Ketcham v. King County Medical Service Corp.

• Decision Date: 16 November 1972
• Docket Number: No. 42001,42001
• Citation: 81 Wn.2d 565,502 P.2d 1197
• Parties: Ferris F. KETCHAM et al., Respondents, v. KING COUNTY MEDICAL SERVICE CORPORATION et al., Respondents, Washington Optometric Association et al., Appellants.
• Court: Washington Supreme Court

Page 565

81 Wn.2d 565

502 P.2d 1197

Ferris F. KETCHAM et al., Respondents, v. KING COUNTY MEDICAL SERVICE CORPORATION et al., Respondents, Washington Optometric Association et al., Appellants.

No. 42001.

Supreme Court of Washington, En Banc.

Nov. 16, 1972.

Rehearing Denied Jan. 16, 1973.

Asmundson, Rhea & Atwood, David E. Rhea, Bellingham, for appellants.

Fred H. Dore, Joseph O. Masterson, Seattle, for respondents.

HALE, Associate Justice.

A hallmark of our times is the growth of prepaid medical service and health care programs throughout the country. These programs usually arise out of contract among doctors, hospitals, pharmacists, subscribers and administrators and sometimes include other licensed practitioners of the healing arts such as optometrists, chiropractors and podiatrists. In 1969, the legislature enacted Laws of 1969, ch. 143, p. 504 (RCW 48.44.025), which provided that, if a patient subscribing to any such plan in this state received vision care from a licensed optometrist, the medical service program of which the patient is a member must reimburse the patient for the optometrist's fee even though such optometrist--or any other optometrist--is not a contracting participant in the program.

Plaintiffs, five licensed medical doctors specializing in the practice of ophthalmology, and participants in prepaid medical and health care programs in this state, brought this suit to have the optometrist reimbursement statute (RCW 48.44.025) declared unconstitutional as one depriving them of property without due process of law and impairing their rights of contract. From a decree holding the statute unconstitutional, the Washington Optometric Association and Donald B. Hanford and Emery Sigeti, licensed and practicing optometrists, appeal.

Plaintiff ophthalmologists, practicing in the Seattle area, specialize in all aspects of treating eye disease and conditions. They diagnose, perform surgery, administer drugs, medicines and chemicals, prescribe and fit glasses and other devices, and, in short, do and perform all medical services necessary to the complete medical care of human vision. They brought this action on behalf of all ophthalmologists as a class practicing in this state, and designated the named health care service organizations, The Washington Optometric Association and the two individually named practicing optometrists, Doctors Donald B. Hanford and Emery Sigeti, as defendants.

Defendant health care service contractors, such as King County Medical Service Corporation and the other named health care contractors are regulated by the Health Care Service Act, RCW 48.44, which provides in RCW 48.44.010:

(1) 'Health care services' means and includes medical, surgical, dental, hospital and other therapeutic services. The services of an optometrist licensed by the state of Washington and the services of a pharmacist registered by the state of Washington are also declared to be health care services for the purposes of this chapter.

There are, of course, many variations in the contract terms among the different health care service contractors, medical doctors, hospitals, clinics and subscribers. But in general, the subscriber pays monthly premiums to the health care service contractor who in turn contracts with participating doctors, hospitals and pharmacists to furnish medical, surgical and hospital care to the subscribers an their dependents, the bills for which are paid, according to the contract, by the health care service contractor. The contract may include, depending upon its terms, dental care, physical and occupational therapy, psychiatric services, optometrists, and such other kinds of therapy as are licensed by the state and agreed to by all of the parties to the plan, but subject to the lawful regulation by the state. The plans are essentially voluntary and based upon freedom of contract by all participating parties, organizations and institutions. It is the claimed impairment of that freedom which gives rise to this case.

In 1969, Laws of 1969, ch. 143, p. 504, the legislature, while prohibiting advertising, enacted the reimbursement provision as follows:

Whenever a health care service contractor has entered into an agreement with his subscribers for vision care, and this service is performed by a licensee under chapter 18.53 RCW, who is neither a health care service contractor nor a participant, then reimbursement or indemnity shall be provided the persons paying for this service in the same amount as that given to a participant.

