OFFICES AND OFFICERS ‑- STATE ‑- HOSPITAL COMMISSION ‑- DISTRICTS ‑- HOSPITAL ‑- APPLICABILITY OF CHAPTER 70.39 RCW TO HOSPITAL DISTRICTS

OFFICES AND OFFICERS ‑- STATE ‑- HOSPITAL COMMISSION ‑- DISTRICTS ‑- HOSPITAL ‑- APPLICABILITY OF CHAPTER 70.39 RCW TO HOSPITAL DISTRICTS

The provisions of RCW 70.39.140 et seq., under which hospital rates and related matters are regulated by the state hospital commission, are applicable to hospitals maintained and operated by public hospital districts formed under chapter 70.44 RCW.

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                                                                February 18, 1977

Honorable Francis D. Baker
Executive Director
State Hospital Commission
206 Evergreen Plaza Building
711 South Capitol Way
Olympia, Washington 98504                                                                                                                 Cite as:  AGLO 1977 No. 7

Dear Sir:

            By letter previously acknowledged you have requested our opinion on a question which we paraphrase as follows:

            Do the provisions of RCW 70.39.140 et seq., under which hospital rates and related matters are regulated by the state hospital commission, apply to hospitals maintained and operated by public hospital districts formed under chapter 70.44 RCW?

            We answer the foregoing question in the affirmative for the reasons set forth in our analysis.

                                                                     ANALYSIS

            Chapter 70.39 RCW codifies the provisions of chapter 5, Laws of 1973, 1st Ex. Sess., the purpose of which, as expressed in RCW 70.39.010,1/ is

             [[Orig. Op. Page 2]]

            ". . . to promote the economic delivery of high quality and effective hospital health care services to the people by establishing a hospital commission with authority over financial disclosure and budget and prospective rate review and other related matters, which will assure all purchasers of hospital health care services that total hospital costs are reasonably related to total services, 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."

            Responsibility for carrying out this objective is vested by RCW 70.39.030 in a five member Washington state hospital commission.  Among the duties of that commission, as provided for by RCW 70.39.100, is the formulation of an accounting system for hospitals to utilize in identifying their costs for services and in submitting budget information to the commission from which hospital rates can be established in accordance with certain detailed procedures set forth in RCW 70.39.140-70.39.160.  Accord, a further portion of RCW 70.39.010, supra, which declares it to be,

            ". . . essential that an effective cost control program be established which will both enable and motivate hospitals to control their spiraling costs.  It is the legislative intent, in pursuance of this declared public policy, to provide for uniform measures on a statewide basis to control hospital costs without the sacrifice of quality of service."

            Under RCW 70.39.120, the commission is authorized to require the filing of information regarding the total financial needs of each hospital together with the resources available or expected to be available to meet those needs.  RCW 70.39.140 then authorizes the commission to initiate such reviews or investigations as may be necessary to assure purchasers ofhospital health care services that the total costs of each hospital are reasonably related to its offering of services, that the hospital's aggregate revenues as expressed by its rates are reasonably related to its aggregate costs, and that its rates are set equitably among all purchasers or classes of purchasers of hospital services without undue discrimination or preference among purchasers.

             [[Orig. Op. Page 3]]

            The various powers and duties of the hospital commission are then set forth in RCW 70.39.150, after which RCW 70.39.160 then says that:

            "From and after the date determined by the commission pursuant to RCW 70.39.140, no hospital subject to the provisions of this chapter shall change or amend that schedule of rates and charges of the type and class which cannot be changed without prior approval of the commission, except in accordance with . . . [certain procedures thereinafter specified] . . ."

            Chapter 70.44 RCW authorizes the establishment of public hospital districts to provide health services, including hospitals and nursing homes, both to residents of the district and to other persons.  See, RCW 70.44.005.  Such districts, acting through their commissioners,2/ are also directed to set the rates to be charged for these services by so much of RCW 70.44.060 as provides that:

            "All public hospital districts organized under the provisions of this chapter shall have power:

            ". . .

            "(3) . . . [to] receive in said hospitals and other health care facilities and furnish proper and adequate services to all persons not residents of said district at such reasonable and fair compensation as may be considered proper:  Provided, That it must at all times make adequate provision for the needs of the district and residents of said district shall have prior rights to the available hospital and other health care facilities of said district, at rates set by the district commissioners."

            The commissioners of a hospital district are also directed to adopt an annual budget for the entire district after holding public hearings.  In this regard RCW 70.44.060(6) reads as follows:

             [[Orig. Op. Page 4]]

            ". . .  On the first Monday in October the commission shall hold a public hearing on said proposed budget at which any taxpayer may appear and be heard against the whole or any part of the proposed budget.  Upon the conclusion of said hearing, the commission shall, by resolution, adopt the budget as finally determined and fix the final amount of expenditures for the ensuing year. . . ."

