SETTLEMENT AND RELEASE OF ALL CLAIMS
RELATED TO CERTIFICATE OF NEED APPLICATIONS

I. INTRODUCTION
1.1

This Settlement Agreement (Agreement) is entered into by the following Parties:
(a) Washington State Department of Health (the Department);
(b) US HealthVest, LLC, a Delaware limited liability company;
(c) Vest Thurston, LLC, a Delaware limited liability company and fully-owned subsidiary of
US HealthVest, LLC;
(d) Universal Health Services, Inc. (UHS), a Delaware corporation;
(e) BHC Fairfax Hospital, Inc. (Fairfax), a Tennessee corporation owned by Universal
Health Services, Inc.;
(f) Providence Health & Services–Washington (Providence), a Washington nonprofit
corporation; and,
(g) Olympia Behavioral Health LLC (OBH), a Washington limited liability company
operated as a joint venture between BHC Fairfax Hospital, Inc. and Providence Health
and Services–Washington.

1.2
US HealthVest, LLC and Vest Thurston, LLC are collectively referred to as HealthVest.
HealthVest, Fairfax, Providence, UHS, OBH and the Department are referred to collectively as
“the Parties”.
II. RECITALS
2.1
Whereas, on July 13, 2016, the Department issued CN # 1580 to HealthVest to establish a
75-bed psychiatric hospital in Lacey, Washington (herein called the “HealthVest 75 Bed CN”).
Providence requested an adjudicative proceeding to contest the issuance of the 75 Bed CN. An
adjudicative hearing was held on December 5, 6, and 7, 2016. The issuance of the 75 Bed CN
was upheld in an Initial Order issued May 9, 2017; and again in the Department’s Final Order
issued October 31, 2017. On November 29, 2017, Providence petitioned for judicial review of
the Final Order in Thurston County Superior Court at Docket Number 17-2-06272-34 (herein
called the “Superior Court Action”);
2.2
Whereas, on December 22, 2016, HealthVest filed an application for a certificate of need
to expand by 40 beds its approved psychiatric hospital in Lacey, Washington, for a total of 115
beds, designated application CN17-22 (herein called the “HealthVest 40 Bed Application”). On
October 6, 2017, the Department declared a pivotal unresolved issue in that application. Fairfax,
Providence, and OBH each submitted public comments, both before and after the Department’s
declaration of a pivotal unresolved issue, in opposition to the 40-Bed Application;
2.3
Whereas, on June 21, 2016, Fairfax, Providence, and OBH filed an application for a
certificate of need to establish an 85-bed psychiatric hospital in Lacey, Washington, designated
application CN16-40 (herein called the “OBH 85 Bed Application”). A portion of the beds for
the proposed new hospital would replace the inpatient psychiatric beds currently operated by

1

 Providence at Providence St. Peter Hospital in Olympia. On April 24, 2017, the Department
issued an evaluation denying the 85 Bed Application. OBH requested a public hearing on
reconsideration, which was denied. OBH requested adjudicative proceedings to contest both the
initial application denial and the denial of reconsideration; the two hearing requests were
consolidated, and HealthVest was permitted to intervene;
2.4
Whereas, the Parties wish to come to agreement regarding the objections and appeals
now pending concerning the HealthVest 75 Bed CN, the HealthVest 40 Bed Application and the
OBH 85 Bed Application, in an effort to expedite the construction of desperately needed inpatient psychiatric hospital beds in the planning area; and,
2.5
Whereas the Parties now desire to resolve all matters between them relating in any way to
CN # 1580, CN # 1580A (as described in Section 3.1(d) below), CN16-40, and/or CN17-22; all
appeals resulting from those certificates and applications; and any other legal or regulatory
matter related to the construction and/or establishment of the OBH hospital in Lacey and/or the
HealthVest hospital in Lacey;
The Parties now enter into the following Agreement.
III. AGREEMENT
3.1
In consideration of HealthVest’s agreement to reduce from 40 to 33 the number of
psychiatric beds requested in the HealthVest 40 Bed Application; in consideration of the
Department’s agreement to grant a certificate of need for the establishment of an 85 bed
psychiatric hospital in the OBH 85 Bed Application; in consideration of HealthVest’s agreement
to withdraw its objections to the OBH 85 Bed Application, to cooperate in the settlement and
dismissal of Master Case Nos. M2017-544 and M2017-740, and not to bring any related actions
or appeals; and to avoid the uncertainty, burden, inconvenience, distraction and expense of
further legal or other proceedings in connection with or related to these matters, Providence
will:
a)
Permanently close its existing 20 psychiatric hospital beds at Providence St. Peter
Hospital in Olympia upon the opening of the new 85-bed OBH hospital;
b)

