BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION In the Matter of the Petition ) No. TG-970532 of Commission Staff for a ) Declaratory Ruling ) Brief of Intervenor Washington ) State Hospital Association I. IDENTITY OF INTERVENOR The Washington State Hospital Association ("WSHA") is a private, non-profit corporation, organized in 1933. Almost all hospitals in Washington (approximately 96) belong to WSHA. The majority of these hospitals are non-profit corporations, exempt from taxation under Section 501(c)(3) of the Internal Revenue Code as charitable organizations. As a trade association, WSHA's purpose is to act as an advocate for its members. WSHA takes a leadership position on issues that affect the delivery, quality, accessibility, affordability and continuity of healthcare___with the ultimate goal of improving the health of the citizens of the State of Washington. WSHA's members generate biomedical waste which they seek to dispose of in legal, efficient, environmentally sound ways. WSHA has been actively involved with its membership since 1991 in offering solutions to recurring biomedical waste hauling problems. Washington Hospital Services ("WHS"), is a for-profit subsidiary of WSHA, whose mission is to provide superior service and value to health care providers in Washington. One of the functions of WHS is to identify economical means to provide services which meet the common needs of health care providers. WHS either directly provides the services or identifies an independent organization to provide the services which WHS then markets. WHS currently has a Marketing Agreement with Stericycle of Washington, Inc., which was reviewed informally by Utilities and Transportation Commission Staff. Under the Agreement, WHS performs specific marketing activities on behalf of Stericycle of Washington and is compensated for these marketing services on a fixed fee basis. Key issues identified then were assuring continuity of service, maintaining cost control, encouraging recycling, and seeking clear, consistent statewide regulatory oversight. These same issues continue today. WSHA members are affected by the practices of biomedical waste disposal carriers. As customers of biomedical waste disposal services, WSHA members have benefitted from competition among carriers. It is important, however, that this competition be fair competition which does not adversely affect the financial viability of carriers. The fundamental concerns of WSHA regarding biomedical waste disposal continue to be the accessibility and availability of affordable services, provided by financially stable, reliable carriers who are committed to long-term disposal of biomedical waste, and certainty with respect to rules regarding practices of carriers. The Utilities and Transportation Commission (the "Commission") has recognized the role that hospitals play in the activities of carriers. In Commission Order M.V.6. No. 1674, In Re Application of Sureway Medical Services, Inc., Hearing No. 6A-75968 (December 1993) at 8 the Commission stated: "The Commission will give considerable weight to the judgment of biohazardous waste generators regarding the sufficiency of existing service, because they are professionally involved in health care, and are in a unique position to evaluate the risks and benefits of collection and disposal services based upon their professional training and experience, and are best able to evaluate what type of service will limit their potential exposure to civil liability for improper transportation and disposal. Also in Commission Order M.V.6. No. 1761, In Re Ryder distribution Resources, Inc. and Stericycle of Washington, Inc., Hearings Nos. 6A-75154 and 77539 (Aug. 1993) at 25, the Commission noted: "We are not regulating disposal when we say that under current law the generator of hazardous and biohazardous wastes may properly have enough of a voice in where, when, and how its biohazardous wastes are disposed as to empower it to receive service from a carrier that has the ability to meet its specialized needs." WSHA members are diverse both in size and geographic location. Some members have been the beneficiary of reduced rates as a result of their non-profit status. Others have not. For this reason, individual hospitals may have positions different than those expressed by WSHA in this brief. WSHA believes, however, that all these hospitals share the same fundamental concerns. WSHA's participation in this proceeding is to assure that there continue to be financially stable, reliable biomedical waste disposal carriers committed to providing long-term disposal of biomedical waste which is available to all members of WSHA throughout the state. Additionally, WSHA is participating to assure that any service agreements between carriers and members are subject to predictable, consistently applied requirements. I. LIMITS OF A DECLARATORY PROCEEDING RCW 34.05.240 provides: (1) any person may petition an agency for a declaratory order with respect to the applicability to specified circumstances of a rule, order, or statute enforceable by the agency. WAC 480-09-230 is the regulatory provision implementing the declaratory order proceeding for the Utilities and Transportation Commission. The Commission staff have raised important issues in their petition for declaratory ruling which are of concern to members of WSHA. These issues are clearly within the purview of the Commission to address, The Commission has authority to "supervise and regulate every solid waste collection company in the state . . . . (1) by fixing and altering its rates [and] charges, classifications, rules and regulations; (2) by regulating the accounts, service, and safety of operations, . . . . [and] (4) by supervising and regulating such persons or companies and all other matters affecting the relationship between them and the public which they serve." RCW 81.77.030. but should be addressed in an appropriate proceeding. The Staff's petition explains why a declaratory ruling is sought to resolve the issues raised: A declaratory ruling will likely resolve the issues more quickly than a complaint proceeding, will allow all carriers who transport medical waste to participate in the process, will resolve the issues on an industry-wide basis rather than a carrier by carrier basis, and will hopefully provide clear operational guidelines to carriers in a competitive market and greater protection to the consuming public. This rationale for seeking a declaratory ruling is laudable; however, the