AN ACT Relating to rural health care; amending RCW 70.39.020, 70.38.025, and 70.38.111; adding a new section to chapter 28B.80 RCW; adding a new section to chapter 70.39 RCW; adding a new chapter to Title 18 RCW; adding new chapters to Title 70 RCW; and creating new sections.

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

PART I

RURAL HEALTH SYSTEM PROJECT

NEW SECTION. Sec. 101. The legislature declares that availability of health services to rural citizens is an issue on which a state policy is needed.

The legislature finds that changes in the demand for health care, in reimbursement polices of public and private purchasers, in the economic and demographic conditions in rural areas threaten the availability of care services.

In addition, many factors inhibit needed changes in the delivery of health care services to rural areas which include inappropriate and outdated regulatory laws, aging and inefficient health care facilities, the absence of local planning and coordination of rural health care services, the lack of community understanding of the real costs and benefits of supporting rural hospitals, the lack of regional systems to assure access to care that cannot be provided in every community, and the absence of state health care policy objectives.

The legislature further finds that the creation of effective health care delivery systems that assure access to health care services provided in an affordable manner will depend on active local community involvement. It further finds that it is the duty of the state to create a regulatory environment and health care payment policy that promotes innovation at the local level to provide such care.

It further declares that it is the responsibility of the state to develop policy that provides direction to local communities with regard to such factors as a definition of health care services, identification of state-wide health status outcomes, clarification of state, regional, community responsibilities and interrelationships for assuring access to affordable health care and continued assurances that quality health care services are provided.

NEW SECTION. Sec. 102. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Administrator" means an individual selected by the secretary to administer the Washington rural health system project.

(2) "Department" means the department of health, if created, otherwise the department of social and health services.

(3) "Health care delivery system" means services and personnel involved in providing health care to a population in a geographic area.

(4) "Health care facility" means any land, structure, system, machinery, equipment, or other real or personal property or appurtenances useful for or associated with delivery of inpatient or outpatient health care service or support for such care or any combination thereof which is operated or undertaken in connection with a hospital, clinic, health maintenance organization, diagnostic or treatment center, extended care facility, or any facility providing or designed to provide therapeutic, convalescent or preventive health care services.

(5) "Health care system strategic plan" means a plan developed by the participant and includes identification of health care service needs of the participant, services and personnel necessary to meet health care service needs, identification of health status outcomes and outcome measures, identification of funding sources, and strategies to meet health care needs including measures of effectiveness.

(6) "Institutions of higher education" means educational institutions as defined in RCW 28B.10.016.

(7) "Local administrator" means an individual or organization representing the participant who may enter into legal agreements on behalf of the participant.

(8) "Participant" means communities, counties, and regions that serve as a health care catchment area where the project site is located.

(9) "Project" means the Washington rural health system project. (10) "Project site" means a site selected to participate in the project.

(11) "Secretary" means the secretary of health or the secretary of social and health services if a department of health is not created by the legislature.

NEW SECTION. Sec. 103. (1) The department shall establish the Washington rural health system project to provide financial and technical assistance to participants. The goal of the project is to help assure access to affordable health care services to citizens in the rural areas of Washington state.

(2) An administrator shall be appointed by the secretary to implement this chapter. The administrator shall report directly to the secretary. The secretary shall select an administrator who has demonstrated experience in rural health system development. Other state administrative costs necessary to implement this project shall be kept at a minimum to insure the maximum availability of funds for participants.

(3) The administrator may appoint such technical or advisory committees as he or she deems necessary. In appointing an advisory committee the administrator should assure representation by health care professionals, health care providers, and those directly involved in the purchase, provision, or delivery of health care services as well as consumers, rural community leaders, and those knowledgeable of the issues involved with health care public policy. Individuals appointed to any technical advisory committee shall serve without compensation for their services as members, but may be reimbursed for their travel expenses pursuant to RCW 43.03.050 and 43.03.060.

