-year terms. Appointments shall require senate confirmation. No member shall serve on the commission for more than two consecutive terms. A vacancy shall be filled by appointment for the remainder of the unexpired term and the initial appointments and vacancies shall not require senate confirmation until the legislature next convenes. ((~~Of the three additional members, other than the secretary, appointed after June 7, 1984, two shall initially be appointed for two-year terms and one for a three-year term.~~))

Sec. 5. Section 6, chapter 5, Laws of 1973 1st ex. sess. as amended by section 104, chapter 287, Laws of 1984 and by section 5, chapter 288, Laws of 1984 and RCW 70.39.050 are each reenacted and amended to read as follows:

A member ((~~representing consumers of health care services and~~)) designated by the governor shall serve as chairman. The commission shall elect from its members a vice-chairman biennially. Meetings of the commission shall be held as frequently as its duties require. The commission shall keep minutes of its meetings and adopt procedures for the governing of its meetings, minutes, and transactions.

((~~Five~~)) Two members shall constitute a quorum, but a vacancy on the commission shall not impair its power to act. No action of the commission shall be effective unless ((~~five~~)) two members concur therein.

The members of the commission shall ((receive no compensation for their service as members but, with the exception of the secretary of social and health services or the secretary's designee, the members shall be reimbursed for their expenses while attending meetings of the commission in the same manner as legislators engaged in interim committee business as in RCW 44.04.120)) be compensated in accordance with RCW 43.03.240 and shall be reimbursed for travel expenses as provided in RCW 43.03.050 and 43.03.060.

Sec. 6. Section 11, chapter 5, Laws of 1973 1st ex. sess. as amended by section 10, chapter 288, Laws of 1984 and RCW 70.39.100 are each amended to read as follows:

(1) The commission, after study and in consultation with advisory committees, if any, shall establish by the promulgation of rules and regulations pursuant to the Administrative Procedure Act, chapter ((~~34.04~~)) 34.05 RCW, a uniform system of accounting and financial reporting, including such cost allocation methods as it may prescribe, by which hospitals shall record and report to the commission their revenues, expenses, other income, other outlays, assets and liabilities, and units of service. All hospitals shall adopt the system for their fiscal year period to be effective at such time and date as the commission shall direct. In determining the effective date for reporting requirements, the commission shall be mindful both of the immediate need for uniform hospital reporting information to effectuate the purposes of this chapter and the administrative and economic difficulties which hospitals may encounter in conversion, but in no event shall such effective date be later than two and one-half years from the date of the formation of the commission.

(2) In establishing such accounting systems and uniform reporting procedures, the commission shall take into consideration:

(a) Existing systems of accounting and reporting presently utilized by hospitals;

(b) Differences among hospitals according to size; financial structure; methods of payment for services; and scope, type, and method of providing services; and

(3) The commission shall, where appropriate, provide for modification, consistent with the purposes of this chapter, of reporting requirements to correctly reflect these differences among hospitals, and to avoid otherwise unduly burdensome costs in meeting the requirements of the uniform system of accounting and financial reporting.

(4) The accounting system, where appropriate, shall be structured so as to establish and differentiate costs incurred for patient-related services rendered by hospitals, as distinguished from those incurred with reference to educational research and other nonpatient-related activities including but not limited to charitable activities of such hospitals.

(5) The commission shall collect and maintain patient discharge data, including data necessary for identification of discharges by diagnosis-related groups and by specific payors. So far as possible, the data collection procedures shall be coordinated with any similar procedures or requirements of the federal department of health and human services for the medicare program and the needs of the department of social and health services in gathering public health statistics, in order to minimize any unduly burdensome reporting requirements imposed on hospitals.

Sec. 7. Section 14, chapter 5, Laws of 1973 1st ex. sess. as last amended by section 58, chapter 505, Laws of 1987 and RCW 70.39.130 are each amended to read as follows:

Subject to RCW 40.07.040, the commission shall prepare and transmit each biennium to the governor and to the legislature a report of commission operations and activities for the preceding fiscal period. 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 15, chapter 5, Laws of 1973 1st ex. sess. as last amended by section 1, chapter 118, Laws of 1988 and RCW 70.39.140 are each amended to read as follows:

(1)(((a) From and after a date not less than twelve months but not more than twenty-four months after the adoption of the uniform system of accounting and financial reporting required by RCW 70.39.100, as the commission may direct,)) The commission shall have the power to initiate such reviews or investigations as may be necessary to assure all purchasers of health care services that the total costs of a hospital are reasonably related to the ((~~total~~)) services offered by that hospital, that costs do not exceed those that are necessary for prudently and reasonably managed hospitals, and that the hospital's rates are reasonably related to the hospital's aggregate costs((~~; and that rates are set equitably among all purchasers or classes of purchasers of services without undue discrimination or preference. Effective July 1, 1985,~~)). This chapter does not preclude any hospital from negotiating with and charging any particular payer or purchaser rates that are less than those approved by the commission, if((:

~~(i) The rates are cost justified and do not result in any shifting of costs to other payers or purchasers in the current or any subsequent year; and~~

~~(ii)~~)) all the terms of such negotiated rates are filed with the commission within ten working days and made available for public inspection.

((~~(b) The commission may retrospectively disapprove such negotiated rates in accordance with procedures established by the commission if such rates are found to contravene any provision of this section.~~

(c) Any hospital may charge rates as negotiated with or established by the department of social and health services. Rates negotiated or established under this subsection (c) are not subject to (a) or (b) of this subsection. Rates negotiated or established under this subsection (c) are not subject to any review or approval by the commission under this chapter.

(2) In order to properly discharge these obligations, the commission shall have full power to review projected annual revenues and approve the reasonableness of rates proposed to generate that revenue established or requested by any hospital subject to the provisions of this chapter. No hospital shall charge for services at rates exceeding those established in accordance with the procedures established hereunder. After June 30, 1985, rates for inpatient care shall be expressed using an appropriate measure of hospital efficiency, such as that based on diagnosis-related groups, and, if necessary for federal medicare participation in a hospital reimbursement control system, hospitals shall charge for such care at rates prospectively established and expressed in terms of a comparable unit of total payment, such as diagnosis-related groups. In the event any hospital reimbursement control system is implemented, children's hospitals shall be exempted until such time as a pediatric based classification system which reflects the unique resource consumption by patients of a children's hospital is perfected. For the purposes of this exemption, children's hospitals are defined as hospitals whose patients are predominantly under eighteen years of age.

(3) In the interest of promoting the most efficient and effective use of health care service, and providing greater promise of hospital cost containment, the commission may develop a hospital reimbursement control system in which all payers or purchasers participate, that includes procedures for establishing prospective rates, that deals equitably with the costs of providing charity care, and that shall include the participation of the federal medicare program under the social security amendments of 1983, Public Law 98-21. The commission shall have the authority to require utilization reviews of patient care to ensure that hospital admissions and services provided are medically justified. The commission may seek approval, concurrence, or participation in such a system from any federal agency, such as the department of health and human services, prior to securing legislative approval pursuant to concurrent resolution for implementation of any hospital reimbursement control system developed pursuant to this section. The commission shall involve the legislature in the development of any plan for a hospital reimbursement control system.

~~(4)~~)) (2) The commission shall assure that no hospital or its medical staff either adopts or maintains admission practices or policies which result in:

(a) A significant reduction in the proportion of patients who have no third-party coverage and who are unable to pay for hospital services;

(b) A significant reduction in the proportion of individuals admitted for inpatient hospital services for which payment is or is likely to be less than the anticipated charges for or costs of such services; or

(c) The refusal to admit patients who would be expected to require unusually costly or prolonged treatment for reasons other than those related to the appropriateness of the care available at the hospital.

((~~(5)~~)) (3) The commission shall adopt rules to implement this section.

(4) The commission shall serve as the state agency responsible for coordinating state actions and otherwise responding and relating to the efforts of the federal department of health and human services in planning and implementing federal cost containment programs with respect to hospitals and related health care institutions as authorized by the social security amendments of 1983, as now or hereafter amended, or other federal law, and any rules or regulations promulgated thereto. In carrying out this responsibility, the commission may assume any function or role authorized by appropriate federal regulations implementing the social security amendments of 1983; or assume any combination of such roles or functions as it may determine will most effectively contain the rising costs of the varying kinds of hospitals and related health care institutions in Washington state. In determining its functions or roles in relation to federal efforts, the commission shall seek to ensure coordination, and the reduction of duplicatory cost containment efforts, by the state and federal governments, as well as the diligent fulfillment of the purposes of this chapter and declared public policy and legislative intent herein.

