What is a Public Hospital District (PHD)?
Public hospital districts are community created governmental entities authorized by state law to deliver any services which might be reasonably expected to improve the health of the district’s residents and others in the districts' market areas. Fifty-six public hospital districts in Washington State operate forty-three hospitals—representing almost half of the acute care hospitals in the state. Public hospital districts play a vital role in rural Washington, as using the district model has allowed many rural communities to keep health care in their own communities. The Washington State legislature granted local communities the ability to create their own hospital districts in 1945. Hospital districts are authorized not only to operate a hospital, but to deliver any service to help people stay healthy-physically, socially and/or mentally. Because they're owned and governed by local citizens, hospital districts tailor their services to meet the unique needs of their individual communities.
Overview and Purpose of Public Hospital Districts
Public hospital districts belong to the Washington state family of special purpose districts and are organized as municipal corporations. They are governmental entities created by statute and operating under all applicable statutory, constitutional and regulatory provisions of the State of Washington and the United States of America.
Sources of Public Hospital District Power
Public hospital districts are organized and exist as a result of chapter 70.44 of the Revised Code of Washington (RCW). It is this statute that created public hospital districts and fundamentally defines their purpose, operations, powers and limitations.
Power Versus Duties, Generally
Hospital district powers are those things which a public hospital district may do, as expressly or implicitly granted by state law. Duties, on the other hand, are those things which a district must do, as required by state law. There are consistent developments in the grey area between express and implied powers and duties. Historically, Washington State has been a leader in requiring public disclosure and transparency, and that trend continues. “Good government” activists promote a philosophy that holds, in part, “whatever is not expressly authorized is specifically prohibited.”
To understand the limits of a public hospital district’s power, it can be useful to understand that districts cannot make law; they can only act based on state and federal law. This distinction may prove useful in thinking about a specific activity of a public hospital district.
Locations and Boundaries
An up-to-date listing and map of Washington public hospital districts can be seen by clicking here. The vast majority of public hospital districts are located in areas considered to be "rural" in character, emphasizing the importance of public hospital districts in meeting the challenges facing rural health care.
Similarities and Differences Among Public Hospital Districts, Non-Profit Hospitals and For-Profit Hospitals
As noted above public hospital districts operate slightly fewer than half of the entities licensed as acute care hospitals in Washington. The vast majority of the other hospitals are operated as not-for-profit corporations, with a handful owned and operated by private corporations on a for-profit or proprietary basis.
Public hospital district hospitals and not-for-profit hospitals—and physician owned clinics, for that matter—follow similar approaches in organizing and delivering health care services within their market areas.
There are at least two important reasons for this similarity: (1) The provision of health and medical services is a standards based industry. Adhering to customary standards of care is designed to ensure that care is of the highest possible quality. Departure from the standard norms, should it result in a bad outcome, leads to litigation. (2) Because patients can choose where they go for health care services, hospitals and other health care providers (whatever form they take) serving the same markets compete with one another for patients and new sources of revenue. Public hospital districts are not immune to these competitive pressures—indeed, if they were to be unresponsive they might face serious financial difficulties and ultimately be forced out of the market place.
With the escalating costs of health care, these competitive pressures have significantly grown within the last decade and now take on increasing complicated forms. For example, it is not unusual for a public hospital district to find that a competitor has developed a service or site for care delivery within district boundaries, which erodes its patient admissions and revenues. The competitor may appear in the form of another hospital (which may be for a for-profit or non-profit institution), a clinic of affiliated physicians, as well as individual practitioners. Indeed, the competitors may even include physicians who have active medical staff privileges at, or contract relationships with, the public hospital district. As a result, to stay competitive, public hospital districts have no choice but to adopt a market-oriented approach, and to think strategically about what services they provide and where they provide them. Also, given this competitive environment—and the desire to provide the best possible care for the public they serve—public hospital districts must also consider with whom they will partner to provide health care services not within their current capacity to provide.
With the exception of public ports (whose competition is generally limited to competing with each other), it is hard to think of another example of a municipal corporation that competes directly with other public and private business enterprises as do public hospital districts.
Both public hospital districts and not-for-profit hospitals are commonly focused on community service. The "profits generated from their activities are redeployed to provide enhanced community services, facility upgrading, or subsidized care for persons unable to pay the full costs of service. Unlike for-profit institutions, they are not accountable to a group of investors who expect a rate of return on their equity investment.
In contrast to not-for-profit entities, public hospital districts are subject to numerous statutory provisions governing how they conduct their business. For example, public hospital district are governed by commissioners who are publicly elected (not-for-profit members are normally appointed). State law imposes strict limitations on the use of public hospital district funds. Also, as ‘municipal corporations’, public hospital districts are subject to the Public Records Act and the Open Public Meetings Act which provide the vehicle for public scrutiny of key documents and proceedings. Not-for-profit activities are monitored in a much more general fashion through state and federal review activities.
Public Hospital District Tax Support
Although they are subject to substantial regulation, public hospital districts enjoy certain unique financial benefits. They are able to access tax revenues, low cost bonds, and may be excused from payment of certain taxes. It is worth noting, however, that income from property tax levies is a relatively small component of a public hospital district’s total revenue stream—the vast majority of income to public hospital districts is derived from the sale of services. In 2009, the public hospital district most dependent on property taxes received less than 7% of its annual operating revenue from those taxes.