(4) The administrator may contract with third parties for services necessary to carry out activities to implement this chapter where this will promote economy, avoid duplication of effort, and make the best use of available expertise.

(5) The administrator may apply for, receive, and accept gifts and other payments, including property and service, from any governmental or other public or private entity or person, and may make arrangements as to the use of these receipts, including the undertaking of special studies and other projects related to the delivery of health care in rural areas.

(6) In designing and implementing the project the administrator shall consider the report of the Washington rural health care commission established under chapter 207, Laws of 1988. Nothing in this chapter requires the administrator to follow any specific recommendation contained in that report except as it may also be included in this chapter.

NEW SECTION. Sec. 104. The department may promulgate and adopt rules consistent with this chapter to carry out the purpose of this chapter. All rules shall be adopted in accordance with chapter 34.05 RCW. All rules and procedures adopted by the department shall minimize paperwork and compliance requirements for participants and should not be complex in nature so as to serve as a barrier or disincentive for prospective participants applying for the project.

NEW SECTION. Sec. 105. The administrator shall have the following powers and duties:

(1) To design the project application and selection process, including a program to advertise the project to rural communities and encourage prospective applicants to apply. Up to six project sites shall be selected which are eligible to receive seed grant funding. Funding shall be used to hire consultants and perform other activities necessary to meet participant requirements defined in this chapter. In considering selection of participants eligible for seed grant funding, the administrator should consider project sites where (a) existing access to health care is severely inadequate, (b) where a financially vulnerable health care facility is present, (c) where a financially vulnerable health care facility is present and an adjoining community in the same catchment area has a competing facility, or (d) where improvements in the delivery of primary care services, including preventive care services, is needed.

!ixUp to six additional project sites shall be selected which receive no funding. The administrator shall select unfunded project sites based upon merit and to the extent possible, based upon the desire to address specific health status outcomes;

(2) To design acceptable outcome measures which are based upon health status outcomes and are to be part of the community plan, to work with communities to set acceptable local outcome targets in the health care delivery system strategic plan, and to serve as a general resource to participants in the planning, administration, and evaluation of project sites;

(3) To assess and approve community strategic plans developed by participants, including an assessment of the technical and financial feasibility of implementing the plan and whether adequate local support for the plan is demonstrated;

(4) To define health care catchment areas, identify financially vulnerable health care facilities, and to identify rural populations which are not receiving adequate health care services;

(5) To identify existing private and public resources which may serve as eligible consultants, identify technical assistance resources for communities in the project, create a register of public and private technical resource services available and provide the register to participants. The administrator shall screen consultants to determine their qualifications prior to including them on the register;

(6) To work with other state agencies, institutions of higher education, and other public and private organizations to coordinate technical assistance services for participants;

(7) To administer available funds for community use while participating in the project and establish procedures to assure accountability in the use of seed grant funds by participants;

(8) To define data and other minimum requirements for adequate evaluation of projects and to develop and implement an overall monitoring and evaluation mechanism for the projects;

(9) To act as facilitator for multiple applicants and entrants to the project;

(10) To advise the secretary on rural health care program needs, including improvements in the delivery of health care services by the department to rural areas;

(11) To report to the legislature and others from time to time on the progress of the projects including the identification of statutory and regulatory barriers to successful completion of rural health care delivery goals and an ongoing evaluation of the project.

NEW SECTION. Sec. 106. The duties and responsibilities of participating communities shall include:

(1) To involve major health care providers, businesses, public officials, and other community leaders in project design, administration, and oversight;

(2) To identify an individual or organization to serve as the local administrator of the project. The administrator may require the local administrator to maintain acceptable accountability of seed grant funding;

(3) To coordinate and avoid duplication of public health and other health care services;

(4) To assess and analyze community health care needs;

(5) To identify services and providers necessary to meet needs;

(6) To develop outcome measures to assess the long-term effectiveness of modifications initiated through the project;