Nothing in this chapter limits the ability of the department of social and health services to establish or negotiate hospital payment rates pursuant to RCW 74.09.120 or in accord with a federally approvable state plan under Title XIX of the federal social security act.

Sec. 9. 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~~)) revenue 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) 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.))

NEW SECTION. Sec. 10. A new section is added to chapter 70.39 RCW to read as follows:

(1) At least ninety days prior to the commencement of its next fiscal year, each hospital requesting approval of a rate of increase in net revenue per adjusted admission in excess of its applicable maximum allowable rate of increase for the next fiscal year shall file with the commission, on forms adopted by the commission and based on the uniform system of accounting and financial reporting:

(a) Its budget for the next fiscal year, including projected expenditures, projected revenues, and statistical measures necessary for the commission to evaluate these projections. Any hospital the final budget of which requires public review and approval may submit its budget prior to public review and approval and shall subsequently file any amendments adopted during the public review process at least forty-five days prior to the beginning of the fiscal year of the hospital.

(b) Its actual experience for the first six months of its current fiscal year, including actual expenditures, actual revenues, and statistical measures necessary for the commission to evaluate the actual experience.

(c) Its estimated experience for the last six months of its current fiscal year, including estimated expenditures, estimated revenues, and statistical measures necessary for the commission to evaluate these estimates.

(d) Information necessary for the commission to evaluate the effectiveness of current services and the justification of the hospital for increased costs to continue current services, improve existing services, and provide new services.

(e) Its schedule of projected rates which will be implemented to generate projected revenues.

(2) Within one hundred twenty days after its fiscal year ends, each hospital shall file with the commission, on forms adopted by the commission and based on the uniform system of accounting and financial reporting, its actual audited experience for that fiscal year, including expenditures, revenues, and statistical measures.

(3) The commission may require other reports based on the uniform system of accounting and financial reporting necessary to accomplish the purposes of this chapter.

NEW SECTION. Sec. 11. A new section is added to chapter 70.39 RCW to read as follows:

(1) The base for hospital budget review for the fiscal year beginning in 1990 shall be the hospital's fiscal year 1988 actual net revenues per adjusted admission inflated forward by the hospital's applicable current year's maximum allowable rate of increase or the commission-approved budgeted net revenues per adjusted admission, whichever is higher, provided that, in cases where the commission has approved a rate of increase below the MARI, the commission-approved maximum allowable rate of increase shall apply.

(2) (a) Except for hospitals filing a budget pursuant to subsection (3) of this section, each hospital, at least ninety days prior to the commencement of its next fiscal year, shall file with the commission a certified statement, hereafter known as the "budget letter," acknowledging its applicable maximum allowable rate of increase in net revenue per adjusted admission from the previous fiscal year as calculated pursuant to section 2(12) of this act, and its maximum projected net revenue per adjusted admission for the next fiscal year, and shall affirm that the hospital shall not exceed such applicable maximum allowable rate of increase. Such letter shall be deemed to be the budget for the hospital for that fiscal year and shall be automatically approved by operation of law. However, the commission shall have thirty days from receipt of the budget letter to determine if the gross revenues per adjusted admission submitted by the hospital are within the maximum allowable rate of increase for that hospital.

(b) If a hospital's net revenues per adjusted admission, as determined by its audited actual experience in any one year, increases at a percentage rate less than the maximum allowable rate of increase or commission-approved rate of increase, whichever is lower, the hospital may carry forward the difference, and earn up to a cumulative maximum of three "banked" percentage points which may be banked to be used in the future. Such banked percentage points may be added to the hospital's maximum allowable rate of increase to increase the gross revenues per adjusted admission in future years, or such points may be used in the current fiscal year if a budget amendment would have been required to keep the hospital out of a penalty situation, provided that the hospital shall use its original approved maximum allowable rate of increase as its base. The hospital shall specify in the budget letter, or in an amendment to the budget letter submitted before the end of the hospital's fiscal year, the number of banked percentage points it intends to add to its maximum allowable rate of increase to increase its gross revenues per adjusted admission. A hospital shall be required to use banked percentage points before submitting a budget for detailed review or before submitting a request for a budget amendment. The commission shall adopt rules which specify procedures for hospitals to bank and use any percentage points as authorized under this section.

(3) At least ninety days prior to the beginning of its fiscal year, each hospital requesting a rate of increase in net revenue per adjusted admission in excess of the maximum allowable rate of increase for the hospital's next fiscal year, or each hospital utilizing banked percentage points pursuant to subsection (2)(b) of this section and requesting a rate of increase in excess of the maximum allowable rate of increase plus the available banked percentage points, shall be subject to detailed budget review and shall file its projected budget with the commission for approval. In determining the base, the hospital's prior year audited actual experience shall be used, unless the hospital's prior year audited actual experience exceeded the applicable rate of increase, in which case the base shall be the gross revenue per adjusted admission from the year before the prior year, increased by the applicable rate of increase for the prior year, and then inflated by the applicable rate of increase for the current year. As used in this subsection, "applicable rate of increase" means the MARI unless the commission has approved a different rate of increase, in which case such rate of increase shall apply. The projected budget filed under section 9 of this act shall be deemed approved unless it is disapproved by the commission within ninety days after filing. Upon agreement by the commission and the hospital, the ninety-day period may be waived or extended. As part of the review process conducted by the commission, the commission may approve, disapprove, or disapprove in part the projected budget. No hospital submitting a budget for approval shall operate at a level of expenditures or revenues which exceeds the maximum allowable rate of increase minus one percentage point, unless a higher rate of increase has been approved by the commission. However, a hospital with banked percentage points requesting a rate of increase which exceeds the maximum allowable rate of increase plus the banked percentage points shall not operate at a level of expenditures or revenues in excess of one percentage point below the maximum allowable rate of increase plus the banked percentage points.

NEW SECTION. Sec. 12. A new section is added to chapter 70.39 RCW to read as follows:

(1) For purposes of budget review and comparison and to assist in making determinations pursuant to subsection (5) of this section, the commission shall consider measures which explain the variation in patient care costs, including, but not limited to, each hospital's case mix, the severity of its patients, its input costs, and its teaching status.

(2) The commission shall review each budget filed pursuant to section 11(3) of this act and amendments filed pursuant to subsection (3) of this section to determine whether the rate of increase contained in the budget or amendment is just, reasonable, and not excessive. In making such determination, the commission shall consider and the hospital may use the following criteria in the following priority, with (a) of this subsection the highest priority, and (k) of this subsection the lowest priority:

(a) The impact of patient days attributable to the medically indigent;

(b) The impact of patient days reimbursed by medicaid;

(d) The ability of the hospital to earn a reasonable rate of return;

(e) The cost and efficiency of providing the current level of services;

(f) The change in hospital costs as measured by changes in the severity of illness, including changes in the case mix;

(g) The actions taken by or the ability of a hospital to reduce the cost of services;

(h) The cost of providing new services or facilities. The cost of these services may not be included until these services or facilities have been approved for a certificate of need by the commission;

(i) The accuracy of previous budget submissions compared to the actual experience of the hospital;

(j) The research and educational services provided by the hospital if it is a teaching hospital;

(k) For psychiatric hospitals, the impact on hospital gross revenues associated with changes in the average length of stay of patients, changes in admissions to hospital units, and changes in admissions to specific services and, when available, case mix.

(3) After a hospital budget is approved, approved as amended, or disapproved for a given fiscal year, no amendment to such budget shall be made, except in accordance with the following procedures:

(a) A request by a hospital to amend its budget shall be filed in writing with supporting documents no later than ninety days before the end of the hospital's fiscal year. The budget amendment shall be approved, disapproved, or disapproved in part by the commission within one hundred twenty days after such filing. Upon agreement by the commission and the hospital, the one hundred twenty-day period may be waived or extended.

