UW Medicine, Valley Medical Center deal is legal, has implications for future affiliations

The three-year-old partnership between UW Medicine and Renton-based Valley Medical Center is legal, according to a decision issued Monday by the Court of Appeals of the State of Washington.

It is the latest development in a multi-year legal battle that pits the two hospital systems against the commissioners of Public Hospital District No. 1 – the publicly funded entity that operates Valley.

The decision is a victory for UW and Valley that reinforces the assertion from both hospitals that they had a right to integrate – essentially folding Valley into the ever-expanding UW Medicine umbrella.

Beyond the immediate case, the decision bodes well for future hospital affiliations with public hospital districts in Washington state. Hospital consolidation has become commonplace under the Affordable Care Act, with some hospitals only surviving the tide of change because larger institutions swoop in and resuscitate them financially.

The true impact of consolidation isn’t yet clear: Hospitals argue that it will lead to lower-cost, better, more coordinated care. Meanwhile, some patient advocates have argued that it could actually create less competition and drive up prices for everyone.

As a public hospital district, Valley receives taxpayer dollars. Forty-two of the state’s 97 hospitals are part of public hospital districts, where residents are taxed to support the hospitals.

Six months after the Valley commissioners approved the affiliation by a 3-2 vote, newly elected commissioner Paul Joos fought back against the decision, arguing the deal was illegal. He said it handed over control of a public institution to an unelected board.

District No. 1’s trustees include eight UW Medicine-appointed commissioners and five elected commissioners. The commissioners had independent oversight of the district and Valley until a 2011 affiliation with the University of Washington, which diluted the commissioners' power over decisions like real estate, liability, revenue and large-scale transactions.

The court affirmed the previous summary judgment from Washington State Superior Court, which dismissed the case.

Phil Talmadge, an attorney representing the District’s commissioners, said he hadn’t heard from his clients yet on whether they would appeal to the state Supreme Court.

“To me this is really disappointing,” said Talmadge, who is also a former state Supreme Court justice. “The notion that you, as group – the elected, decision-making body of a government – can decide to relinquish your core government responsibilities to a nongovernmental board, to me, that’s a line you can’t cross over.”

The attorney representing the commissioners didn’t immediately return requests for comment late Monday.

The court’s dismissal was the second recent victory for the pro-hospital consolidation camp. A Thurston County Superior Court recently threw out broad new rules that would have required state approval for most of these consolidations.

Other regional affiliations between district and nondistrict hospitals include the 2012 partnership between Seattle-based Virginia Mason Medical Center and Kirkland-based Evergreen Healthcare. Evergreen is a part of Public Hospital District No. 2 of King County.

In 2010, Seattle-based Swedish Medical Center linked up with Edmonds-based Stevens Hospital, part of Public Hospital District No. 2 of Snohomish County.

Updated: This story has been updated to add comment from Phil Talmadge, the attorney representing Public Hospital District No. 1.