Voluntarily dismiss with prejudice its appeal in the Superior Court Action;

c)
Waive and forego any further proceedings contesting the issuance of the
HealthVest 75-Bed CN;
d)
Waive and forego any proceedings contesting the Department’s issuance of
amended CN # 1580A eliminating the condition for HealthVest to partially fund its
project with the now-expired Department of Commerce grant;
e)
Withdraw its objections and waive any further proceedings contesting the
HealthVest 40 Bed Application and the issuance of a 33-bed certificate of need to
HealthVest;

2

 f)
Waive any opportunity to comment on the proposed settlement between the
Department and HealthVest under RCW 70.38.115(10)(c) and WAC 246-310-610(4);
and,
g)
Otherwise waive and forego any other legal objection, appeal, or other
interference with any permit, license, or other approval by any government entity or
accreditation group in connection with HealthVest’s construction and establishment of a
108-bed psychiatric hospital in Lacey, Washington, pursuant to the terms of this
Agreement.
3.2
In consideration of HealthVest’s agreement to reduce from 40 to 33 the number of
psychiatric beds requested in the HealthVest 40 Bed Application; in consideration of the
Department’s agreement to grant a certificate of need for the establishment of an 85 bed
psychiatric hospital in the OBH 85 Bed Application; in consideration of HealthVest’s agreement
to withdraw its objections to the OBH 85 Bed Application, to cooperate in the settlement and
dismissal of Master Case Nos. M2017-544 and M2017-740, and not to bring any related actions
or appeals; and to avoid the uncertainty, burden, inconvenience, distraction and expense of
further legal or other proceedings in connection with or related to these matters, UHS and
Fairfax will:
a)
Waive and forego any objection or appeal contesting the issuance of the
HealthVest 75 Bed CN or Providence’s settlement of its claims regarding that issuance;
b)
Waive and forego any proceedings contesting the Department’s issuance of
amended CN # 1580A eliminating the condition for HealthVest to partially fund its
project with the now-expired Department of Commerce grant;
c)
Withdraw its objections and waive any further proceedings contesting the
HealthVest 40 Bed Application and the issuance of a 33-bed certificate of need to
HealthVest;
d)
Waive any opportunity to comment on the proposed settlement between the
Department and HealthVest under RCW 70.38.115(10)(c) and WAC 246-310-610(4);
and,
e)
Otherwise waive and forego any other objection, appeal, or other interference
with any permit, license, or other approval by any government entity or accreditation
group in connection with HealthVest’s construction and establishment of a 108-bed
psychiatric hospital in Lacey, Washington, pursuant to the terms of this Agreement.
3.3
In consideration of HealthVest’s agreement to reduce from 40 to 33 the number of
psychiatric beds requested in the HealthVest 40 Bed Application; in consideration of the
Department’s agreement to grant a certificate of need for the establishment of an 85 bed
psychiatric hospital in the OBH 85 Bed Application; in consideration of HealthVest’s agreement
to withdraw its objections to the OBH 85 Bed Application, to cooperate in the settlement and
dismissal of Master Case Nos. M2017-544 and M2017-740, and not to bring any related actions