(b) After a hospital requests a budget amendment, but before the final decision by the commission on the amendment, the commission may extend provisional approval to any part of the amendment. This provisional approval shall be superseded by the final decision of the commission.

(c) If approved by the commission as part of a budget amendment, the following items shall be applied retroactively for the entire budget year of the hospital:

(i) Increased case mix, including increased severity of illness; and

(ii) Unforeseen and unforeseeable increases in malpractice insurance premiums, prior-year medicare cost-report settlements, and retroactive changes in medicare reimbursement methodology.

(4) The commission shall disapprove any budget or amendment or part thereof as excessive that contains a rate of increase which is not necessary to maintain total hospital costs at a level reasonably related to total services provided and which is not necessary to maintain a prudently managed hospital.

(5) The commission shall disapprove, in its entirety or in part, any budget or any budget amendment that contains a rate of increase which the commission finds, pursuant to subsection (2) of this section, to be unjust, unreasonable, or excessive.

(6) (a) Upon receipt of a budget or an amendment to a budget, the staff of the commission shall review the budget and executive staff members designated by the commission shall make preliminary findings and recommendations in writing as to whether the budget should be approved, disapproved, or disapproved in part. The staff shall send the preliminary findings by certified mail to the hospital. The hospital shall have fourteen days from the receipt of the preliminary findings and recommendations to file written objections and request a hearing with the commission if a hearing is desired, or to file written objections if a hearing is not requested by the hospital.

(b) If a hearing is requested, it shall be conducted by the commission or, at the election of the commission, by an administrative law judge.

(d) The failure of a hospital to request a hearing within fourteen days of the receipt of the preliminary findings of the staff constitutes a waiver of the right of the hospital to contest the final decision of the commission, and the commission is authorized to enter a final order consistent with the staff's preliminary findings without further proceedings.

(e) During the pendency of any hearing or an appeal of a final order of the commission, no hospital shall operate at a level of expenditures and revenues which exceeds the maximum allowable rate of increase minus one percentage point, unless a higher rate of increase has been approved by the commission. However, a hospital with banked percentage points requesting a rate of increase which exceeds the maximum allowable rate of increase plus the banked percentage points shall not operate at a level of expenditures or revenues in excess of one percentage point below the maximum allowable rate of increase plus the banked percentage points.

(7) The commission may publish its findings in connection with any review conducted under this section in a newspaper of general circulation in the county in which the hospital is located.

(8) Notwithstanding any other provisions of this section, any rural hospital shall be exempt from filing a budget, shall be exempt from budget review and approval for exceeding the maximum allowable rate of increase, and shall be exempt from any penalties arising therefrom. However, each such hospital shall be required to submit to the commission its audited, actual experience, as required by RCW 70.39.150 and section 10(2) of this act.

(9) The review and approval of hospital budgets pursuant to this chapter shall apply to hospital budgets for fiscal years which begin on or after January 1, 1990.

NEW SECTION. Sec. 13. A new section is added to chapter 70.39 RCW to read as follows:

(1) The commission shall annually compare the audited actual experience of each hospital to the audited actual experience of that hospital for the previous year.

(a) For hospitals submitting budget letters, if the commission determines that the audited actual experience of a hospital exceeded its previous year's audited actual experience by more than the maximum allowable rate of increase as certified in the budget letter, the amount of such excess shall be determined by the commission and a penalty shall be levied against such hospital pursuant to subsection (2) of this section.

(b) For hospitals subject to budget review, if the commission determines that the audited actual experience of a hospital exceeded its previous year's audited actual experience by more than the most recent approved budget or the most recent approved budget as amended, the amount of such excess shall be determined by the commission, and a penalty shall be levied against such hospital pursuant to subsection (2) of this section.

(c) For hospitals submitting a budget letter and for hospitals subject to budget review, the commission shall annually compare each hospital's audited actual experience for net revenues per adjusted admission to the hospital's audited actual experience for net revenues per adjusted admission for the previous year. If the rate of increase in net revenues per adjusted admission between the previous year and the current year was less than the MARI, the hospital may carry forward the difference and earn up to a cumulative maximum of three banked net revenue percentage points. Such banked net revenue percentage points shall be available to the hospital to offset in any future-year penalties for exceeding the approved budget or the maximum allowable rate of increase as set forth in subsection (2) of this section. Nothing in this subsection shall be used by a hospital to justify the approval of a budget or a budget amendment by the commission in excess of the maximum allowable rate of increase.

(2) Penalties shall be assessed as follows:

(a) For the first occurrence within a five-year period, the commission shall prospectively reduce the current budget of the hospital by the amount of the excess up to five percent; and, if such excess is greater than five percent over the maximum allowable rate of increase, any amount in excess of five percent shall be levied by the commission as a fine against such hospital, to be deposited in the health access account.

(b) For the second occurrence within the five-year period following the first occurrence as set forth in (a) of this subsection, the commission shall prospectively reduce the current budget of the hospital by the amount of the excess up to two percent; and, if such excess is greater than two percent over the maximum allowable rate of increase, any amount in excess of two percent shall be levied by the commission as a fine against such hospital, to be deposited in the health access account.

(c) For the third occurrence within the five-year period following the first occurrence as set forth in (a) of this subsection, the commission shall:

(i) Levy a fine against the hospital in the total amount of the excess, to be deposited in the health access account.

(ii) Notify the hospital of the violation, whereupon the commission shall not accept any application for a certificate of need from or on behalf of such hospital until such time as the hospital has demonstrated, to the satisfaction of the commission, that, following the date the penalty was imposed under (c)(i) of this subsection, the hospital has stayed within its projected or amended budget or its applicable maximum allowable rate of increase for a period of at least one year. However, this provision does not apply with respect to a certificate-of-need application filed to satisfy a life or safety code violation.

(iii) Upon a determination that the hospital knowingly and willfully generated such excess, initiate disciplinary proceedings to revoke the license of such hospital or impose an administrative fine on such hospital not to exceed twenty thousand dollars.

The determination of the amount of any such excess shall be based upon net revenues per adjusted admission. It is the intent of this section that the commission, in levying any penalty imposed against a hospital for exceeding its maximum allowable rate of increase or its approved budget pursuant to this subsection, consider the effect of changes in the case mix of the hospital. It is the responsibility of the hospital to demonstrate, to the satisfaction of the commission, any change in its case mix.

(3) Unforeseen and unforeseeable events which affect the net revenue per adjusted admission and which are beyond the control of the hospital, such as prior-year medicare cost-report settlements, retroactive changes in medicare reimbursement methodology, and increases in malpractice insurance premiums, which occurred in the last three months of the hospital fiscal year during which the hospital generated the excess may be used by the commission to reduce the amount of excess of the hospital as determined pursuant to this section.

(4) If the commission finds that any hospital chief executive officer, or any person who is in charge of hospital administration or operations, has knowingly and willfully allowed or authorized actual operating revenues or expenditures that are in excess of projected operating revenues or expenditures in the hospital's approved hospital budget as approved by the commission, the commission shall order such officer or person to pay an administrative fine not to exceed five thousand dollars.

NEW SECTION. Sec. 14. A new section is added to chapter 70.39 RCW to read as follows:

(1) It is the policy of this state that philanthropic support for health care should be encouraged and expanded, especially in support of experimental and innovative efforts to improve the health care delivery system.

(2) For purposes of determining reasonable costs of services furnished by hospitals, unrestricted grants, gifts, and income from endowments shall not be deducted from any operating costs of such hospitals, and, in addition, the following items shall not be deducted from any operating costs of such hospitals:

(a) An unrestricted grant or gift, or income from such a grant or gift, which is not available for use as operating funds because of its designation by the hospital's governing board.

(b) A grant or similar payment which is made by a governmental entity and which is not available, under the terms of the grant or payment, for use as operating funds.

(c) The sale or mortgage of any real estate or other capital assets of the hospital which the hospital acquired through a gift or grant and which is not available for use as operating funds under the terms of the gift or grant or because of its designation by the hospital's governing board, except for recovery of the appropriate share of gains and losses realized from the disposal of depreciable assets.