(7) To write a health care delivery system strategic plan including to the extent possible, identification of outcome measures needed to achieve health status outcomes identified in the plan. New organizational structures created should integrate existing programs and activities of local health providers so as to maximize the efficient planning and delivery of health care by local providers and promote more accessible and affordable health care services to rural citizens. Participants should create health care delivery system strategic plans which promote health care services which the participant can financially sustain;

(8) To screen and contract with consultants for technical assistance if the project site was selected to receive funding and assistance is needed;

(9) To monitor and evaluate the project in an ongoing manner;

(10) To implement necessary changes as defined in the plans such as converting existing facilities, developing or modifying services, recruiting providers, or obtaining agreements with other communities to provide some or all health care services; and

(11) To provide data and comply with other requirements of the administrator that are intended to evaluate the effectiveness of the projects.

NEW SECTION. Sec. 107. (1) The administrator may call upon other agencies of the state to provide available information to assist the administrator in meeting the responsibilities under this chapter. This information shall be supplied as promptly as circumstances permit.

(2) The administrator may call upon other state agencies including institutions of higher education as authorized under Title 28B RCW to identify and coordinate the delivery of technical assistance services to participants in meeting the responsibilities of this chapter. The state agencies and institutions of higher education shall cooperate and provide technical assistance to the administrator to the extent that current funding for these agencies and institutions of higher education permits.

NEW SECTION. Sec. 108. In addition to the powers and duties specified in section 105 of this act the administrator has the power to enter into contracts for the following functions and services:

(1) With public or private agencies, to assist the administrator in the administrator's duties to design or revise the health status outcomes, or to monitor or evaluate the performance of participants.

(2) With public or private agencies, to provide technical or professional assistance to project participants.

NEW SECTION. Sec. 109. (1) Participants are authorized to use funding granted to them by the administrator for the purpose of contracting for technical assistance services. Participants shall use only consultants identified by the administrator for consulting services unless the participant can show that an alternative consultant is qualified to provide technical assistance and is approved by the administrator. Adequate records shall be kept by the participant showing project site expenditures from grant moneys. Inappropriate use of grant funding shall be a gross misdemeanor.

(2) In providing a list of qualified consultants the administrator and the state shall not be held responsible for assuring qualifications of consultants and shall be held harmless for the actions of consultants. Furthermore, the administrator and the state shall not be held liable for the failure of participants to meet contractual obligations established in connection with project participation.

NEW SECTION. Sec. 110. Sections 101 through 110 of this act shall constitute a new chapter in Title 70 RCW.

PART II

RURAL HEALTH FACILITY LICENSURE MODEL

NEW SECTION. Sec. 201. The legislature finds that many rural communities do not operate hospitals in a cost-efficient manner. The cost of operating the rural hospital often exceeds the revenues generated. Some of these hospitals face closure and this may result in the loss of health care services for the community. Many communities are struggling to retain health care services by operating a cost-efficient facility located in the community. Current regulatory laws do not provide for the licensure option that is appropriate for rural areas.

The legislature further finds that a major barrier for the development of an appropriate rural licensure model is federal medicare approval to guarantee reimbursement for the costs of providing care and operating the facility. Medicare certification typically elaborates upon state licensure requirements. Medicare approval of reimbursement is more likely if the state has developed legal criteria for a rural-appropriate health facility. Medicare has begun negotiations with other states facing similar problems to develop exceptions with the goal of allowing reimbursement of rural alternative health care facilities. This state should begin negotiations with the federal government with the objective of designing a medicare eligible rural health care facility structured to meet the health care needs of rural Washington and be eligible for federal and state financial support for its development and operation.

NEW SECTION. Sec. 202. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Department" means the department of health, if created, otherwise the department of social and health services.

(2) "Rural health care facility" means a facility, group, or other formal organization or arrangement of facilities, equipment, and personnel capable of providing or assuring availability of health services. The services to be provided by the rural health care facility may be delivered in a single location or may be geographically dispersed in the community health service catchment area so long as they are organized under a common administrative structure or through a mechanism that provides appropriate referral, treatment, and follow-up.

