Down to the wire: Budget good for health care system

June 30, 2017

The legislature today released a $43 billion operating budget for the 2017-2019 biennium. If approved before midnight — as is expected — they will have avoided a partial state government shutdown by mere hours. WSHA is very pleased with the results for health care overall, and particularly applauds the legislature’s additional funding of and important reforms to the state’s mental health system.

The main issue at play this session has been how the legislature would meet the Supreme Court’s McCleary mandate to fully fund basic education. The Democratic House and Republican Senate started billions of dollars apart on this and other spending issues, but eventually closed the gap using increased revenue projections from existing sources, a complicated property tax mechanism and limited new sources of revenue. Finally, it appears that action on the capital budget will be delayed until at least mid-July pending compromise on a solution to recent water rights litigation.

The big picture

Here are a few items of note for hospitals and health systems:

  • No cuts to Medicaid payments for hospital-based clinics
  • Hospital safety net assessment funded
  • Significant progress on mental health care funding and reforms
  • No increase to the business and occupation (B&O) tax
  • Rural hospitals received funding for the Washington Rural Health Access Preservation (WRHAP) program and nursing home payments
  • Medicaid waiver funds appropriated
  • Plans to integrate the financing for mental and physical health still on track
  • Balance billing legislation will not pass this session
  • Statewide paid family leave program likely to be established (details below)

2017-2019 biennium budget highlights

No cuts to Medicaid payments for hospital-based clinics. Hospital-based clinics will be able to continue to provide access in their communities to primary and specialty care for Medicaid patients. WSHA and our members prevented a proposed $150 million cut.

Hospital Safety Net Assessment Program (About $300 million in net total funds for hospitals). WSHA is glad to see the safety net assessment program was included as requested. This is targeted to return about $300 million per biennium in additional Medicaid payments to hospitals and $300 million per biennium to the state.

Mental health funding (more than $150 million total funds). The budget makes significant investments in mental health funding with a psychiatric inpatient rate increase and additional funding for community mental health. It also sets forth a path to provide more long-term treatment for 90/180 day commitments in the community. WSHA advocated strongly on many of these new funding areas. More below.

Medicaid demonstration funding. The final budget fully appropriates the federal funds for the state’s Medicaid demonstration and adds oversight from the joint select committee on health. Without the appropriation, the waiver work would not have been able to continue.

Post-acute discharge placement. The budget makes improvements in the following ways:

  • Increases in rates and staff salaries for nursing, adult family homes and other post-acute settings ($83.9 million total funds). Difficulty with timely and appropriate discharge from community hospitals is a significant and ongoing concern. The budget includes several items to begin to address this issue: 1) a rate increase for nursing homes, and 2) salary adjustment to comply with the minimum wage and attract workforce.
  • Increase in post-discharge placement options for complex patients at state hospitals ($34 million total funds). The budget provides new funds for facilities accepting state hospital patients with behavioral health needs, making it easier for facilities to accept complex Medicaid payments. This allows these patients to move out of the state hospitals and increase throughput. This funding also helps patients to prepare for and transition to post-acute care.
  • Study of placement issues. The Health Care Authority and the Department of Social and Health Services (DSHS) are directed to work with hospitals and other stakeholders to make recommendations to reduce barriers and improve the ability to place patients, including those with complex needs, in skilled nursing facilities. WSHA recognizes that discharging patients remains a major concern.

Nursing home care in small rural hospitals. Increased Medicaid payment rates will help support four rural nursing homes in public hospital districts, enabling those residents to stay in their home communities. The budget directs DSHS to fund this need out of its existing appropriation.

Medicaid payment for integrated behavioral health in primary care ($4 million total funds). The budget funds new collaborative care codes for Medicaid, which are currently recognized by Medicare.

Essential services in small rural hospitals ($2.1 million total funds). The budget provides funding for transitional payments for the hospitals involved in the WRHAP program.

Combating opioids by improving the Prescription Monitoring Program (about $1.2 million total funds). The budget gives additional funds to the Department of Health to provide opioid prescribing reports to hospitals, clinics and providers. This data will help identify opportunities to reduce over-prescribing of opioids. The funds also support a program to reduce opioid overdose deaths by notifying a patient’s prescriber and primary care provider when a patient experiences an overdose event.