NEW SECTION. Sec. 15. A new section is added to chapter 70.39 RCW to read as follows:

When a hospital alleges that a factual determination made by the commission is incorrect, the burden of proof shall be on the hospital to demonstrate that such determination is, in light of the total record, not supported by a preponderance of the evidence. The burden of proof remains with the hospital in all cases involving administrative agency action.

NEW SECTION. Sec. 16. A new section is added to chapter 70.39 RCW to read as follows:

The commission shall evaluate and analyze available data and information to determine the outcome and effectiveness of health services, utilization management services, and payment methods.

(1) The commission shall make their evaluations available to consumers, purchasers, and providers of health care.

(2) The commission shall use the information to develop guidelines which may be used as standards of care to encourage necessary services and to discourage unnecessary services.

(3) The commission shall use the information to:

(a) Develop model health care benefit packages for use by employers and providers in implementing health benefit plans which promote the cost-effective delivery of adequate care.

(b) Serve as a clearinghouse for information concerning innovations in the delivery of health care services and the enhancement of competition in the health care marketplace.

(c) Make recommendations relating to mechanisms through which state government might lead by example in the prudent purchase of cost-effective adequate health services for its employees and clients.

(d) Develop cost containment strategies for use by providers, employers, or consumers of health care.

(e) Serve as a clearinghouse for information concerning federal and state legislative initiatives affecting the private health care delivery system and governmental health care programs.

(f) Develop an outreach program to assist small business to include cost containment initiatives for small business health insurance plans.

Sec. 17. Section 2, chapter 161, Laws of 1979 ex. sess. as last amended by section 1, chapter 20, Laws of 1988 and RCW 70.38.025 are each amended to read as follows:

When used in this chapter, the terms defined in this section shall have the meanings indicated.

(1) "Board of health" means the state board of health created pursuant to chapter 43.20 RCW.

(2) "Capital expenditure" is an expenditure, including a force account expenditure (i.e., an expenditure for a construction project undertaken by a facility as its own contractor) which, under generally accepted accounting principles, is not properly chargeable as an expense of operation or maintenance. Where a person makes an acquisition under lease or comparable arrangement, or through donation, which would have required review if the acquisition had been made by purchase, such expenditure shall be deemed a capital expenditure. Capital expenditures include donations of equipment or facilities to a health care facility which if acquired directly by such facility would be subject to certificate of need review under the provisions of this chapter and transfer of equipment or facilities for less than fair market value if a transfer of the equipment or facilities at fair market value would be subject to such review. The cost of any studies, surveys, designs, plans, working drawings, specifications, and other activities essential to the acquisition, improvement, expansion, or replacement of any plant or equipment with respect to which such expenditure is made shall be included in determining the amount of the expenditure.

(3) "Commission" means the health care commission as defined in RCW 70.39.020.

(4) "Continuing care retirement community" means an entity which provides shelter and services under continuing care contracts with its members and which sponsors or includes a health care facility or a health service. A "continuing care contract" means a contract to provide a person, for the duration of that person's life or for a term in excess of one year, shelter along with nursing, medical, health-related, or personal care services, which is conditioned upon the transfer of property, the payment of an entrance fee to the provider of such services, or the payment of periodic charges for the care and services involved. A continuing care contract is not excluded from this definition because the contract is mutually terminable or because shelter and services are not provided at the same location.

((~~(4)~~)) (5) "Council" means the state health coordinating council created in RCW 70.38.055 and described in Public Law 93-641 as its successor agency.

((~~(5)~~)) (6) "Department" means the state department of social and health services.

((~~(6)~~)) (7) "Expenditure minimum" means, for the purposes of the certificate of need program, one million dollars adjusted by the department by rule to reflect changes in the United States department of commerce composite construction cost index; or a lesser amount required by federal law and established by the department by rule.

((~~(7)~~)) (8) "Federal law" means Public Law 93-641, as amended, or its successor.

((~~(8)~~)) (9) "Health care facility" means hospices, hospitals, psychiatric hospitals, tuberculosis hospitals, nursing homes, kidney disease treatment centers, ambulatory surgical facilities, rehabilitation facilities, continuing care retirement communities, and home health agencies, and includes such facilities when owned and operated by the state or by a political subdivision or instrumentality of the state and such other facilities as required by federal law and implementing regulations, but does not include Christian Science sanatoriums operated, listed, or certified by the First Church of Christ Scientist, Boston, Massachusetts. In addition, the term does not include any nonprofit hospital: (a) Which is operated exclusively to provide health care services for children; (b) which does not charge fees for such services; (c) whose rate reviews are waived by the state hospital commission; and (d) if not contrary to federal law as necessary to the receipt of federal funds by the state. In addition, the term does not include a continuing care retirement community which: (i) Offers services only to contractual members; and (ii) provides its members a contractually guaranteed range of services from independent living through skilled nursing, including some form of assistance with activities of daily living; and (iii) contractually assumes responsibility for costs of services exceeding the member's financial responsibility as stated in contract, so that, with the exception of insurance purchased by the retirement community or its members, no third party, including the medicaid program, is liable for costs of care even if the member depletes his or her personal resources; and (iv) has offered continuing care contracts and operated a nursing home continuously since January 1, 1988, or has obtained a certificate of need to establish a nursing home; and (v) maintains a binding agreement with the department assuring that financial liability for services to members, including nursing home services, shall not fall upon the department; and (vi) does not operate, and has not undertaken, a project which would result in a number of nursing home beds in excess of one for every four living units operated by the continuing care retirement community, exclusive of nursing home beds; and (vii) has undertaken no increase in the total number of nursing home beds after January 1, 1988, unless a professional review of pricing and long-term solvency was obtained by the retirement community within the prior five years and fully disclosed to members.

((~~(9)~~)) (10) "Health maintenance organization" means a public or private organization, organized under the laws of the state, which:

(a) Is a qualified health maintenance organization under Title XIII, section 1310(d) of the Public Health Services Act; or

(b)(i) Provides or otherwise makes available to enrolled participants health care services, including at least the following basic health care services: Usual physician services, hospitalization, laboratory, x-ray, emergency, and preventive services, and out-of-area coverage; (ii) is compensated (except for copayments) for the provision of the basic health care services listed in (b)(i) to enrolled participants by a payment which is paid on a periodic basis without regard to the date the health care services are provided and which is fixed without regard to the frequency, extent, or kind of health service actually provided; and (iii) provides physicians' services primarily (A) directly through physicians who are either employees or partners of such organization, or (B) through arrangements with individual physicians or one or more groups of physicians (organized on a group practice or individual practice basis).

((~~(10)~~)) (11) "Health services" means clinically related (i.e., preventive, diagnostic, curative, rehabilitative, or palliative) services and includes alcoholism, drug abuse, and mental health services and as defined in federal law.

((~~(11)~~)) (12) "Health service area" means a geographic region appropriate for effective health planning which includes a broad range of health services ((~~and a population of at least four hundred fifty thousand persons~~)).

((~~(12)~~)) (13) "Institutional health services" means health services provided in or through health care facilities and entailing annual operating costs of at least five hundred thousand dollars adjusted by the department by rule to reflect changes in the United States department of commerce composite construction cost index; or a lesser amount required by federal law and established by the department by rule: PROVIDED, That no new health care facility may be initiated as an institutional health service.

(((13) "Major medical equipment" means medical equipment which is used for the provision of medical and other health services and which costs in excess of one million dollars, adjusted by the department by rule to reflect changes in the United States department of commerce composite construction cost index; or a lesser amount required by federal law and established by the department by rule; except that such term does not include medical equipment acquired by or on behalf of a clinical laboratory to provide clinical laboratory services if the clinical laboratory is independent of a physician's office and a hospital and it has been determined under Title XVIII of the Social Security Act to meet the requirements of paragraphs (10) and (11) of section 1861(s) of such act.))

(14) "Person" means an individual, a trust or estate, a partnership, a corporation (including associations, joint stock companies, and insurance companies), the state, or a political subdivision or instrumentality of the state, including a municipal corporation or a hospital district.

(15) "Provider" generally means a health care professional or an organization, institution, or other entity providing health care but the precise definition for this term shall be established by rule of the department, consistent with federal law.

(16) "Public health" means the level of well-being of the general population; those actions in a community necessary to preserve, protect, and promote the health of the people for which government is responsible; and the governmental system developed to guarantee the preservation of the health of the people.

