Ketcham v. King County Medical Service Corp.

502 P.2d 1197, 81 Wash. 2d 565, 1972 Wash. LEXIS 761

• Court: Washington Supreme Court
• Decided: November 16, 1972
• Docket: 42001
• Status: Published

Opinions

Hale, J.

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 services 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 and 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 Wn.2d 436, 433 P.2d 677 (1967), appeal dismissed, 392 U.S. 643, 20 L. Ed. 2d 1347, 88 S. Ct. 2281 (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. State Bd. of Registration for Architects, 73 Wn.2d 298, 438 P.2d 215 (1968); Reesman v. State, 74 Wn.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 Wn.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 that 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 ophthalmologists 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 ophthalmologists 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 ophthalmologists, 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 ophthalmologists whose specialization includes ear, nose and throat see about 3,000 eye patients a year. The ophthalmologists who participate in a program of prepaid medicine insist upon doing eye examinations and uniformly perform them when fitting glasses. They attach greater importance to the eye examination than to the refraction. Thus, in conducting refraction tests for fitting glasses, the ophthalmologist not only examines the patient’s eyes for disease, abnormalities and deterioration, but also for signs of other diseases not directly involving care and treatment of the human eye. In the course of a year, they discover and begin early treatment, they say, of many serious eye diseases which only an ophthalmologist would likely discover and only an ophthalmologist by law can heal; and they detect and refer to other medical specialists for early treatment or hospitalization diseases and bodily conditions not directly included in eye care.

One ophthalmologist testified that he regularly finds on an average of four or five patients a year suffering from pathological conditions whose eyes have been refracted by optometrists but who were not referred to ophthalmologists for eye care. These patients had such diseases and conditions as cataracts, glaucoma and retinal detachment. An optometrist, say the ophthalmologists, is not authorized to use drugs for dilation of the eye, and no matter how highly trained an optometrist may be, he will be unable to detect many diseases of the eye without dilating the pupil with eyedrops. Without dilation with drugs, glaucoma and other diseases and many tumors cannot be seen unless the symptoms appear centrally located, that is, opposite the pupil. Among the diseases and bodily conditions that the ophthalmologists may detect in a routine eye examination made in conjunction with doing an eye refraction for glasses are brain tumors, arteriosclerosis, tuberculosis, diabetes, chorioretinitis, glaucoma, retinal detachment, iritis, retinal sarcoidosis, fat embolic presence and choroideal nerves, all of which usually demand immediate medical treatment. One ophthalmologist in the course of his testimony exhibited a microscopic slide showing a tumor of the eye which revealed a primary cancer lesion of the breast. To detect these diseases by means of an eye examination, the ophthalmologists agreed, requires a dilation of the pupil; this, they say, can be done properly only by means of drugs. Treatment of the diseases of the eye requires both medicine and surgery, they say—none of which may be given or performed by optometrists.

One ophthalmologist testified, that of the thousands of patients he examined each year, he prescribes the first pair of glasses for 30 to 40 percent, and about 70 percent need either their first pair or a change in their glasses. Thus, of the thousands examined annually by each ophthalmologist, nearly one-third need some kind of medical care other than a prescription for glasses. All of the ophthalmologists testifying described various eye diseases and conditions requiring early diagnoses and treatment; these they said would probably go undetected if the examination were conducted by optometrists and medical doctors not specializing in ophthalmology. It was the consensus of the ophthalmologists testifying that 35 percent of the patients examined have what are described as pathological problems.

Under the ethics of their professions, ophthalmologists cannot advertise; optometrists, however, may and as a general practice do advertise. The ophthalmologists do not wish to be associated in the practice of their profession with a profession which advertises. All of the medical doctors do receive occasional referrals from optometrists who, in giving refractions, have discovered suspected eye disease or conditions treatable only by an ophthalmologist, but all of the ophthalmologists testifying said they have discovered many more cases of eye disease and general disease detectable by ophthalmologists performing eye examinations which had not been referred to medical doctors by optometrists who had examined and prescribed glasses for the same patients. The ophthalmologists, in their testimony, cited instances of patients who had been seen by optometrists—some several times in 1 year—and had been given merely a prescription for stronger glasses on each occasion yet actually needed immediate nonrefractory medical treatment for serious conditions.

Since the premiums paid by the subscribers into the various health care programs cover in-advance diagnosis, treatment, surgery, hospital care and in some instances physical and other related therapy, early detection of disease or deteriorating physical condition usually bears a direct relationship to the ultimate cost of the treatment, including the number of days to be spent in the hospital. It was thus the consensus of the ophthalmologists that they participate in the various prepaid medical programs on the assumption that a high percentage of deteriorating conditions of the eye and other diseases will be detected early through the thousands of eye examinations given annually by all of the participating ophthalmologists. Early detection of disease or deteriorating health in the long run is not only good medical practice, they contend, but sound economics, as well. Compelling the ophthalmologists to reimburse the patient for the costs of optometric refractions not only will seriously impair this procedure from a medical standpoint, they say, but impairs the obligation of their contracts with the patients, medical service corporations and hospitals by forcing them to incur obligations favoring parties with whom they have no intention of contracting, and turning over in part the avails of their contracts to parties who have not participated in them.

