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Originally published Thursday, February 13, 2014 at 8:17 PM

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Hospital group sues state over rules that allow merger review

Hospitals are suing over state rules requiring scrutiny of “affiliations” and mergers as well as sales, purchases or leases of hospitals.


Seattle Times health reporter

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The Washington State Hospital Association, representing 98 hospitals, has sued the state over new rules that allow the state to scrutinize hospital affiliations and mergers as well as sales, purchase or lease arrangements.

The lawsuit, filed Thursday in Thurston County Superior Court, asks the court to invalidate the recently adopted Certificate of Need (CON) rules, and asserts those rules don’t have a basis in the underlying law.

“We know the new rules go too far because the Department of Health has consistently said the law doesn’t apply to mergers or affiliations,” said association President and CEO Scott Bond.

The hospital association said the rules, as written, mean that even relatively small business decisions — including those that don’t affect patient care, such as outsourcing billing — would have to go through an “extensive and expensive review.”

Currently, WSHA said, a CON application requires a $40,000 filing fee and typically takes months or years to complete.

The CON requires providers to get state approval for changes such as building some new facilities, offering new or expanded services, adding beds or launching new high-level health-care services, such as organ transplantation or open-heart surgery. The state Department of Health says the purpose is to make sure new services or facilities are needed for quality patient care.

Gov. Jay Inslee last year asked the Health Department to review the rules amid a flurry of new affiliations among hospitals and medical-care systems, many of them involving Catholic systems. Critics contended such arrangements escape review but affect patient access to end-of-life and reproductive-health services, among other issues.

Inslee said the state process had not kept pace with changes in health-care delivery because affiliations, mergers and other arrangements often result in outcomes similar to sales, purchasing and leasing, and affect the control of hospitals and patient access.

The rule change took effect Jan. 23, and means that the state will now review any kind of “change of control” of a hospital.

Supporters of the changes took issue with the WSHA’s position.

“Health-system mergers have been occurring at an unprecedented pace in Washington state and, due to creative lawyering, have often evaded Department of Health review,” said Leah Rutman, policy counsel for the ACLU of Washington.

She said the Health Department correctly recognized that “the CON process needs to include oversight of these mergers, which affect the availability of a full range of health-care services.”

The lawsuit will not affect the new requirement that hospitals post their policies on reproductive and end-of-life care, nondiscrimination and admissions. That provision was moved to other rules that affect hospital licensing.

Carol M. Ostrom: costrom@seattletimes.com or 206-464-2249. On Twitter @costrom



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