(17) "Regional health council" means a public regional planning body or a private nonprofit corporation which is organized and operated in a manner that is consistent with the laws of the state and which is capable of performing each of the functions described in RCW 70.38.085. A regional health council shall have a governing body for health planning which is composed of a majority (but not more than sixty percent of the members) of persons who are residents of the health service area served by the entity; who are consumers of health care; who are broadly representative of the social, economic, linguistic, and racial populations, and geographic areas of the health service area, and major purchasers of health care; and who are not, nor within the twelve months preceding appointment have been, providers of health care. The remainder of the members shall be residents of the health service area served by the agency who are providers of health care.

(18) "Regional health plan" means a document which provides at least a statement of health goals and priorities for the health service area. In addition, it sets forth the number, type, and distribution of health facilities, services, and manpower needed within the health service area to meet the goals of the plan.

(19) "State health plan" means a document developed in accordance with RCW 70.38.065.

(20) "Tertiary health service" means a health service that is provided in a health facility, requires a large amount of capital investment, and is not commonly found in general hospitals. The commission shall further define these services by rule.

Sec. 18. Section 8, chapter 161, Laws of 1979 ex. sess. as last amended by section 6, chapter 235, Laws of 1983 and RCW 70.38.085 are each amended to read as follows:

The council shall establish health service areas within the state and designate regional health councils organized, composed, and established in accordance with this chapter and criteria established by the council, considering the resources available for such purpose.

Each designated regional health council shall have as its primary responsibility the provision of effective health planning for its health service area and the promotion of health services, manpower, and facilities which meet identified needs and reduce documented inefficiencies. To meet its primary responsibility, a designated regional health council shall carry out the following functions:

(1) Exercise such duties, powers, and responsibilities as are prescribed for health systems agencies in federal law, consistent with the policy of this chapter.

(2) Identify local health problems and concerns and assemble and analyze health data and information consistent with the requirements of the board;

(3) ((~~Develop, consistent with the criteria established by the council, other materials of assistance to the council in preparation of the state health plan;~~

~~(4)~~)) Review and make recommendations to the council respecting the need for health services in the health service area of the council;

((~~(5)~~)) (4) Seek the assistance of individuals and public and private entities in the health service area, to the extent practicable; and

((~~(6)~~)) (5) Exercise such other duties and functions as may be established by the council or department to fulfill the intent and purposes of this chapter, which may include review, analysis, and recommendations on applications for certificates of need.

In addition, the regional health councils may establish, biennially review, and amend as necessary a regional health plan which provides at least a statement of health goals and priorities for the health service area and sets forth the number, type, and distribution of health facilities, services, and manpower needed within the health service area to meet the goals of the plan.

Sec. 19. Section 10, chapter 161, Laws of 1979 ex. sess. as last amended by section 21, chapter 288, Laws of 1984 and RCW 70.38.105 are each amended to read as follows:

(1) The ((~~department~~)) commission is authorized and directed to implement the certificate of need program in this state pursuant to the provisions of this chapter.

(2) There shall be a state certificate of need program which is administered consistent with the requirements of federal law as necessary to the receipt of federal funds by the state.

(3) No person shall engage in any undertaking which is subject to certificate of need review under subsection (4) of this section without first having received from the ((~~department~~)) commission either a certificate of need or an exception granted in accordance with this chapter.

(4) The following shall be subject to certificate of need review under this chapter:

(a) The construction, development, or other establishment of a new health care facility;

(b) The sale, purchase, or lease of part or all of any existing hospital as defined in RCW 70.39.020;

(c) ((Any capital expenditure by or on behalf of a health care facility which substantially changes the services of the facility after January 1, 1981, provided that the substantial changes in services are specified by the department in rule;

(d) Any capital expenditure by or on behalf of a health care facility which exceeds the expenditure minimum as defined by RCW 70.38.025. However, a capital expenditure which is not subject to certificate of need review under (a), (b), (c), (e), (f), or (g) of this subsection and which is solely for any one or more of the following is not subject to certificate of need review except to the extent required by the federal government as a condition to receipt of federal assistance and does not substantially affect patient charges:

~~(i) Communications and parking facilities;~~

~~(ii) Mechanical, electrical, ventilation, heating, and air conditioning systems;~~

~~(iii) Energy conservation systems;~~

~~(iv) Repairs to, or the correction of, deficiencies in existing physical plant facilities which are necessary to maintain state licensure;~~

~~(v) Acquisition of equipment, including data processing equipment, which is not or will not be used in the direct provision of health services;~~

~~(vi) Construction which involves physical plant facilities, including administrative and support facilities, which are not or will not be used for the provision of health services;~~

~~(vii) Acquisition of land; and~~

~~(viii) Refinancing of existing debt;~~

~~(e)~~)) A change in bed capacity of a health care facility which increases the total number of licensed beds or redistributes beds among facility and service categories of acute care, skilled nursing, intermediate care, and boarding home care if the bed redistribution is to be effective for a period in excess of six months; and

((~~(f) Acquisition of major medical equipment:~~

~~(i) If the equipment will be owned by or located in a health care facility; or~~

(ii) If, after January 1, 1981, the equipment is not to be owned by or located in a health care facility, the department finds consistent with federal regulations the equipment will be used to provide services for hospital inpatients, or the person acquiring such equipment did not notify the department of the intent to acquire such equipment at least thirty days before entering into contractual arrangements for such acquisition;

~~(g)~~)) (d) Any new ((~~institutional~~)) tertiary health services which are offered in or through a health care facility, and which were not offered on a regular basis by, in, or through such health care facility within the twelve-month period prior to the time such services would be offered((~~; and~~

(h) Any expenditure by or on behalf of a health care facility in excess of the expenditure minimum made in preparation for any undertaking under subsection (4) of this section and any arrangement or commitment made for financing such undertaking. Expenditures of preparation shall include expenditures for architectural designs, plans, working drawings, and specifications. The department may issue certificates of need permitting predevelopment expenditures, only, without authorizing any subsequent undertaking with respect to which such predevelopment expenditures are made.

~~(5) No person may divide a project in order to avoid review requirements under any of the thresholds specified in this section~~)).

Sec. 20. Section 9, chapter 139, Laws of 1980 as amended by section 3, chapter 119, Laws of 1982 and RCW 70.38.111 are each amended to read as follows:

(1) The ((~~department~~)) commission shall not require a certificate of need for the offering of an inpatient ((~~institutional~~)) tertiary health service ((or the acquisition of major medical equipment for the provision of an inpatient institutional health service or the obligation of a capital expenditure for the provision of an inpatient institutional health service by--)) by:

(a) A health maintenance organization or a combination of health maintenance organizations if (i) the organization or combination of organizations has, in the service area of the organization or the service areas of the organizations in the combination, an enrollment of at least fifty thousand individuals, (ii) the facility in which the service will be provided is or will be geographically located so that the service will be reasonably accessible to such enrolled individuals, and (iii) at least seventy-five percent of the patients who can reasonably be expected to receive the ((~~institutional~~)) tertiary health service will be individuals enrolled with such organization or organizations in the combination((,));

(b) A health care facility if (i) the facility primarily provides or will provide inpatient health services, (ii) the facility is or will be controlled, directly or indirectly, by a health maintenance organization or a combination of health maintenance organizations which has, in the service area of the organization or service areas of the organizations in the combination, an enrollment of at least fifty thousand individuals, (iii) the facility is or will be geographically located so that the service will be reasonably accessible to such enrolled individuals, and (iv) at least seventy-five percent of the patients who can reasonably be expected to receive the ((~~institutional~~)) tertiary health service will be individuals enrolled with such organization or organizations in the combination((,)); or

(c) A health care facility (or portion thereof) if (i) the facility is or will be leased by a health maintenance organization or combination of health maintenance organizations which has, in the service area of the organization or the service areas of the organizations in the combination, an enrollment of at least fifty thousand individuals and, on the date the application is submitted under subsection (2) of this section, at least fifteen years remain in the term of the lease, (ii) the facility is or will be geographically located so that the service will be reasonably accessible to such enrolled individuals, and (iii) at least seventy-five percent of the patients who can reasonably be expected to receive the ((~~institutional~~)) tertiary health service will be individuals enrolled with such organization((,));

if, with respect to such offering, acquisition, or obligation, the department has, upon application under subsection (2) of this section, granted an exemption from such requirement to the organization, combination of organizations, or facility.