One of the defendants, Donald B. Hanford, Doctor of Optometry, and formerly secretary of the state optometric association, testified that optometrists do examine the eye to look for pathological conditions and that he, in the course of his practice, refers about 20 or 30 cases a year to medical doctors for treatment. He said that optometrists perform refractions—that is, a bending of the light in the eye and measuring it for correction—and that optometrists use an ophthalmoscope with which to look at the interior of the eye to check for disease by a process of illumination and magnification. Internal eye pressure, as an indication of glaucoma, he said, is measured by tonometry without the use of drugs. He said that RCW 18.53.100(14) contemplates that licensing of optometrists means the capability “to demonstrate in manner satisfactory to the director, their practical ability to correctly measure eyes, fit glasses, adjust frames and neutralize lenses correctly.”

Dr. Hanford acknowledged that an optometrist, under pain of revocation of license, cannot lawfully hold himself out as an “eye specialist” in connection with the practice of optometry. He believed that there existed a marked difference between “vision specialist” and “eye specialist” and implied that, when optometrists employ the term “vision specialist” in their advertising, a layman would have no difficulty in ascertaining that he does not mean “eye specialist.” The term “eye specialist,” he said, is not available for use by optometrists. Optometrists, he said, are prohibited by law from employing drugs in their practice and from performing surgery; if the term “eye specialist” were used by an optometrist, he said, his license would be revoked. Dr. Hanford identified several bills for professional services which he had rendered to his patients who were members of the defendant Kitsap Physicians Service and which had been paid by the patient. He estimated that 20 or so of his patients were members of that program. He said he had discovered eye disease among his patients which he believed had not been discovered by ophthalmologists in previous examinations.

Henry Schumacher, Doctor of Optometry, former president of the state optometric association and presently chairman of the state board of optometry, testifying for the defense, described the requirements for admission to practice and pointed out that optometrists have from 5 to 7 years of college level education and training. He said that, as a practicing optometrist, he is reimbursed for his optometric services from the Clark County prepaid medical program. The Clark County Physicians Service, he said, pays the optometrist directly for eye refractions. Optometrists, he said, bill that medical bureau directly at the rate of $15 for eye refractions, even though optometrists are not participating members of the Clark County Physicians Service which limits its membership to medical doctors. He said that he understands the use of the term “eye specialist” by optometrists to be illegal, but that the term “vision specialist” was not. Thus, he implied, if optometrists employ the expression “vision specialist” on their advertising it would not be illegal. Optometrists, he said, do not perform surgery; they cannot employ drugs for dilation of the eyes for examination nor in treating the eyes. In summary, he testified that optometrists are not authorized to and do not treat pathology, employ drugs or perform surgery in their practices. When he personally finds a pathological condition in his patients, he said, he refers them to an ophthalmologist.

The evidence in this case supports the judgment of the trial court. Neither on its face nor from the detailed facts of this particular case does the statute show a rational connection between the public health, welfare and safety and the compulsory payment of fees for professional services to optometrists—even though such payments are described as a reimbursement or indemnity. To the contrary, the enforcement of this statute might well lower the standards of medical care and jeopardize the success of prepaid medical programs by depriving patients of the services of many highly trained ophthalmologists. This case shows, as does the very language of the statute, that the statute was designed and operates to collect optometrists’ professional fees from a fund created by others, and with which they have no privity. It works to compel the medical doctors to answer for the debts of others, not by their own contracts and agreements but by compulsion and against their will. Nothing in the statute elevates the requirements for the practice of either ophthalmology, optometry or general medicine and surgery—it does no more than intrude upon the financial arrangement of one contract to set up an indemnity for others not a party thereto.

Legislatures may not under the guise of the police power impair the specific guarantee of freedom of contract. To override the freedom of contract under the constitution, the exercise of the police power must be reasonably necessary in the interest of the health, safety, morals and welfare of the people. County of Spokane v. Valu-Mart, Inc., 69 Wn.2d 712, 419 P.2d 993 (1966); State v. Spino, 61 Wn.2d 246, 377 P.2d 868 (1963); Tukwila v. Seattle, 68 Wn.2d 611, 414 P.2d 597 (1966). The statute must pass the judicial test of reasonableness, and the courts will not sustain restrictions upon useful, lawful and unharmful activities of the people or the use of property in pursuance thereof unless it is shown that the restrictions sought to be imposed by means of the police powers are rationally connected to improving or benefiting the public peace, health, safety and welfare. State v. Spino, supra; Remington Arms Co. v. Skaggs, 55 Wn.2d 1, 345 P.2d 1085 (1959); Hauser v. Arness, 44 Wn.2d 358, 267 P.2d 691 (1954); State ex rel. Seattle Title Trust Co. v. Roberge, 278 U.S. 116, 73 L. Ed. 210, 49 S. Ct. 50, 86 A.L.R. 654 (1928). A contract is impaired. by a statute which alters its terms, imposes new conditions or lessens its value (Tremper v. Northwestern Mut. Life Ins. Co., 11 Wn.2d 461, 119 P.2d 707 (1941)), and this, we think, is precisely what the statute in issue does to existing health care contracts.