(3) "Administrative structure" means a system of contracts or formal agreements between organizations and persons providing health services in an area that establishes the roles and responsibilities each will assume in providing the services of the rural health care facility.

NEW SECTION. Sec. 203. (1) The department shall establish and adopt such minimum standards and regulations pertaining to the construction, maintenance, and operation of rural health care facilities and rescind, amend, or modify such regulations from time to time as necessary in the public interest. In developing the regulations, the department shall consult with representatives of rural hospitals, community mental health centers, public health departments, community and migrant health clinics, and other providers of health care in rural communities. The department shall also consult with third-party payors, consumers, local officials, and others to insure broad participation in defining regulatory standards and requirements that are appropriate for rural facilities.

(2) When developing the rural health facility licensure rules, the department shall consider the report of the Washington rural health care commission established under chapter 207, Laws of 1988. Nothing in this chapter requires the department to follow any specific recommendation contained in that report except as it may also be included in this chapter.

(3) The department shall consult with the administrator authorized by this chapter when developing rules and licensing rural health care facilities.

(4) Upon developing rules, the department shall enter into negotiations with appropriate federal officials to seek medicare approval of the facility and financial participation of medicare and other federal programs in developing and operating the facility.

(5) The department shall report periodically to the senate health care and corrections committee and house of representatives health care committee on the progress of rule development and negotiations with the federal government.

NEW SECTION. Sec. 204. In developing the licensure regulations, the department shall:

(1) Minimize regulatory requirements to permit local flexibility and innovation in providing services;

(2) Promote the cost-efficient delivery of health care and other social services as is appropriate for the particular local community;

(3) Promote the delivery of services in a coordinated and nonduplicative manner;

(4) Maximize the use of existing health care facilities in the community;

(5) Permit regionalization of health care services when appropriate;

(6) Provide for linkages with hospitals, tertiary care centers, and other health care facilities to provide services not available in the facility; and

(7) Achieve health care outcomes defined by the community through a community planning process.

NEW SECTION. Sec. 205. The rural health care facility is not considered a hospital for determining building occupancy purposes.

NEW SECTION. Sec. 206. Sections 201 through 205 of this act shall constitute a new chapter in Title 70 RCW.

PART III

HEALTH PROFESSIONAL LOAN FORGIVENESS PROGRAM

NEW SECTION. Sec. 301. The legislature finds that changes in demographics, the delivery of health care services, and an escalation in the cost of educating health professionals has resulted in shortages of health professionals. A poor distribution of health care professionals has resulted in a surplus of some professionals in some areas of the state and a shortage of others in other parts of the state such as in the more rural areas. The high cost of health professional education requires that health care practitioners command higher incomes to repay the financial obligations incurred to obtain the required training. Health professional shortage areas are often areas that have troubled economies and lower per capita incomes. These areas often require more services because the health care needs are greater due to poverty or because the areas are difficult to service due to geographic circumstances. The salary potentials for shortage areas are often not as favorable when compared to nonshortage areas and practitioners are unable to serve. The legislature further finds that encouraging health professionals to serve in shortage areas is essential to assure continued access to health care for people living in these parts of the state.

NEW SECTION. Sec. 302. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Loan repayment" means a loan that is paid in full or in part if the participant renders health care services in a health professional shortage area or medically underserved areas as defined by the state health coordinating council or its successor.

(2) "Participant" means a licensed health professional who has commenced practice as a primary care provider in a designated health professional shortage area.

(3) "Board" means the higher education coordinating board.

(4) "Health professional shortage areas" means those geographic areas where health professionals are in short supply as a result of geographic maldistribution and where vacancies exist in serious numbers that jeopardize patient care and pose a threat to the public health and safety. The state health care coordinating council or its successor shall determine health professional shortage areas in the state guided by federal standards of "health manpower shortage areas," and "medically underserved areas," and "medically underserved populations."

(5) "Satisfied" means paid-in-full.