(2) A health maintenance organization, combination of health maintenance organizations, or health care facility shall not be exempt under subsection (1) of this section from obtaining a certificate of need before offering ((~~an institutional health service, acquiring major medical equipment, or obligating capital expenditures unless--~~)) a tertiary health service unless:

(a) It has submitted at least thirty days prior to the offering of ((~~an institutional health service, acquiring major medical equipment, or obligating capital expenditures in excess of the expenditure minimum an application for such exemption,~~)) tertiary health service; and

(b) The application contains such information respecting the organization, combination, or facility and the proposed offering, acquisition, or obligation as the ((~~department~~)) commission may require to determine if the organization or combination meets the requirements of subsection (1) of this section or the facility meets or will meet such requirements((,)); and

(c) The ((~~department~~)) commission approves such application. The ((~~department~~)) commission shall approve or disapprove an application for exemption within thirty days of receipt of a completed application. In the case of a proposed health care facility (or portion thereof) which has not begun to provide ((~~institutional~~)) tertiary health services on the date an application is submitted under this subsection with respect to such facility (or portion), the facility (or portion) shall meet the applicable requirements of subsection (1) of this section when the facility first provides such services. The ((~~department~~)) commission shall approve an application submitted under this subsection if it determines that the applicable requirements of subsection (1) of this section are met.

(3) A health care facility (or any part thereof) or medical equipment with respect to which an exemption was granted under subsection (1) of this section may not be sold or leased and a controlling interest in such facility or equipment or in a lease of such facility or equipment may not be acquired and a health care facility described in (1)(c) which was granted an exemption under subsection (1) of this section may not be used by any person other than the lessee described in (1)(c) unless((--)):

(a) The ((~~department~~)) commission issues a certificate of need approving the sale, lease, acquisition, or use((,)); or

(b) The ((~~department~~)) commission determines, upon application, that (i) the entity to which the facility or equipment is proposed to be sold or leased, which intends to acquire the controlling interest, or which intends to use the facility is a health maintenance organization or a combination of health maintenance organizations which meets the requirements of (1)(a) (i), and (ii) with respect to such facility or equipment, meets the requirements of (1)(a) (ii) or (iii) or the requirements of (1)(b) (i) and (ii).

(4) In the case of a health maintenance organization, an ambulatory care facility, or a health care facility, which ambulatory or health care facility is controlled, directly or indirectly, by a health maintenance organization or a combination of health maintenance organizations, the ((~~department~~)) commission may under the program apply its certificate of need requirements only to the offering of inpatient ((~~institutional~~)) tertiary health services and the acquisition of major medical equipment and the obligation of capital expenditures for the offering of inpatient institutional health services, and then only to the extent that such offering, acquisition, or obligation is not exempt under the provisions of this section.

Sec. 21. Section 11, chapter 161, Laws of 1979 ex. sess. as last amended by section 22, chapter 288, Laws of 1984 and RCW 70.38.115 are each amended to read as follows:

(1) Certificates of need shall be issued, denied, suspended, or revoked by the designee of the ((~~secretary of the department~~)) commission in accord with the provisions of this chapter and rules of the ((~~department~~)) commission which establish review procedures and criteria for the certificate of need program.

(2) Criteria for the review of certificate of need applications, except as provided in subsection (3) of this section for health maintenance organizations, shall include but not be limited to consideration of the following:

(a) The relationship of the health services being reviewed to the applicable health plans;

(b) The need that the population served or to be served by such services has for such services;

(d) The financial feasibility and the probable impact of the proposal on the cost of and charges for providing health services in the community to be served((, including findings and recommendations of the Washington state hospital commission in the case of applications submitted by hospitals. An application by a hospital shall be denied if the state hospital commission does not recommend approval, unless the secretary provides the commission with a written statement setting forth the reason or reasons, and citing the applicable subsection or subsections of this section, for approving an application that the commission has determined to be not feasible));

(e) In the case of health services to be provided, (i) the availability of alternative uses of project resources for the provision of other health services, (ii) the extent to which such proposed services will be accessible to all residents of the area to be served, and (iii) the need for and the availability in the community of services and facilities for osteopathic and allopathic physicians and their patients. The ((~~department~~)) commission shall consider the application in terms of its impact on existing and proposed institutional training programs for doctors of osteopathy and medicine at the student, internship, and residency training levels;

(f) In the case of a construction project, the costs and methods of the proposed construction, including the cost and methods of energy provision, and the probable impact of the construction project reviewed (i) on the cost of providing health services by the person proposing such construction project and (ii) on the cost and charges to the public of providing health services by other persons;

(g) The special needs and circumstances of osteopathic hospitals, nonallopathic services and children's hospitals;

(h) Improvements or innovations in the financing and delivery of health services which foster cost containment and serve to promote quality assurance and cost-effectiveness;

(i) In the case of health services proposed to be provided, the efficiency and appropriateness of the use of existing services and facilities similar to those proposed;

(j) In the case of existing services or facilities, the quality of care provided by such services or facilities in the past; and

(k) In the case of hospital certificate of need applications, whether the hospital meets or exceeds the regional average level of charity care, as determined by the hospital commission.

(3) A certificate of need application of a health maintenance organization or a health care facility which is controlled, directly or indirectly, by a health maintenance organization, shall be approved by the ((~~department~~)) commission if the ((~~department~~)) commission finds:

(a) Approval of such application is required to meet the needs of the members of the health maintenance organization and of the new members which such organization can reasonably be expected to enroll; and

(b) The health maintenance organization is unable to provide, through services or facilities which can reasonably be expected to be available to the organization, its institutional health services in a reasonable and cost-effective manner which is consistent with the basic method of operation of the organization and which makes such services available on a long-term basis through physicians and other health professionals associated with it.

A health care facility (or any part thereof) ((~~or medical equipment~~)) with respect to which a certificate of need was issued under this subsection may not be sold or leased and a controlling interest in such facility or equipment or in a lease of such facility or equipment may not be acquired unless the ((~~department~~)) commission issues a certificate of need approving the sale, acquisition, or lease.

(4) The decision of the ((~~department~~)) commission on a certificate of need application shall be consistent with the state health plan in effect, or superseding rule, except in emergency circumstances which pose a threat to the public health. The ((~~department~~)) commission in making its final decision may issue a conditional certificate of need if it finds that the project is justified only under specific circumstances. The conditions shall directly relate to the project being reviewed. The conditions may be released if it can be substantiated that the conditions are no longer valid and the release of such conditions would be consistent with the purposes of this chapter.

(5) Criteria adopted for review in accordance with subsection (2) of this section may vary according to the purpose for which the particular review is being conducted or the type of health service reviewed.

(6) The ((~~department~~)) commission shall specify information to be required for certificate of need applications. Within fifteen days of receipt of the application, the ((~~department~~)) commission shall request additional information considered necessary to the application or start the review process. Applicants may decline to submit requested information through written notice to the ((~~department~~)) commission, in which case review starts on the date of receipt of the notice. Applications may be denied or limited because of failure to submit required and necessary information.

(7) Concurrent review is for the purpose of comparative analysis and evaluation of competing or similar projects in order to determine which of the projects may best meet identified needs. Categories of projects subject to concurrent review include at least new health care facilities((,)) and new services((~~, and expansion of existing health care facilities~~)). The ((~~department~~)) commission shall specify time periods for the submission of applications for certificates of need subject to concurrent review, which shall not exceed ninety days. Review of concurrent applications shall start fifteen days after the conclusion of the time period for submission of applications subject to concurrent review. Concurrent review periods shall be limited to one hundred fifty days, except as provided for in rules adopted by the ((~~department~~)) commission authorizing and limiting amendment during the course of the review, or for an unresolved pivotal issue declared by the ((~~department~~)) commission.

(8) Review periods for certificate of need applications other than those subject to concurrent review shall be limited to ninety days. Review periods may be extended up to thirty days if needed by a review agency, and for unresolved pivotal issues the ((~~department~~)) commission may extend up to an additional thirty days. A review may be extended in any case if the applicant agrees to the extension.