            The question here presented is whether the above described regulatory provisions of RCW 70.39.140 et seq., apply to hospitals maintained by such public hospital districts ‑ to the end that the budgets and rate schedules of those hospitals will be subject to those provisions of the hospital commission law.  Our answer is in the affirmative.

            The provisions of chapter 70.39 RCW apply to any "hospital" in this state which comes within the definition of that term as set forth in RCW 70.39.020.  Specifically, RCW 70.39.020(3) says that:

            "'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 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."

            RCW 70.41.020(2), to which reference is made in the foregoing definition, is, in turn, the definition of "hospital" for the purposes of the Laws of 1955, chapter 267, now codified as chapter 70.41 RCW.  As therein defined the term "hospital" means:

            ". . . any institution, place, building, or agency which provides accommodations, facilities and services over a continuous period of twenty-four hours or more, for observation, diagnosis, or care, of two or more individuals not related to the operator who are suffering from illness, injury, deformity, or abnormality, or from any other condition for which obstetrical, medical, or surgical services would be appropriate  [[Orig. Op. Page 5]] for care or diagnosis.  'Hospital' as used in this chapter does not include hotels, or similar places furnishing only food and lodging, or simply domiciliary care; nor does it include clinics, or physician's offices where patients are not regularly kept as bed patients for twenty-four hours or more; nor does it include nursing homes, as defined and which come within the scope of chapter 18.51 RCW; nor does it include maternity homes, which come within the scope of chapter 18.46 RCW; nor does it include psychiatric hospitals, which come within the scope of chapter 71.12 RCW; nor any other hospital, or institution specifically intended for use in the diagnosis and care of those suffering from mental illness, mental retardation, convulsive disorders, or other abnormal mental condition.  Furthermore, nothing in this chapter or the rules and regulations adopted pursuant thereto shall be construed as authorizing the supervision, regulation, or control of the remedial care or treatment of residents or patients in any hospital conducted for those who rely primarily upon treatment by prayer or spiritual means in accordance with the creed or tenets of any well recognized church or religious denominations;"

            RCW 70.41.090, codifying § 9, chapter 267, supra, further provides that:

            "After January 1, 1956, no person or governmental unit of the state of Washington, acting separately or jointly with any other person or governmental unit, shall establish, maintain, or conduct a hospital in this state, or use the word 'hospital' to describe or identify an institution, without a license under this chapter:  Provided, That the provisions of this section shall not apply to state mental institutions and psychiatric hospitals which come within the scope of chapter 71.12 RCW."  (Emphasis supplied.)

            Thus any hospital operated by a public hospital district must be licensed under chapter 70.41 RCW and, therefore, would be a "hospital" as defined in RCW 70.39.020(2),supra.  As a result, the provisions of RCW 70.39.140 et seq., supra, pertaining to rates and budgets must be deemed to apply to such hospitals.

             [[Orig. Op. Page 6]]

            This conclusion is further reinforced by a consideration of the frustration of the purposes of chapter 70.39 RCW which would result if hospitals operated by hospital districts were not included under the authority of the hospital commission.  Legislation should be interpreted in terms of its general object and purpose.  Eastlake Community Council v. Roanoke Assoc., 82 Wn.2d 475, 513 P.2d 36 (1973).  In this case, RCW 70.39.010 contains a statement of the purposes for which the hospital commission was created.  While such a legislative statement of purpose does not have operative effect it does serve as an important guide to the intended effect of the act it precedes.  Hartman v. State Game Comm'n, 85 Wn.2d 176, 532 P.2d 614 (1975).

            RCW 70.39.010 says, in essence, that the hospital commission was established to provide uniform measures on a statewide basis to control hospital costs and to regulate hospital rates for the benefit of all purchasers of health care services.  However, thirty-eight of the one hundred and fifteen hospitals now open within the state are operated by hospital districts.  Thus, if the rates and budgets of a full one‑third of the state's hospitals were deemed not to be subject to the regulatory authority of the commission there would be a major limitation on the ability of the commission to act on a statewide basis for the benefit of all health care purchasers.  This result, in turn, would not be in accord with the legislature's stated purpose in enacting the hospital commission law.