3

 or appeals; and to avoid the uncertainty, burden, inconvenience, distraction and expense of
further legal or other proceedings in connection with or related to these matters, OBH will:
a)
Submit to the Department information necessary to clarify the OBH 85 Bed
Application, as set forth in Paragraph 3.7;
b)
Not admit any patient to its new psychiatric hospital in Lacey, Washington earlier
than sixteen months after the date of this Agreement;
c)
Waive and forego any objection or appeal contesting the issuance of the
HealthVest 75 Bed CN or Providence’s settlement of its claims regarding that issuance;
d)
Waive and forego any proceedings contesting the Department’s issuance of
amended CN # 1580A eliminating the condition for HealthVest to partially fund its
project with the now-expired Department of Commerce grant;
e)
Withdraw its objections and waive any further proceedings contesting the
HealthVest 40 Bed Application and the issuance of a 33-bed certificate of need to
HealthVest;
f)
Waive any opportunity to comment on the proposed settlement between the
Department and HealthVest under RCW 70.38.115(10)(c) and WAC 246-310-610(4);
and,
g)
Otherwise waive and forego any other objection, appeal, or other interference
with any permit, license, or other approval by any government entity or accreditation
group in connection with HealthVest’s construction and establishment of a 108-bed
psychiatric hospital in Lacey, Washington, pursuant to the terms of this Agreement.
3.4
In consideration of the Department’s agreement to grant a certificate of need for 33
psychiatric beds in the HealthVest 40 Bed Application; in consideration of the Department’s
agreement to issue an amended CN # 1580A eliminating the condition for HealthVest to partially
fund its project with the now-expired Department of Commerce grant, and the agreement of
Providence, Fairfax, and OBH to bring no objection or appeal to CN # 1580A; in consideration
of Providence’s agreement to permanently close its existing psychiatric hospital beds at
Providence St. Peter Hospital in Olympia upon the opening of the new 85-bed OBH hospital; in
consideration of Providence’s agreement to withdraw and dismiss its appeal of the HealthVest 75
Bed CN and not to bring any related actions or appeals; in consideration of the individual and
collective agreements of Providence, Fairfax, and OBH to withdraw all objections to the
HealthVest 40 Bed Application and not to bring any related actions or appeals; and to avoid the
uncertainty, burden, inconvenience, distraction and expense of further legal or other proceedings
in connection with or related to these matters, HealthVest will:
a)
Withdraw its objections and waive any further proceedings contesting the OBH
85 Bed Application and the issuance of an 85-bed certificate of need to OBH;
b)

Cooperate in the dismissal of Master Case Nos. M2017-544 and M2017-740;
4

 c)
Waive any opportunity to comment on the proposed settlement between the
Department and Providence, Fairfax, and/or OBH under RCW 70.38.115(10)(c) and
WAC 246-310-610(4); and,
d)
Otherwise waive and forego any other objection, appeal, or other interference
with any permit, license, or other approval by any government entity or accreditation
group in connection with OBH’s construction and establishment of an 85-bed psychiatric
hospital in Lacey, Washington, pursuant to the terms of this Agreement.
3.5
To avoid the uncertainty, burden, inconvenience, distraction and expense of further legal
or other proceedings in connection with or related to these matters, and to ensure the public
interest is served through the timely development and operation of inpatient psychiatric hospital
services in Thurston County, the Department will support, approve and accept the decisions of
Providence, Fairfax, OBH, and HealthVest to dismiss their respective appeals and withdraw their
respective objections pursuant to the terms of this Agreement; and take the actions set forth
below.
3.6
The Parties agree that each of the certificates of need issued to OBH and HealthVest in
Thurston County will contain the following conditions regarding patients civilly detained under
the Involuntary Treatment Act:
So long as the state desires to contract with the facility for providing care to Involuntary
Treatment Act (ITA) patients, [the CN holder] will contract with the state to provide that
care. An ITA referral may only be rejected if there are no beds available at [the facility]
at the time of referral or if such referral is clinically inappropriate.
On an annual, calendar year basis, at least 20% of the hospital’s inpatient admissions
shall be ITA patients. The Department of Health may hereinafter set a lower percentage
of ITA admissions on a statewide basis.
The hospital shall maintain records documenting the following:
• Number of ITA patient referrals;
• Number of ITA patients admitted;
• Annual ITA admissions as a percentage of total hospital admissions; and,
• Reason for not accepting each declined ITA patient.
These records shall be provided to the Department on a semi-annual basis.
3.7
As of the execution of this Agreement, OBH has submitted to the Department
information necessary to clarify the OBH 85 Bed Application.
3.8
Within seven business days from the execution of this Agreement, the Department agrees
to complete its review of the information referenced in Paragraph 3.7. Following such review
and by no later than January 2, 2018, the Department will issue a conditional approval of the
OBH 85 Bed Application in the amount of 85 psychiatric beds. Upon OBH’s acceptance of all
conditions, the Department will issue an “Intent to Issue” a certificate of need to OBH for the
establishment of an 85 bed psychiatric hospital. Provided, however, that issuance of an “Intent to