(6) "Licensed health professional" means a person authorized in the state of Washington to practice medicine pursuant to chapter 18.57 or 18.57A RCW or 18.71 or 18.71A RCW, to practice nursing pursuant to chapter 18.88 or 18.78 RCW, or to practice dentistry pursuant to chapter 18.32 RCW.

NEW SECTION. Sec. 303. The health professional loan repayment program is established for licensed health professionals serving in health professional shortage areas. The program shall be administered by the higher education coordinating board. In administrating this program, the board shall have the following duties:

(1) It shall select licensed health professionals to participate in the loan repayment program;

(2) It shall adopt rules to administer the program;

(3) It shall publicize the program; and

(4) It shall solicit and accept grants and donations from public and private sources for the program.

NEW SECTION. Sec. 304. The board shall establish a planning committee to assist it in developing criteria for the selection of participants. The board shall, at a minimum, include on the planning committee: Representatives from rural hospitals; public health districts or departments; community and migrant clinics; and private providers.

NEW SECTION. Sec. 305. The board may grant loan repayment awards to eligible participants from the funds appropriated for this purpose, or from any private or public funds given to the board for this purpose. The amount of the loan repayment shall not exceed fifteen thousand dollars per year for a maximum of five years. The board may establish awards of less than fifteen thousand dollars per year based upon reasonable levels of expenditures for each of the health professions covered by this chapter. Participants in the conditional nurse scholarship program authorized by chapter 28B.104 RCW are ineligible to receive assistance from the program.

NEW SECTION. Sec. 306. Participants in the health professional loan repayment program shall receive payment from the program for the purpose of repaying educational loans secured while attending a program of health professional training which led to licensure as a licensed health professional in the state of Washington.

(1) Participants shall agree to serve at least three years in a designated health professional shortage area.

(2) In providing health care services the participant shall not discriminate against any person on the basis of the person's ability to pay for such services or because payment for the health care services provided to such persons will be made under the insurance program established under part A or B of Title XVIII of the federal social security act or under a state plan for medical assistance approved under Title XIX of the federal social security act and agrees to accept assignment under section 18.42(b)(3)(B)(ii) of such act for all services for which payment may be made under part B of Title XVIII and enters into an appropriate agreement with the department of social and health services for medical assistance under Title XIX to provide services to individuals entitled to medical assistance under the plan. Participants found by the board to be in violation of this section shall be declared ineligible to receive assistance from the program.

(3) Repayment shall be limited to reasonable educational and living expenses as determined by the board and shall include principal and interest.

(4) Loans from both government and private sources may be repaid by the program. Participants shall agree to allow the board access to loan records and to acquire information from lenders necessary to verify eligibility and to determine payments. Loans may not be renegotiated with lenders to accelerate repayment.

(5) Repayment of loans established pursuant to this program shall begin no later than ninety days after the individual has become a participant. Payments shall be made quarterly to the participant until the loan is repaid or the participant becomes ineligible due to discontinued service in a health professional shortage area or after the fifth year of services when eligibility discontinues, whichever comes first.

(6) Should the participant discontinue service in a health professional shortage area payments against the loans of the participants shall cease to be effective on the date that the participant discontinues service.

(7) Participants who serve less than three years shall be obligated to repay to the program an amount equal to twice the total amount paid by the program on their behalf in addition to any payments on the unsatisfied portion of the principal and interest. The board shall determine when extraordinary circumstances exist for a participant so that the requirements of this subsection should be modified.

(8) The board is responsible for the collection of payments made on behalf of participants from the participants who discontinue service before their three-year obligation. The board shall exercise due diligence in such collection, maintaining all necessary records to ensure that the maximum amount of payment made on behalf of the participant is recovered. Collection under this section shall be pursued using the full extent of the law, including wage garnishment if necessary.

(9) The board shall not be held responsible for any outstanding payments on principal and interest to any lenders once a participant's eligibility expires.

NEW SECTION. Sec. 307. After consulting with the higher education coordinating board, the governor may transfer the administration of this program to another agency with an appropriate mission.