guidance sought regarding reduced rates exceeds the scope of a declaratory ruling and would be more appropriately addressed in a rulemaking proceeding. While a rulemaking proceeding will not resolve the issues more quickly, it will allow all carriers who transport medical waste to participate in the process, will resolve the issues on an industry-wide basis rather than a carrier by carrier basis, and will provide clear operational guidelines to carriers and protection to the consuming public. The issues raised by the petition with respect to service agreements are asking for the applicability of specific rules and statutes to specific provisions in a service agreement. Resolution of these issues is within the parameters established by RCW 34.05.240 for a declaratory order. On the other hand, the reduced rate issue is only partly a request for interpretation or applicability of a statute enforceable by the agency. The request for declaratory ruling ordering that "carriers may not charge free or reduced rates to charitable or non-profit hospitals or clinics under RCW 81.28.080 without demonstrating "charitable purpose" concerns the applicability of a particular statute to specified circumstances. Establishing requirements for a medical waste carrier to demonstrate its "charitable purpose" extends beyond a determination as to the applicability of the statute. Such requirements would more appropriately be defined in a rulemaking proceeding. Similarly, the petition suggestion that the Commission issue an order "setting guidelines for charging free or reduced rates for charitable purposes" would be more appropriately addressed in regulations, not a declaratory proceeding. Additionally, guidelines or requirements addressing "charitable purpose" should be limited to defining the "charitable purpose" of the medical waste carrier. The charitable purposes of hospitals are addressed by other regulatory bodies and defining hospitals' charitable purposes would be outside the scope of the Commission's authority. I. ISSUES PRESENTED IN THE PETITION A. Service Agreements. Petitioner describes the issues regarding the service agreements as follows: Whether statutes and rules which govern charging tariff rates and discontinuing service apply to service agreements for the collection and disposal of biomedical waste, i.e., requirements for minimum length of service, extended notice time for cancellation, and liquidated damages provisions. The parties have agreed in their stipulated facts that carriers are in fact including minimum lengths of service, extended notice requirements for cancellation and liquidated damage provisions in service agreements for transportation and disposal of medical waste. (Stipulated Facts No. 2) It has also been agreed that specifying a minimum term of service and including liquidated damages provisions in service agreements discourages customers from exercising their right to terminate service under the rule and choose service provided by another carrier without restriction. (Stipulated Facts Nos. 1 and 3) Service agreements are important documents to describe the relationship between the generator of biomedical waste and the carrier. Because these agreements define what may be a unique relationship between a particular customer and a carrier, terms of the agreement which may be negotiated should be flexible. This flexibility must be exercised, however, within the parameters established by statute, regulation or Commission ruling. The Commission has authority to "supervise and regulate" all matters affecting the relationship between carriers and the public which they serve. RCW 81.77.030. This would include authority to regulate the service agreements. Existing regulations do in fact address this issue. WAC 480-70-710(1) provides: A customer may discontinue service by notifying the company to stop service. A notice shall be made to the company at least three full business days before the next scheduled pick up. WSHA concurs with the Staff Petition that requiring customers to provide more than three business days notice of cancellation appears to violate this rule. Additionally, requiring customers to sign agreements specifying a minimum term of service or including a liquidated damages provision in a service agreement, has the effect of discouraging customers from exercising the right to terminate service under the rule, in effect negating the intent of the rule. WSHA also concurs that liquidated damages provisions violate RCW 81.28.080 which is made applicable to solid waste collection by WAC 480-70-440. Unless liquidated damages are included in the tariff filed by a carrier, there is no basis for a charge or demand for compensation by the carrier in the form of liquidated damages. Stabilization of service is important. Requirements for minimum lengths of service, extended notice requirements for cancellation, and liquidated damages provisions may, in fact, provide stability for carriers, but WSHA believes that alternatives should be explored which will assure the financial stability of carriers without violating existing rules and regulations of the Commission. WSHA looks to the Commission and its regulatory oversight to assure financial stability in the market place while preserving the rights of consumers. Issues of financial fitness and viability of existing operations are considered by the Commission in evaluating an application for certificate and should be considered in the supervision and regulation of carriers. See Commission Order M.V.6. No. 1663, In Re Application of Sureway Medical Services, Inc., Hearing No. 6A-75968 (Nov. 1993) at 35. Reduced Rates. There is an exception to the requirement that carriers may only assess rates and charges set forth in tariffs filed with the Commission. (Stipulated Facts No. 7). RCW 81.28.080 sets forth the requirement that carriers must charge only tariff rates. The statute begins with the following phrase: No common carrier shall charge, demand, collect or receive a greater or less or different compensation for transportation of persons or property, or for any service in connection therewith, than the rates, fare and charges applicable to such transportation as specified in its schedules filed and in effect at the time; . . . . Exceptions to this general rule are subsequently described in this statute. Among the exceptions is the following: Common carriers subject to the provisions of this title may carry, store, or handle, free or at a reduced rates, property