Focus on mental health

The budget puts forward significant changes to how care is delivered for patients living with a mental illness. Making improvements for patients in the mental health system, both in hospitals and the community health setting, has been a high priority and advocacy focus for WSHA and our members. Generally, we are very pleased with the changes but recognize these conversations will need to continue to ensure we have enough capacity at the right levels in the system to serve patients.

The budget makes investments along the continuum from community mental health to discharging resources for patients with complex behavioral conditions. Over time, the budget decreases state hospital civil beds and increases funding to community facilities, including hospitals.

In summary, the budget provides more than $150 million in investments in the following areas (total state and federal funds):

  • $4 million for payment codes for Medicaid for integrated behavioral health in primary care.
  • $10.9 million for a Medicaid inpatient psychiatric rate increase. Funding is prioritized to first fix hospital payment rates for beds in facilities and units opened since 2013. The remaining dollars will be used for a general rate increase for Medicaid.
  • $18.6 million for up to 48 beds for 90/180 day commitments in community hospitals and evaluation and treatment facilities. We are disappointed that institutions for mental disease are not allowed to participate at this time. The budget also assumes four civil wards will be coming offline or converted to forensic beds between 2019-2021.
  • $1.1 million for depression screening for adolescents and postpartum mothers.
  • $10.9 million for 96 beds in crisis walk-in centers for patients to get care outside emergency departments.
  • $37 million in community mental health rate increases through Behavioral Health Organizations.
  • About $80 million for compliance and new forensic beds in Western and Eastern State hospitals.

Volk study. The budget also includes funding for a study on the recent state Supreme Court case of Volk v. Demeerleer. This case changed the standard for the duty of providers to give warning about potential violence from a mental health patient. WSHA and allies hope the study will address concerns that the ruling will have a significant impact on provider capacity and access to mental health care.

Health care policy items

Balance billing. Despite continued efforts throughout all three special sessions to reach compromise amongst legislators and the major stakeholders on a process to shield consumers from unexpected out-of-network bills from providers, progress stalled and HB 2114 will not pass this session. The issue is likely to return in 2018.

Paid family leave. Months of intense negotiation between labor and business interests appears to have produced a compromise that will establish a statewide paid family leave program beginning in 2020. The program will provide eligible employees 12 weeks of family and 12 weeks of medical leave annually, with a combined annual maximum of 16 weeks (or 18 weeks for serious pregnancy complications).

Other key health care spending

Health care is a big part of the state’s budget, and there are several other health care items we are tracking (in total funds).

  • Single drug formulary. The budget assumes savings of $142 million by implementation of a single prescription drug list and contract with a single pharmacy benefit manager. The budget protects 340B hospitals and clinics.
  • Newborn screening fee. Increased the newborn screening fee in order to add a new screen to the panel. We estimate about $1 million more would be paid by hospitals for Medicaid patients.
  • Certificate of need (CN) study. Funded a $25,000 study to examine the CN program and provide recommendations to increase successful applications, including inpatient psychiatric beds.
  • Medicaid managed care organization premiums receive no increase.
  • Combatting opioids. The proposed budget funds about $1.8 million dollars for a pain management call center and $3 million for nurse case managers to support medication-assisted treatment.
  • Study on Medicaid tele-psychiatry consultation. Report to the legislature by Oct. 1, 2017. We think this relates to provider-to-provider consults.
  • Hepatitis C. Increased funding of $173 million for pharmaceutical costs.
  • High-risk insurance pool is funded at an additional $18.5 million to extend coverage through December 2022.
  • Medicaid caseload adjustment. The budget assumes savings of $184 million due to reductions in Medicaid caseload due to increases in the minimum wage.
  • Dental care. Additional funding of $2 million to transition to managed care dental. The budget assumes improvements in dental payment and utilization will be offset by $16 million in avoided dental-related emergency department expenses.
  • DOH rulemaking. The budget provides about $1 million to the Department of Health for rulemaking by the Pharmacy Commission and oversight for the nurse staffing legislation.
  • Public health increase of $12 million in funds to local public health and Department of Health for work on controlling spread of communicable disease, chronic disease and other threats.


Contact Us

Washington State Hospital Association
999 Third Avenue
Suite 1400
Seattle, WA 98104

Map / Directions

206.281.7211 phone
206.283.6122 fax

Staff List