This is the provision which the trial court held to be unconstitutional as one impairing the obligation of contract. The court granted plaintiffs an injunction restraining defendant health service contractor from expending money paid into the plan by subscribing members for optometrists' fees under this statute.

The constitutions deal explicitly with freedom of contract:

No state shall . . . pass any Bill of Attainder, ex post facto Law, Or Law impairing the Obligation of Contracts . . .

(Italics ours.) U.S.Const. art. 1 § 10.

No bill of attainder, ex post facto law, Or law impairing the obligations of contracts shall ever be passed.

(Italics ours.) Const. art. 1 § 23. While recognizing the viability of these provisions, defendants contend that the freedom of contract must give way at times, and in this particular instance, to the overriding police power of the state.

There is little doubt that the police power may be applied to protect the public health and safety. State ex rel. Rhodes v. Cook, 72 Wash.2d 436, 433 P.2d 677 (1967), appeal dismissed, 392 U.S. 643, 88 S.Ct. 2281, 20 L.Ed.2d 1347 (1968). In the exercise of the police power, as an attribute of sovereignty, the state may, to promote the public welfare and safety and to safeguard life, health, property and morals, regulate businesses, professions and callings. Creelman v. Board of Registration for Architects, 73 Wash.2d 298, 438 P.2d 215 (1968); Reesman v. State, 74 Wash.2d 646, 445 P.2d 1004 (1968). Because the protections are broad, the police power is to be broadly construed. If a state of facts justifying the legislation in question reasonably can be conceived to exist, then it will be presumed that such facts exist and the legislation will be sustained. State v. Laitinen, 77 Wash.2d 130, 459 P.2d 789 (1969).

But we are confronted here not directly with the public peace, welfare, health and safety, for the health care services act in particular (RCW 48.44) and the insurance code in general (RCW title 48) have already entered the field and comprehensively covered the subject of health care service contracts and statutes adopted prescribing minimum standards of education, training and proficiency for the practice of the various healing arts. The instant case deals with none of these standards but arises from an amendment to existing legislation, and has nothing to do with the qualifications to practice the healing arts or the standards for such practice. It is an amendment which appears prima facie to affect fiscal matters only and thus to impair the obligation of existing contracts, and burdens the right to extend such contracts in the future. It appears to have been enacted not in the interest of regulating a profession or calling, or affecting the standards for the practice of medicine or the operation of hospitals or the practice of optometry, but to provide a financial indemnity to one branch of the healing arts at the expense of other contracting parties.

We are dealing with a right particularly enumerated in the constitution--the freedom to contract. By obligation of contract is meant 'The law binds (the parties) to perform (their) undertaking.' Sturges v. Crowninshield, 17 U.S. (4 Wheat.) 122, 4 L.Ed. 529 (1819). Neither the due process clause nor the impairment of contract clause of either constitution overrides the power of the state to establish regulations that are reasonably necessary to secure the health, safety, good order, comfort or general welfare of the community. 16 C.J.S. Constitutional Law § 281 (1956); 16 Am.Jur.2d Constitutional Law § 289 (1964). But the test is one of reasonableness. If the obligation of contract is to be impaired by the exercise of the police power, there must be a rational connection between the accomplishment of the purpose and the means employed. In directing the subscribers, I.e., patients, shall be indemnified by the medical service corporations for the fees paid to optometrists for vision care, the statute not only impairs the contract between the subscribers or patients and the medical service corporations, but the obligations among participating hospitals, physicians, and medical service corporations as well, and additionally against their will compels the opthalmologists and hospitals to practice in a professional association with the optometrists on pain of either participating in this new legislatively ordained arrangement or withdrawing from the existing contract.

In their testimony, the opthalmologists implied that they regarded the freedom of contract as a component of the right to practice medicine and surgery under the licensing power of this state; unless the police power is of overriding import, they would decline to participate in professional association with optometrists. They contend that the statute compelling them to do so not only takes their property without due process of law and impairs the obligations of their contracts but will weaken the financial status of prepaid medical programs and lower the standards of eye care in this state.

A composite of their testimony shows, we think, that opthalmologists, who limit their practice to the examination, treatment and surgery of the eye, each examine or treat between 5,000 and 6,500 patients annually, and those opthalmologists whose specialization includes ear, nose and throat see about 3,000 eye patients a year. The opthalmologists who participate in a...