for . . . . charitable purposes. RCW 81.28.080 does not address the authority of the Commission, but rather the obligations of carriers. Therefore, the use of the word "may" in the phrase "may carry, store or handle, free or at reduced rates" pertains to choices that the carrier may make, not the authority of the Commission to allow or disallow reduced rates. A carrier is not required to "carry, store, or handle" property at reduced rates in order to fulfill its charitable purposes or intentions, but may do so if it chooses. The reduced rate allowance for charitable purposes of carriers found in RCW 81.28.080 creates an exception to the rule that no common carrier may charge different rates. By its plain meaning, it also creates an exception to the nondiscrimination requirements of RCW 81.28.180. RCW 81.28.180 provides: A common carrier shall not, directly or indirectly, by any special rate, rebate, drawback, or other device or method, charge, demand, collect, or receive from any person or corporation a greater or lesser compensation for any service rendered or to be rendered in the transportation of persons or property, except as authorized in this title, than it charges, demands, collects, or receives from any person or corporation for doing a like and contemporaneous service in the transportation of a like kind of traffic under the same or substantially similar circumstances and conditions. The phrase "except as authorized in this title" would apply to the reduced rate exception authorized under RCW 81.28.080. RCW 81.28.080 limits a carrier's choice to charge reduced rates to the extent that it requires that the reason for charging the reduced rate must be for the carrier's charitable purposes. WSHA concurs with the analysis in the Staff's Petition that: [I]n determining whether a carrier seeks to provide free or reduced rates for charitable purposes, the Commission should look first to whether the shipper is a charitable organization, as there is likely to be no charitable purpose for transportation without a charitable organization as a shipper. It is well established in Washington that nonprofit hospitals are charitable organizations. In Re Rust's Estate, 168 Wash. 344, 12 P.2d 396 (1932); See also Swedish Hospital et al. v. Department of Labor and Industries, 26 Wn.2d 819 (1947). In Jewell v. Utilities and Transportation, 90 Wn.2d 775, 582 P.2d 1167 (1978) the Washington Supreme Court implicitly recognized hospitals as charitable organizations in discussing telephone company charitable contributions and stating " . . . the telephone companies choose to contribute to, among other charities, hospitals or private colleges. Id. at 777. (Emphasis added.) The parties have agreed that there currently is competition in the market for the provision of services of transportation and disposal of biomedical waste. (Stipulated Facts No. 5) Additionally, not for profit hospitals have requested bids from different carriers in order to obtain the lowest rates. (Stipulated Facts No. 6) Further, under the current practice of carriers providing reduced to not for profit hospital and clinics but charging tariff rates to for profit hospitals and clinics, the difference is not the type of service provided, but the organization to whom the service is provided. (Stipulated Facts No. 8) Notwithstanding this distinction between entities, biomedical waste collection companies are not currently offering below tariff rates for regular biomedical waste collection service to non-profit hospitals and clinics for charitable purposes, but rather as a means to compete for this business. (Stipulated Facts No. 9) In light of the stipulated facts, it would seem that carriers do not have "charitable purposes" in charging reduced rates to hospitals. This raises new issues for consideration. (1) What is the effect of a Commission ruling on service agreements entered into in good faith by hospitals on the representation that non-tariff rates were permissible for charitable organizations? (2) Is there a way to minimize the impact of a Commission ruling which might adversely affect existing non-tariff rates? (3) In the unique and specialized area of transportation and disposal of biomedical waste, what is the best way to assure Commission supervision and review of service agreements? Each of these issues suggests the need for further discussion among Commission staff, biomedical waste carriers and customers. These are issues that cannot be adequately addressed in this declaratory proceeding. As discussed in Section II of this Brief, WSHA believes that this proceeding is not appropriate for addressing issues of criteria for determining biomedical waste carrier's charitable purpose or for arriving at an alternative procedure for defining review of service agreements. To adequately address reduced rates for charitable purposes and a consistent process for service agreement review, a rulemaking proceeding should be commenced and alternatives should be explored among Commission staff, carriers and customers. WSHA would support additional discussion and statutory or regulatory action to develop a method of service agreement review for biomedical waste transportation and disposal. One approach might be the adoption of regulations similar to WAC 480-70-360 which addresses contracts between contract carriers and shippers. Other alternatives could be explored as well. CONCLUSION WSHA supports the Commission staff request for a ruling regarding the obligation to comply with existing rules and regulations. Consistent with the terms of WAC 480-70-710(1), hospitals should be free to terminate and change carriers without restriction. In particular, minimum length of service terms or notice of cancellation of service agreement requirements must not restrict or discourage hospitals from exercising their rights under WAC 480-70-710(1). Additionally, liquidated damage provisions in service agreements should be prohibited either as inconsistent with WAC 480-70-710(1), in effect negating that rule, or as a violation of RCW 81.28.080 unless the liquidated damage provisions are included as a part of the tariff filing. The Commission should decline to issue a declaratory ruling as to reduced rates. Instead it should commence further discussions among interested parties for the purpose of developing regulations. Dated this 21st day of August, 1997. Respecfully submitted, GRAHAM & JAMES LLP/RIDDELL WILLIAMS P.S. By Barbara Allan Shickich Attorney for Washington State Hospital Association