Authored by Marcus Skeem and Hunter Ferguson of Stoel Rives LLP

In Skagit County Pub. Hosp. Dist. No. 304 v. Skagit County Pub. Hosp. Dist. No. 1, the Washington Supreme Court addressed whether a rural Public Hospital District (PHD) may provide healthcare services within the boundaries of another rural PHD without the second district’s permission.  Although RCW 70.44.060 states that a PHD has power to provide healthcare services outside the boundaries of the district, the Court found the statute ambiguous.  Looking to the legislative history of the statute and analogizing to boundary limitations on municipal water district operations, the Court held that a rural PHD may not provide healthcare services within the boundaries of another PHD without the second district’s permission.

BACKGROUND

Skagit Valley Public Hospital District No. 1 (Skagit Valley) acquired a third party’s medical practice.  Included in the acquisition was a medical office situated within the boundaries of Skagit Valley Public Hospital District No. 304 (United General).  Skagit Valley advised United General of the intent to purchase the unit within the United General boundaries and assured United General that referrals from the unit to United General would not be affected by the acquisition.  Skagit Valley also offered United General the option to purchase the unit.  United General declined to exercise the option and instead filed a complaint against Skagit Valley asserting that Skagit Valley needed United General’s approval to operate within its boundaries.  The trial court issued a writ of prohibition, stopping Skagit Valley from providing healthcare services within the boundaries of United General’s district.  Skagit Valley appealed directly to the Washington Supreme Court, which affirmed (6-3).

ANALYSIS

 Although RCW 70.44.60 allows a PHD to provide healthcare services outside of its boundaries, the Court concluded that the statutory terms “outside of its boundaries” was ambiguous as to whether a PHD is free provide healthcare services anywhere outside its geographic boundaries or only in areas not within the geographic boundaries of another PHD.

Examining the statute’s legislative history, the Court determined that the legislature intended that a PHD not operate within the boundaries of another PHD without the second district’s consent because of a provision allowing interlocal cooperation.

The Court found support for this conclusion in a general rule from a previous case regarding municipal water districts that stated “there cannot be two municipal corporations exercising the same functions in the same territory at the same time.”  Skagit Valley argued that this rule applied only when the corporations exercised governmental functions as opposed to proprietary functions.  It then pointed out that it had been denied sovereign immunity in a recent unrelated suit based on findings that it acted in a proprietary rather than a governmental capacity.  The court held, however, that a municipal corporation could act in a proprietary capacity as to one function but in a governmental capacity as to another, and thus the rule applied.

In summary, the court made the following conclusions, limiting its holding to rural PHD’s only:

  • A municipal corporation such as a PHD may act in a proprietary capacity in some respects, while acting in a governmental capacity in other respects.
  • A rural PHD acts in a governmental capacity when providing healthcare services.
  • A rural PHD may not provide healthcare services within the boundaries of another rural PHD without the second PHD’s permission.
  • The court also addressed a second issue regarding writs of prohibition, holding that even though United General could have sought relief, such as a preliminary injunction, other than a writ of prohibition, it was not manifestly unreasonable that there was “no plain, speedy, and adequate remedy available” as is required for obtaining a writ of prohibition.

Dissent: In dissent (joined in full by C. Johnson, J., and in part by Stephens, J.), Chief Justice Johnson posited that there was no ambiguity in the statutory terms “outside of its boundaries” and that the majority’s resort to legislative history and case law interpreting different statutory schemes governing municipal water districts was improper.  Regarding the procedural requirements for a writ of prohibition, the dissent further argued that the trial court improperly issued the writ because alternative remedies were available.