            An interpretation of chapter 70.39 RCW which denied the authority of the hospital commission to review the budgets and rate schedules of such public hospitals would also be inconsistent with the rule that remedial statutes are to be given a liberal construction.  Peet v. Mills, 76 Wash. 437, 136 Pac. 685 (1913).  The legislation creating the hospital commission was enacted in an attempt to remedy a particular mischief recognized by the legislature.  The authority of the commission must therefore be given the broadest reading possible to give it a complete opportunity to ameliorate the problems which resulted in its creation.

            What this means, in turn, is that insofar as rate schedules and budgets are concerned, final authority over those subjects no longer rests exclusively with the various hospital district boards of commissioners under RCW 70.44.060,supra, because, to the extent of any irreconcilable conflicts between those statutes and RCW 70.39.140 et seq., the former must be deemed to have been impliedly amended by the latter.

             [[Orig. Op. Page 7]]

            Chapter 70.44 RCW originated in 1945 as chapter 264, Laws of 1945.  Conversely, the legislation establishing the hospital commission was enacted in 1973 as chapter 5, Laws of 1973, 1st Ex. Sess.  It is true that the latter act contains no provision which expressly amends or repeals any portion of the earlier one.  However, later legislation can impliedly amend or repeal earlier legislation and, while such results are not favored, they occur if certain factors are present.  State v. Becker, 39 Wn.2d 94, 234 P.2d 897 (1951).  Provisions in an earlier act will be impliedly repealed if the later act covers the entire subject matter of the earlier one, is complete within itself and is evidently intended to supersede prior legislation on the subject or is so clearly inconsistent with the earlier act that a fair and reasonable construction cannot reconcile them.  Jenkins v. State, 85 Wn.2d 883, 540 P.2d 1363 (1975).

            In our opinion all of these tests are met in this case.  The subject of final authority over hospital rates and budgets is entirely covered by provisions in chapter 70.39 RCW.  That law is a broad, remedial act that sets up a regulatory scheme which is complete within itself.  The power of hospital district commissioners to establish hospital rates and adopt budgets without review is clearly inconsistent with the power of the hospital commission to regulate and review the same things.  Thus, there is no manner in which the two acts can be reconciled in this respect because final authority for budget and rate levels necessarily must reside in only one body.  Therefore, it must be concluded that chapter 70.39 RCW has superseded the provisions of chapter 70.44 RCW relative to final authority over rates and budgets of hospitals operated by public hospital districts.

            In so concluding we have not overlooked the fact that the statute outlining the powers and duties of public hospital districts, RCW 70.44.060, was amended by the legislature in both 1973 and 1974.  See, § 83, chapter 195, Laws of 1973, 1st Ex. Sess., and § 2, chapter 165, Laws of 1974, Ex. Sess.  The 1973 amendments, however, related only to the rate of taxes which could be levied by the hospital districts while the 1974 amendments related to increasing the types of services which could be offered by such districts.  Since these amendments did not deal with any aspect of rate and budget setting provisions already contained in the statute they therefore reflect no intention by the legislature to retain or reenact a law which is inconsistent with the 1973 law creating the hospital commission.  Instead, so much of those amendments as included reference to the fixing of rates or the adoption of budgets was merely "old" language contained  [[Orig. Op. Page 8]] in the bill in order to meet the requirements of Article II, § 37 of our state constitution.  As stated inKnowlton v. Mason County, 134 Wash. 255, 261, 235 Pac. 33 (1925):

            "'By observing the constitutional form of amending a section of a statute, the legislature does not express an intention then to enact the whole section as amended, but only an intention then to enact the change which is indicated.  Any other rule of construction would surely introduce unexpected results and work great inconvenience.'"3/

             Also, lest there be any misunderstanding, it is important to note that where possible, provisions relating to the same subject matter which are embodied in different statutes should be harmonized to give effect to both statutes.  State ex rel. Shomaker v. Superior Court, 193 Wash. 465, 76 P.2d 306 (1938).  Therefore, only the portions of chapter 70.44 RCW that are actually inconsistent or irreconcilable with chapter 70.39 RCW should be viewed as having been amended or repealed by the latter act.  Other provisions contained in chapter 70.44 RCW relating to rates and budgets of district hospitals should be given effect to the fullest extent possible without detracting from the hospital commission's ultimate authority to regulate hospital rates and budgets.

            Finally, our attention has been directed to various problems which, it is said, will result from the foregoing approach to your question.  Public hospital districts, it is argued, will be unduly hampered in their operations, and particularly in borrowing money through the issuance of bonds, etc., by having their budgets and rate schedules subject to review by the hospital commission.  Whatever their magnitude, however, those problems do not seem to us to justify a contrary answer to your question as a matter of law.  Instead, at best, they merely suggest a possible need for some further attention to the question by the legislature which, as you know, is now in session.

             [[Orig. Op. Page 9]]