Inside Olympia


May 14, 2012 - Volume 12, Number 16

Governor Signs Budget, Vetoes Sections


The Governor recently signed the Washington State budget (House Bill 2127) into law.  She vetoed three sections of particular interest to hospitals and health systems. 

Positive Vetoes:

The Washington State Hospital Association (WSHA) urged the Governor to veto two studies that would have impacted hospitals.  We are pleased she chose to veto both studies.

Facility Fees:  Hospital-based clinics are often the only or a major source of health care for Medicaid, Medicare, and uninsured patients.  Hospital-based clinics are subject to more regulation and often deliver more complex care than other outpatient settings.  As a way to cover these costs, many hospitals charge a facility fee for their hospital-based clinic services.  Legislators expressed concerns about these fees and included language in the budget that would have required the Washington State Health Care Authority to study the payment of facility fees and to issue a report to the Washington State Legislature by November 2012.

WSHA asked the Governor to veto this section, noting that the need for facility fees is well documented and well regulated by the federal Centers for Medicare and Medicaid Services.  We also expressed concern that as written, the study would have been unlikely to produce accurate and meaningful results.  The language included no consideration of hospital-based clinics’ role in serving Medicare, Medicaid, and uninsured patients and how this service compares to community providers.  In addition, the study’s timing did not make sense, given the passage of House Bill 2582 that requires hospitals to report data about facility fees to the Washington State Department of Health in 2013.

In the Governor’s veto message, she noted that “both funding and time is insufficient for the successful completion of the study,” and that it is “premature to conduct this study until the necessary data are submitted and analyzed.”

We are pleased with the veto, but our work is not done.  The importance of provider-based fees in maintaining access to care is not well understood by legislators.  WSHA staff will be asking hospital leaders to help educate legislators over the summer and fall.

Critical Access Hospitals:  The Governor vetoed the budget proviso requiring a study of Critical Access Hospitals.  This proviso would have required the Health Care Authority, in collaboration with numerous parties, to submit a design for rural health system access and quality incentive payments to the legislature in December 2012.  While we agree a focused look at Critical Access Hospitals and rural health care is timely, the language contained in the study proviso was unworkable.  It also came with no funding. 

In asking the Governor to veto this section, WSHA and the Association of Washington Public Hospital Districts (AWPHD) assured her we intend to keep our commitment to the legislature and to her to create and implement a plan for the future of rural health.  WSHA and AWPHD intend to undertake an analysis that will:  (1) define the health needs and resources that exist in rural communities; (2) propose one or more service delivery models that will ensure access to quality care; and (3) recommend changes in policies and payment systems that will support access and incentivize the efficient delivery of quality health services.

In her veto message, the Governor wrote, “. . . the issue of how to use limited resources to best meet the health care needs of our state’s rural residents is an important one.  I understand the Legislature intends to focus on this issue and I ask my staff and the staff of the relevant agencies to participate in and support these efforts.”

Veto of Concern:

Managed Care Contracting:  The enacted budget would have required the Health Care Authority to certify that Medicaid managed care plans have adequate care networks, and allow re-bidding in certain counties if Medicaid managed care plans are unable to ensure an adequate network.  WSHA has concerns about whether the primary care and specialty care networks are sufficiently robust to care for Medicaid enrollees.

In vetoing this language, the Governor wrote:

“I am concerned that this proviso circumvents state laws requiring competitive procurements to be free from influence or bias.  Competitive procurements ensure that public contracts are awarded based on quality and cost.  The agency recently completed its procurement process for Medicaid managed care services.  New competitors in the market were able to offer innovative proposals without sacrificing access or quality of care, saving taxpayers $131 million in this biennium.  This was done under the specific directive in this operating budget to ‘place substantial emphasis upon price competition in the selection of successful bidders,’ when awarding managed care contracts for Medicaid enrollees.  A federal judge recently upheld the competitive process.  Unfortunately, some competitors did not compete on price, quality, and innovation criteria.  This result is what we expect from a competitive procurement process.”


WSHA will continue to be involved in the implementation of the new Medicaid managed care contracts, with particular attention to access to care.  We will not be successful in decreasing unnecessary emergency room visits or ensuring patients get health care in the right place without adequate community capacity.


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