5

 Issue” a certificate of need and subsequent certificate of need under this Agreement is not
relevant to or a basis for any future certificate of need decisions or settlements.
3.9
Concurrent with the issuance of the conditional approval described in Paragraph 3.8, the
Department agrees to issue amended CN # 1580A affirming HealthVest’s 75 bed certificate of
need, eliminating the condition for HealthVest to partially fund its project with the now-expired
Department of Commerce grant and incorporating the condition regarding Involuntary Treatment
Act patients as set forth in Paragraph 3.6. A draft of CN # 1580A is attached to this Agreement
as Attachment 1. The Parties agree that the issuance of CN # 1580A will render null and void
CN # 1580. Provided, however, that issuance of an amended certificate of need under this
agreement is not relevant to or a basis for any future certificate of need decisions or settlements.
3.10 Concurrent with the issuance of the conditional approval described in Paragraph 3.8, the
Department agrees to issue an evaluation conditionally approving the HealthVest 40 Bed
Application in the amount of 33 inpatient psychiatric beds, on conditions substantially similar to
those imposed in CN # 1580A. Upon HealthVest’s acceptance of all conditions, the Department
will issue a new certificate of need to HealthVest for 33 additional inpatient psychiatric beds at
its previously-approved South Sound Behavioral Hospital. The Department agrees that it shall
not be a condition of HealthVest’s 33-bed certificate of need that those 33 beds be commenced,
constructed, or opened on a phased basis separate from the commencement, construction, and
opening of HealthVest’s 75-bed certificate of need. Provided, however, that issuance of a
certificate of need under this Agreement is not relevant to or a basis for any future certificate of
need decisions or settlements.
3.11 HealthVest agrees to accept the Department’s reduction from 40 to 33 of the number of
beds to be approved under its application CN17-22.
3.12 Within five business days following the Department’s issuance of the Intent to Issue
described in Paragraph 3.8, Providence, Fairfax, and OBH individually and collectively agree to
move to dismiss with prejudice the following proceedings challenging the Department’s denial
of CN16-40:
In re: Certificate of Need Application of Providence Health & Services—WA d/b/a/
Providence St. Peter Hospital and BHC Fairfax Hospital Inc. to Establish a Psychiatric
Hospital in Thurston County, Olympia Behavior Health LLC, BHC Fairfax Hospital,
Inc., and Providence Health and Services—WA, Petitioners.
Adjudicative Service Unit Nos. M2017-544 and M2017-740 (consolidated)
3.13 Within five business days following the dismissal of the proceedings identified in
Paragraph 3.12, Providence agrees to move to dismiss with prejudice the following case
challenging the Department’s approval of CN #1580:
Providence Health & Services–Washington d/b/a Providence St. Peter Hospital v.
Department of Health of the State of Washington, et al.
Thurston County Superior Court No. 17-2-06272-34

6

 3.14 The Parties each agree to bear their own attorneys’ fees and costs, and the Parties each
agree not to seek costs or attorneys’ fees incurred in any of the above-mentioned matters.
3.15 Following dismissal of the cases identified in Paragraphs 3.12 and 3.13 of this
Agreement, HealthVest, Providence, UHS, Fairfax, and OBH each agree not to dispute, either
through litigation or otherwise, any of the determinations made by the Department in the
evaluation and approval of CN # 1580, CN # 1580A, CN16-40, and/or CN17-22.
3.16 Following dismissal of the cases identified in Paragraphs 3.12 and 3.13 of this
Agreement, HealthVest further agrees not to dispute, either through litigation or otherwise, any
additional legal or regulatory review or approval sought and/or received by OBH in relation to
the establishment of an 85-bed psychiatric hospital in Lacey under the certificate of need issued
on application CN16-40, including but not limited to land use, environmental review, building
permits and/or other entitlements, licensure, and/or certification issues.
3.17 Following dismissal of the cases identified in Paragraphs 3.12 and 3.13 of this
Agreement, Providence, UHS, Fairfax, and OBH further agree, individually and collectively, not
to dispute, either through litigation or otherwise, any additional legal or regulatory review or
approval sought and/or received by HealthVest in relation to the establishment of a 108-bed
psychiatric hospital in Lacey under CN # 1580A and the certificate of need issued on application
CN17-22, including but not limited to land use, environmental review, building permits and/or
other entitlements, licensure, and/or certification issues.
3.18 Settlement of these matters shall not be construed as an admission on the part of any of
the Parties as to the relative merits of any other Party’s position in these matters.
3.19 This Agreement is proposed by the Parties and shall not be construed in favor of, or
against, any party.
3.20 This Agreement represents the entire understanding of the Parties with regard to the
subject matter addressed by this Agreement, and fully and finally settles all disputes, claims, and
allegations among the Parties regarding the HealthVest project to establish a psychiatric hospital
in Lacey, Washington, and regarding the OBH project to establish a psychiatric hospital in
Lacey, Washington.
3.21 This Agreement shall be binding upon and inure to the benefit of the Parties and their
respective successors and assigns.
3.22 This Agreement shall be construed, governed, and enforced in accordance with the laws
of the State of Washington.
3.23 The individuals signing below represent and warrant that they have the requisite authority
to bind the entities on whose behalf they are signing.
3.24 This Agreement may be executed in any number of counterparts, each of which shall be
deemed an original, but all such counterparts together shall constitute one and the same
instrument.
7