(9) The ((~~department~~)) commission or a designated regional health council shall conduct a public hearing on a certificate of need application if requested unless the review is expedited or subject to emergency review. The ((~~department~~)) commission by rule shall specify the period of time within which a public hearing must be requested and requirements related to public notice of the hearing, procedures, recordkeeping and related matters.

(10) Any applicant denied a certificate of need or whose certificate of need has been suspended or revoked shall be afforded an opportunity for administrative review in accordance with chapter ((~~34.04~~)) 34.05 RCW and a hearing shall be held within one hundred twenty days of a request therefor. An administrative law judge shall review the decision of the ((~~secretary's designee~~)) commission and render a proposed decision for consideration by the ((~~secretary~~)) commission in accordance with chapter 34.12 RCW or remand the matter to the ((~~secretary's designee~~)) commission for further consideration. The ((~~secretary's~~)) commission's final decision is subject to review by the superior court as provided in chapter ((~~34.04~~)) 34.05 RCW.

(11) The ((~~department~~)) commission may establish procedures and criteria for reconsideration of decisions.

(12) An amended certificate of need shall be required for the following modifications of an approved project:

(a) A new service;

(b) An expansion of a service beyond that originally approved;

(d) A significant reduction in the scope of a project without a commensurate reduction in the cost of the project, or a cost increase (as represented in bids on a construction project or final cost estimates acceptable to the person to whom the certificate of need was issued) if the total of such increases exceeds twelve percent or fifty thousand dollars, whichever is greater, over the maximum capital expenditure approved. The review of reductions or cost increases shall be restricted to the continued conformance of the project with the review criteria pertaining to financial feasibility and cost containment.

(13) An application for a certificate of need for a capital expenditure which is determined by the department to be required to eliminate or prevent imminent safety hazards or correct violations of applicable licensure and accreditation standards shall be approved.

Sec. 22. Section 12, chapter 161, Laws of 1979 ex. sess. as last amended by section 9, chapter 235, Laws of 1983 and RCW 70.38.125 are each amended to read as follows:

(1) A certificate of need shall be valid for two years: PROVIDED, That one six-month extension may be made if it can be substantiated that substantial and continuing progress toward commencement of the project has been made as defined by regulations to be adopted pursuant to this chapter.

(2) A project for which a certificate of need has been issued shall be commenced during the validity period for the certificate of need.

(3) The ((~~department~~)) commission, in cooperation with the regional health councils, ((~~and the hospital commission in the case of hospital projects,~~)) shall monitor the costs and components of approved projects to assure conformance with certificates of need that have been issued. Rules and regulations adopted shall specify when changes in the cost or components of a project require reevaluation of the project. The ((~~department~~)) commission may require applicants to submit periodic progress reports on approved projects or other information as may be necessary to effectuate its monitoring responsibilities.

(4) The secretary of the department of social and health services, in the case of a new health facility, shall not issue any license unless and until a prior certificate of need shall have been issued by the ((~~department~~)) commission for the offering or development of such new health facility.

(5) Any person who engages in any undertaking which requires certificate of need review without first having received from the ((~~department~~)) commission either a certificate of need or an exception granted in accordance with this chapter shall be liable to the state in an amount not to exceed one hundred dollars a day for each day of such unauthorized offering or development. Such amounts of money shall be recoverable in an action brought by the attorney general on behalf of the state in the superior court of any county in which the unauthorized undertaking occurred. Any amounts of money so recovered by the attorney general shall be deposited in the state general fund.

(6) The ((~~department~~)) commission may bring any action to enjoin a violation or the threatened violation of the provisions of this chapter or any rules and regulations adopted pursuant to this chapter, or may bring any legal proceeding authorized by law, including but not limited to the special proceedings authorized in Title 7 RCW, in the superior court in the county in which such violation occurs or is about to occur, or in the superior court of Thurston county.

Sec. 23. Section 13, chapter 161, Laws of 1979 ex. sess. as amended by section 10, chapter 235, Laws of 1983 and RCW 70.38.135 are each amended to read as follows:

The ((~~secretary of the department~~)) commission shall have authority to:

(1) Provide when needed temporary or intermittent services of experts or consultants or organizations thereof, by contract, when such services are to be performed on a part time or fee-for-service basis;

(2) Make or cause to be made such on-site surveys of health care or medical facilities as may be necessary ((~~to the development of the state health plan~~)) for policy development and the administration of the certificate of need program;

(3) Upon review of recommendations, if any, from the board of health:

(a) Promulgate rules under which health care ((~~facilities~~)) providers doing business within the state shall submit to the ((~~department~~)) commission such data related to health and health care as the ((~~department~~)) commission finds necessary to the performance of its functions under this chapter;

(b) Promulgate rules pertaining to the maintenance and operation of medical facilities which receive federal assistance under the provisions of Title XVI;

(c) Promulgate rules in implementation of the provisions of this chapter, including the establishment of procedures for public hearings for predecisions and post-decisions on applications for certificate of need;

(d) Promulgate rules providing circumstances and procedures of expedited certificate of need review if((:

~~(i) An application is found consistent with the state health plan; and~~

~~(ii)~~)) there has not been a significant change in existing health facilities of the same type or in the need for such health facilities and services;

(4) Grant allocated state funds to regional health councils to fund not more than seventy-five percent of the costs of regional planning activities, excluding costs related to review of applications for certificates of need, provided for in this chapter or approved by the ((~~council~~)) commission; and

(5) Contract with and provide reasonable reimbursement for designated regional health councils to assist in determinations of certificates of need.

Sec. 24. Section 9, chapter 223, Laws of 1982 as amended by section 25, chapter 288, Laws of 1984 and RCW 43.131.253 are each amended to read as follows:

The hospital commission and its powers and duties shall be terminated on June 30, ((~~1989~~)) 1993, as provided in RCW 43.131.254.

Sec. 25. Section 10, chapter 223, Laws of 1982 as amended by section 26, chapter 288, Laws of 1984 and RCW 43.131.254 are each amended to read as follows:

The following acts or parts of acts, as now existing or hereafter amended, are each repealed, effective June 30, ((~~1990~~)) 1994:

(1) Section 2, chapter 5, Laws of 1973 1st ex. sess., section 1, chapter 288, Laws of 1984 and RCW 70.39.010;

(2) Section 3, chapter 5, Laws of 1973 1st ex. sess., section 2, chapter 288, Laws of 1984 and RCW 70.39.020;

(3) Section 4, chapter 5, Laws of 1973 1st ex. sess., section 3, chapter 288, Laws of 1984 and RCW 70.39.030;

(4) Section 5, chapter 5, Laws of 1973 1st ex. sess., section 1, chapter 36, Laws of 1977, section 4, chapter 288, Laws of 1984 and RCW 70.39.040;

(5) Section 6, chapter 5, Laws of 1973 1st ex. sess., section 104, chapter 287, Laws of 1984, section 5, chapter 288, Laws of 1984 and RCW 70.39.050;

(6) Section 7, chapter 5, Laws of 1973 1st ex. sess., section 1, chapter 35, Laws of 1977, section 6, chapter 288, Laws of 1984 and RCW 70.39.060;

(7) ((~~Section 8, chapter 5, Laws of 1973 1st ex. sess., section 7, chapter 288, Laws of 1984 and RCW 70.39.070;~~

~~(8)~~)) Section 9, chapter 5, Laws of 1973 1st ex. sess., section 8, chapter 288, Laws of 1984 and RCW 70.39.080;

((~~(9)~~)) (8) Section 10, chapter 5, Laws of 1973 1st ex. sess., section 9, chapter 288, Laws of 1984 and RCW 70.39.090;

((~~(10)~~)) (9) Section 11, chapter 5, Laws of 1973 1st ex. sess., section 10, chapter 288, Laws of 1984 and RCW 70.39.100;

((~~(11)~~)) (10) Section 12, chapter 5, Laws of 1973 1st ex. sess., section 11, chapter 288, Laws of 1984 and RCW 70.39.110;

((~~(12)~~)) (11) Section 13, chapter 5, Laws of 1973 1st ex. sess., section 12, chapter 288, Laws of 1984 and RCW 70.39.120;

