FINAL BILL REPORT

HB 2046

                                  C 118 L 88

BYRepresentative Grimm

Relating to hospital reimbursement.

SYNOPSIS AS ENACTED

BACKGROUND:

The 1987-89 Operating Budget assumed that the Department of Social and Health Services (DSHS) would begin purchasing hospital services through a new competitive bid process.  Contractually agreed to competitive bids were expected to contain the growth of the medical assistance budget, saving at least $14 million in state funds.  The savings would result from two features of the new system.  First, large segments of the hospital program would be restricted to the most efficient hospitals.  Second, where the bidding process reduced the number of participating hospitals, these hospitals could reduce prices because the patient volume would increase.

Washington's Hospital Commission is authorized to review and approve all negotiated hospital rates.  In 1987 the commission adopted a rule exempting DSHS negotiated hospital rates from commission review and approval.

On February 29, 1988 Thurston County Superior Court invalidated the Hospital Commission rule exempting DSHS negotiated rates from commission review and approval.

The court order placed the future of competitive contracting in doubt. Although the commission's rule supported the bid process the commission had opposed competitive bidding in a letter to the U.S. Department of Health and Human Services.  In addition, in a disputed negotiated rate case (a 48 percent discount offered by Grays Harbor Hospital to Washington's Physicians Service), the commission was unable to reach consensus.  These actions have raised serious questions regarding the commission's effectiveness.  Further delays in implementing the bid process as a result of the commission's indecision is estimated to cost $1.2 million per month.

SUMMARY:

Hospitals are permitted to charge rates negotiated with, or established by, the Department of Social and Health Services (DSHS).  Rates negotiated with DSHS are not subject to the commission's review and approval.  It is clarified that nothing in the Hospital Commission's statutes limits the ability of DSHS to negotiate hospital rates pursuant to a federally approvable state plan under Title XIX of the federal Social Security Act (MEDICAID).

VOTES ON FINAL PASSAGE:

      House 67  29

      Senate    27    22

EFFECTIVE:March 18, 1988