NEW SECTION. Sec. 308. No loan repayment may be awarded after June 30, 1995.

NEW SECTION. Sec. 309. Sections 301 through 308 of this act shall constitute a new chapter in Title 18 RCW.

PART IV

RURAL TRAINING OPPORTUNITIES FOR HEALTH CARE PROFESSIONALS

NEW SECTION. Sec. 401. The legislature finds that a shortage of physicians, nurses, and physician assistants exists in rural areas of the state. In addition, many education programs to train these health care providers do not include options for practical training experience in rural settings. As a result, many health care providers find their current training does not prepare them for the unique demands of rural practice.

The legislature declares that the availability of rural training opportunities as a part of professional medical, nursing, and physician assistant education would provide needed practical experience, serve to attract providers to rural areas, and help address the current shortage of these providers in rural Washington.

NEW SECTION. Sec. 402. A new section is added to chapter 28B.80 RCW to read as follows:

(1) The higher education coordinating board, in consultation with at least the state board for community college education, the superintendent of public instruction, and state-supported education programs in medicine and nursing, shall develop a plan for increasing rural training opportunities for students in medicine and nursing. The plan shall provide for direct exposure to rural health professional practice conditions for students planning careers in rural medicine and nursing.

(2) The boards and the medical and nurse education programs shall:

(a) Inventory existing rural-based clinical experience programs, including internships, clerkships, residencies, and other training opportunities available to students pursuing degrees in nursing and medicine;

(b) Identify where training opportunities do not currently exist and are needed;

(d) Develop recommendations on establishing agreements between education programs to assure that all students in medical and nurse education programs in the state have access to rural training opportunities; and

(e) Review private and public funding sources to finance rural-based training opportunities.

(3) The higher education coordinating board shall report to the house of representatives and senate standing committees on health care by December 1, 1989, with their findings and recommendations including needed legislative changes.

PART V

HEALTH PROFESSIONAL CROSS-CREDENTIALING IN RURAL AREAS

NEW SECTION. Sec. 501. The legislature finds that a shortage of trained radiological technologists, respiratory therapists, and pharmacy and laboratory technologists exists in rural areas of the state. In addition, low patient volumes in rural hospitals and primary care clinics make it financially difficult to hire and retain separate individuals with skills from each of these professions. The result is that health care services that could be provided locally are often not provided and patients are forced to go to urban areas for care.

The legislature declares that some limited cross- credentialing of health professionals with skills from one or more of these professions would be desirable in rural areas where shortages exist. The legislature further declares that the cross-credentialing of health professionals should not result in a reduction in the quality of health care provided by such individuals.

NEW SECTION. Sec. 502. (1) The department of licensing, in consultation with the board of pharmacy, the state health coordinating council, or its successor agency, the higher education coordinating board, representatives of rural hospitals and rural primary health care clinics, and other entities that the department of licensing wishes to consult with, shall investigate opportunities for the development of a pool of individuals who are cross-trained with skills in radiology, respiratory therapy, and pharmacy and laboratory technology.

(2) The department shall:

(a) Determine whether there is a need for health care professionals with multiple skills in rural areas;

(b) Determine whether individuals can be cross-credentialed for multiple skills without a reduction in the quality of health care;

(d) Identify what training and educational requirements are needed to allow for the medical practice of individuals with multiple skills;

(e) Develop recommendations on changes in current credentialing requirements to allow for credentialing of individuals with multiple skills; and

(f) Develop recommendations on whether the health care practice of cross-credentialed individuals should be limited to rural areas of the state.

(3) The department shall submit its findings and recommendations to the state health coordinating council, or its successor agency, by June 1, 1990. The state health coordinating council shall report to the house of representatives committee on health care and the senate committee on health care and corrections by December 1, 1990, on the need for changes in current credentialing requirements for the affected professions.