((~~(13)~~)) (12) Section 14, chapter 5, Laws of 1973 1st ex. sess., section 82, chapter 75, Laws of 1977, section 13, chapter 288, Laws of 1984, section 58, chapter 505, Laws of 1987 and RCW 70.39.130;

((~~(14)~~)) (13) Section 15, chapter 5, Laws of 1973 1st ex. sess., section 1, chapter 163, Laws of 1974 ex. sess., section 14, chapter 288, Laws of 1984, section 1, chapter 118, Laws of 1988 and RCW 70.39.140;

(14) Section 1, chapter 262, Laws of 1988 and RCW 70.39.144;

(15) Section 16, chapter 5, Laws of 1973 1st ex. sess., section 1, chapter 154, Laws of 1977 ex. sess., section 18, chapter 288, Laws of 1984 and RCW 70.39.150;

(16) ((~~Section 17, chapter 5, Laws of 1973 1st ex. sess., section 19, chapter 288, Laws of 1984 and RCW 70.39.160;~~

~~(17)~~)) Section 18, chapter 5, Laws of 1973 1st ex. sess., section 67, chapter 57, Laws of 1985 and RCW 70.39.170;

((~~(18)~~)) (17) Section 19, chapter 5, Laws of 1973 1st ex. sess. and RCW 70.39.180;

((~~(19)~~)) (18) Section 20, chapter 5, Laws of 1973 1st ex. sess. and RCW 70.39.190;

((~~(20)~~)) (19) Section 21, chapter 5, Laws of 1973 1st ex. sess., section 20, chapter 288, Laws of 1984 and RCW 70.39.200;

((~~(21)~~)) (20) Section 22, chapter 5, Laws of 1973 1st ex. sess. and RCW 70.39.900;

((~~(22)~~)) (21) Section 23, chapter 5, Laws of 1973 1st ex. sess. and RCW 70.39.910;

((~~(23)~~)) (22) Section 15, chapter 288, Laws of 1984 and RCW 70.39.165;

((~~(24)~~)) (23) Section 23, chapter 288, Laws of 1984 and RCW 70.39.195; and

((~~(25)~~)) (24) Section 24, chapter 288, Laws of 1984 and RCW 70.39.125.

NEW SECTION. Sec. 26. The following acts or parts of acts are each repealed:

(1) Section 8, chapter 5, Laws of 1973 1st ex. sess., section 17, chapter 125, Laws of 1984, section 7, chapter 288, Laws of 1984 and RCW 70.39.070; and

(2) Section 17, chapter 5, Laws of 1973 1st ex. sess., section 19, chapter 288, Laws of 1984 and RCW 70.39.160.

NEW SECTION. Sec. 27. The legislature declares that access to adequate health care is a right which should be available to all Washingtonians. As such, this health access right is a major public policy concern and that unless addressed through specific statutory direction, adequate health care through the expenditure of public funds will not be attainable for a vast majority of the state's population.

The legislature finds that the increase in health costs threaten to make health care unaffordable to many citizens. Furthermore, the legislature finds that unreimbursed health care services provided to persons who are unable to pay for such services causes the cost of services to paying patients to increase in a manner unrelated to the actual cost of services delivered. Consequently, the legislature finds that inequities between hospitals in the provision of unreimbursed services prevent hospitals which provide the bulk of such services from competing on an equitable economic basis with hospitals which provide relatively little care to indigent people. Therefore, it is the intent of the legislature to provide a mechanism for the funding of health care services to indigent persons, the cost of which shall be borne by the state and by hospitals which are granted the privilege of operating in this state.

NEW SECTION. Sec. 28. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Department" means the department of social and health services.

(2) "Hospital" means a health care institution as defined in RCW 70.39.020(3).

(3) "Adjusted net patient services revenue" means the net patient services as defined by the hospital commission, of all hospitals with the exception of revenues from the following sources:

(a) Reimbursement received through the state medical assistance program;

(b) Reimbursement received through the federal medicare program.

NEW SECTION. Sec. 29. The health access fund is created in the custody of the state treasurer. All receipts from assessment fees and other revenue collected under sections 30 and 31 of this act shall be deposited into the fund. Expenditures from the fund may be used only for (1) reimbursement of administrative expenditures as specified in section 31 of this act to the department of social and health services and the department of revenue; and (2) disbursements to hospitals under the medically indigent program created by RCW 74.09.700. Only the secretary of social and health services or the secretary's designee may authorize expenditures from the fund. The fund is subject to allotment procedures under chapter 43.88 RCW.

NEW SECTION. Sec. 30. Effective October 1, 1989, there is hereby levied and there shall be collected by the department of revenue from each hospital an assessment equal to 2.06 percent of the hospital's adjusted net patient services revenue, as defined in section 28 of this act, for the provision of hospital services for the preceding monthly or quarterly payment period. A hospital that does not charge any fees for services rendered to patients may apply to the department for a waiver of the assessment. The department of social and health services and the department of revenue may adopt such rules, pursuant to chapter 82.32 RCW, as are necessary to administer this chapter.

NEW SECTION. Sec. 31. The department shall contract with the department of revenue for the administration and collection of the assessment, and the department of revenue shall deduct a percentage amount, as provided by contract, related to the actual cost of collecting funds not to exceed one percent of the revenues collected for administration and collection expenses incurred by the department of revenue. The contract between the department and the department of revenue shall be approved by the office of financial management. The remainder of any portion of any assessment authorized by this chapter collected by the department of revenue shall be deposited by the department of revenue in the health access fund.

NEW SECTION. Sec. 32. The department of revenue shall impose an administrative fine, not to exceed five hundred dollars per day, for failure of any hospital to pay its assessment by the first day of the calendar quarter on which it is due. Failure of a hospital to pay its assessment within thirty days after the assessment is due shall be grounds for the department to impose an administrative fine not to exceed five thousand dollars per day.

NEW SECTION. Sec. 33. If a department of health is created, the hospital commission shall be abolished and its powers, duties, and functions transferred to the department of health. All references to the director or the hospital commission in the Revised Code of Washington shall be construed to mean the director or the department of health.

NEW SECTION. Sec. 34. If a department of health is created, all reports, documents, surveys, books, records, files, papers, or written material in the possession of the hospital commission shall be delivered to the custody of the department of health. All cabinets, furniture, office equipment, motor vehicles, and other tangible property employed by the hospital commission shall be made available to the department of health. All funds, credits, or other assets held by the hospital commission shall be assigned to the department of health.

If a department of health is created, any appropriations made to the hospital commission shall be transferred and credited to the department of health.

Whenever any question arises as to the transfer of any personnel, funds, books, documents, records, papers, files, equipment, or other tangible property used or held in the exercise of the powers and the performance of the duties and functions transferred, the director of financial management shall make a determination as to the proper allocation and certify the same to the state agencies concerned.

NEW SECTION. Sec. 35. If a department of health is created, all employees of the hospital commission are transferred to the jurisdiction of the department of health. All employees classified under chapter 41.06 RCW, the state civil service law, are assigned to the department of health to perform their usual duties upon the same terms as formerly, without any loss of rights, subject to any action that may be appropriate thereafter in accordance with the laws and rules governing state civil service.

NEW SECTION. Sec. 36. If a department of health is created, all rules and all pending business before the hospital commission shall be continued and acted upon by the department of health. All existing contracts and obligations shall remain in full force and shall be performed by the department of health.

NEW SECTION. Sec. 37. The transfer of the powers, duties, functions, and personnel of the hospital commission shall not affect the validity of any act performed prior to the transfer.

NEW SECTION. Sec. 38. If apportionments of budgeted funds are required because of the transfers directed by sections 34 through 37 of this act, the director of financial management shall certify the apportionments to the agencies affected, the state auditor, and the state treasurer. Each of these shall make the appropriate transfer and adjustments in funds and appropriation accounts and equipment records in accordance with the certification.

NEW SECTION. Sec. 39. Nothing contained in sections 33 through 38 of this act may be construed to alter any existing collective bargaining unit or the provisions of any existing collective bargaining agreement until the agreement has expired or until the bargaining unit has been modified by action of the personnel board as provided by law.

NEW SECTION. Sec. 40. Sections 27 through 32 of this act shall constitute a new chapter in Title 70 RCW.