That other states have upheld legislation as to future health care service contracts requiring medical doctors to include in the health care program not only optometrists but chiropodists and podiatrists (Godfrey v. Massachusetts Medical Serv.,.........Mass............., 270 N.E.2d 804 (1971); Maryland Medical Serv., Inc. v. Carver, 238 Md. 466, 209 A.2d 582 (1965)), we find unconvincing on the constitutional points involved here. Nor do we find convincing the rationale of United Medical Serv., Inc. v. Holz, 5 Misc. 2d 999, 161 N.Y.S.2d 624, aff’d, 4 App. Div. 2d 1017, 169 N.Y.S.2d 416 (1957), which sustained the New York statute, i.e., 27 McKinney’s Consol. Laws of New York Annot., Insurance Law § 250 (Supp. 1971-72), that compels medical doctors to make their health service programs available to and include as an integral part thereof licensed optometrists, podiatrists and chiropractors; and if the patient’s affliction involves mental, nervous or emotional disorders and ailments, it must provide for direct participation by and indemnity to not only psychiatrists but psychologists as well. See Western New York Medical Plan, Inc. v. Wikler, 8 App. Div. 2d 988, 189 N.Y.S.2d 61, aff'g 15 Misc. 2d 277, 178 N.Y.S.2d 981 (1958), holding the statute inapplicable to medical service programs already in existence. The reasoning supporting these holdings we find faulty and unacceptable because these cases tend to aggrandize the police power of the state to the farthest limits of the legislature’s collective imagination.

Another aspect of the statute generally overlooked is that the evidence shows that only some 20 to 25 percent of the ophthalmologists’ patients are members of any health care program and that with regard to such patients, the bills rendered by the ophthalmologists for professional services to the health care contractor usually are substantially lower than for nonmember patients. This, of course, is done to help keep the program solvent and to encourage people to join the prepaid medical and hospital program. How many and to what extent highly specialized medical personnel will continue to participate in such programs if the courts persist in compelling them to practice in conjunction with other licensed healers such as optometrists, podiatrists, chiropractors, psychologists and other certificated healers such as suggestive therapists, mechanotherapists, physcultopathists, sanipractors and other drugless healers (RCW 18.36) and midwives (RCW 18.50), is questionable. That a few patients may elect to have their prepayments cover the professional services of nonmedical doctors licensed by the state may in the long run work to deprive many of the professional services of the most highly trained medical specialists under a prepayment program. Such mandatory indemnity provisions we doubt can be said to advance the general welfare or the public health or safety.

Another aspect of this statute should be considered. Not only does the enactment, if upheld, so aggrandize the police power of the state that virtually any assertion hereafter made in furtherance of the police power will have to be upheld, but, additionally, it is repugnant to the Fourteenth Amendment.¹ The statute operates to take the property of the participating and contributing members of a prepaid health care program without due process of law, and grants special privileges and immunities to optometrists. Not being a member of the program and contributing nothing to it, and not sharing in the problems or costs of management, optometrists under the aegis of this statute and the compulsory indemnity features nevertheless will share in all of the benefits. If a prepaid medical program established by ophthalmologists and other medical doctors, who have helped to organize the program and continue to manage and operate it as participating members, and to which they contribute financially by reduced billing, must indemnify nonparticipating optometrists, then the medical doctors in general and ophthalmologists in particular are inevitably deprived of their property without due process of law and optometrists at the same time are given special privileges and immunities. One cannot imagine a statute that more directly achieves this unconstitutional end short of outright confiscation.

The right to contract, of course, is not sacrosanct and does not stand above the general welfare. A myriad of cases in this country have held that freedom of contract must give way to the overriding necessity of society in insuring domestic tranquility and protecting the public health, safety and morals, and providing for the general welfare. Thus, without regard to contracts entered into by the parties, the police power in protecting the nation’s supplies of food and medicine, spending the public treasury, regulating its traffic, preserving its waters, zoning its lands, maintaining its schools and public institutions, regulating its industries and agriculture, and in a multitude of other functions affecting the public interest, have been held paramount and within the constitutional power of government. But this has never been done under any theory, tacit or express, that the freedom to contract—among individuals and with government—is not a valuable civil right and one cherished by both constitutions. The legislature, in enacting this statute, ignored this salient precept and imparted a supervisory and awesome quality to the exercise of the police power of the state. To sustain this statute would leave the state virtually unrestricted and unlimited in the exercise of its police power—a power which is neither mentioned nor described in either constitution.

Finding no such overriding power in the legislative and executive branches of government under our written constitution, we therefore affirm.

Rosellini, Neill, and Stafford, JJ., concur.

Hamilton, C.J., concurs in the result.

1 No person shall be deprived of life, liberty or property without due process of law (Const. art. 1, § 3) or his contracts impaired (U.S. Const. art. 1, § 10).