PART VI

STANDARDS FOR NURSES' TRAINING

NEW SECTION. Sec. 601. The legislature finds that a current shortage of nurses exists in many areas of the state as well as in certain nurse specialties. Surveys of nurses in Washington state evidenced a need for more accessible education for advancement to higher levels of practice.

The legislature declares that there is a need for the development of a state-wide plan for nursing education to meet the educational needs of nurses and the health care needs of the citizens of Washington state.

NEW SECTION. Sec. 602. The higher education coordinating board, in consultation with at least the state board of nursing, the state board of practical nursing, representatives of the state board for community college education, the superintendent of public instruction, public and private nursing education, health care facilities, and practicing nurses, shall develop a state-wide plan to be implemented no later than January 1, 1992. The plan shall provide for:

(1) Geographic availability of nursing education and training programs;

(2) Curriculum standards for each type of nursing education and training program;

(3) Procedures to facilitate optimal transfer or granting of course credit; and

(4) The use of evaluation processes, which may include challenge exams, to maximize opportunities for receiving credit for both knowledge and clinical skills.

The higher education coordinating board shall submit a plan to the legislature by December 1, 1990. The board shall make a progress report to the senate and house of representatives standing committees on health care by December 1, 1989.

PART VII

EXEMPTING RURAL HOSPITALS FROM STATE HOSPITAL COMMISSION RATE APPROVAL

Sec. 701. 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 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, 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 technical, economic, and social consequences of technological applications, including the indirect, unintended, or delayed 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) "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.

(11) "Rural hospital" means a hospital:

(a) In an area that is not within a twenty-mile radius of an urban area exceeding thirty thousand people; or

(b) That is not in Bellingham, Aberdeen-Hoquiam, Longview-Kelso, Wenatchee, Yakima, Sunnyside, Richland-Pasco-Kennewick, or Walla Walla; or

(c) 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.

NEW SECTION. Sec. 702. A new section is added to chapter 70.39 RCW to read as follows:

Rural hospitals are exempt from the rate approval functions of the state hospital commission. Nothing in this section is to be construed as exempting rural hospitals from the reporting requirements of this chapter.

PART VIII

EXEMPTING RURAL HOSPITALS FROM CERTAIN CERTIFICATE OF NEED REQUIREMENTS

Sec. 801. 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) "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) "Council" means the state health coordinating council created in RCW 70.38.055 and described in Public Law 93-641.

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

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

(8) "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) "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) "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) "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) "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) "Rural hospital" means a hospital:

(a) In an area that is not within a twenty-mile radius of an urban area exceeding thirty thousand people; and

(b) That is not in Bellingham, Aberdeen-Hoquiam, Longview-Kelso, Wenatchee, Yakima, Sunnyside, Richland-Pasco-Kennewick, or Walla Walla; or

(c) 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 licensed beds, and (iv) the total annual hospital revenues are less than ten million dollars.

Sec. 802. 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 shall not require a certificate of need for the offering of an inpatient institutional 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--

(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 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 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 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) 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, and

(b) the application contains such information respecting the organization, combination, or facility and the proposed offering, acquisition, or obligation as the department 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 approves such application. The department 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 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 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 issues a certificate of need approving the sale, lease, acquisition, or use, or

(b) the department 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 may under the program apply its certificate of need requirements only to the offering of inpatient institutional 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.

(5) Except for the provisions of this chapter requiring certificate of need review for the addition of new beds or the reclassification of existing beds for use as skilled nursing or intermediate care, or the establishment of a new nursing home, home health, or hospice facility, or the establishment of tertiary services as defined by the state board of health or the establishment of new institutional services, or new health care facilities covered by this chapter that result in a duplication of that service with an existing service already provided in the service area, rural hospitals are exempt from certificate of need requirements.

PART IX

NEW SECTION. Sec. 901. Subpart headings as used in this act constitute no part of the law.

NEW SECTION. Sec. 902. If specific funding for the purpose of sections 101 through 110 and 301 through 309 of this act, referencing this act by bill number, is not provided by June 30, 1989, in the omnibus appropriations act, then those sections of this act shall be null and void.