 3.25 The Parties agree that in the event of a disagreement over the terms or conditions of this
Agreement, the parties shall arbitrate the dispute. Judicial Dispute Resolution, LLC and Larry
Jordan shall serve as the arbitrator in the event of an arbitration. The Department will not be
responsible for any of the costs of the arbitration.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]

8

 IV. SIGNATURES
Each individual signing this document on behalf of each respective Party represents that he or
she is authorized to bind that respective Party to this Agreement.
Dated this 1 Ith day of December, 2017,
US HEALTHVEST, LLC
a Delaware limited liability company

UNIVERSAL HEALTH SERVICES, INC.
a Delaware corporation

Dr. Richard Kresch
Chief Executive Officer

Debra K. Osteen
Executive Vice President and President
Behavioral Health Division

VEST THURSTON, LLC
a Delaware limited liability company

BHC FAIRFAX HOSPITAL, INC.
a Tennessee corporation

C

Its Sole Member, US HealthVest, LLC
Dr. Richard Kresch
Managing Member

IS

Ron Escarda
Chief Executive Officer
PROVIDENCE HEALTH & SERVICES—
WASHINGTON
a Washington corporation

WASHINGTON STATE DEPARTMENT OF
HEALTH

an agency of t"ate of Washington
Medrice Coluccio
Chief Executive, Providence Health &
Services-Southwest Washington

By:
NancyT o~
Executive Director, Health and Facilities
and Certificate of Need

OLYMPIA BEHAVIORAL HEALTH LLC
a Washington limited liability company

Its Sole Member, BHC Fairfax Hospital, Inc.
Ron Escarda
Chief Executive Officer
0j

 IV. SIGNATURES

Each individual signing this document on behalf of each respective Party represents that he or
she is authorized to bind that respective Party to this Agreement.

Dated this 1 day of December, 2017.

US HEALTHVEST, LLC
a Delaware limited liability company


By: 

?Dr. Richard Kresch
Chief Executive Officer

 

VEST THURSTON, LLC

a Delaware limited liability company



 

B?/W/Zz/Mmaas

Its Sole Member: US HealthVest, LLC
Dr. Richard Kresch
Managing Member

WASHINGTON STATE DEPARTMENT OF
HEALTH
an agency of the State of Washington

By:

 

Nancy Tyson
Executive Director, Health and Facilities
and Certificate of Need

UNIVERSAL HEALTH SERVICES, INC.

a Delaware corporation

By:

 

Debra K. Osteen
Executive Vice President and President
Behavioral Health Division

BHC FAIRFAX HOSPITAL, INC.

3 Tennessee corporation

By:

 

Ron Escarda
Chief Executive Of?cer

PROVIDENCE HEALTH 
WASHINGTON
a Washington corporation

By:

 

Medrice Coluccio
Chief Executive, Providence Health 
Services-Southwest Washington

OLYMPIA BEHAVIORAL HEALTH LLC

a Washington limited liability company

By:

 

Its Sole Member, BHC Fairfax Hospital, Inc.
Ron Escarda
Chief Executive Officer

IV. SIGNATURES

Each individual signing this document on behalf of each respective Party represents that he or
she is authorized to bind that respective Party to this Agreement.

Dated this I day of December, 2017.

US HEALTHVEST, LLC
a Delaware limited liability company

By:
Dr. Richard Kre?sch
Chief Executive Of?cer

 

VEST THURSTON, LLC
a Delaware limited liability company
By: US HealthVest, LLC, its sole member

By:

 

Dr. Richard Kresch
Managing Member

WASHINGTON STATE DEPARTMENT OF
HEALTH
an agency of the State of Washington

By:
Nancy Tyson
Executive Director, Health and Facilities
and Certi?cate of Need

 

UNIVERSAL HEALTH SERVICES, INC.
a Delaware corporation

 

Debra Osteen
Executive Vice President and President
Behavioral Health Division

BHC FAIRFAX HOSPITAL, INC.
:1 Tennessee corporation

By:

 

Ron Escarda
Chief Executive Of?cer

PROVIDENCE HEALTH SERVICES-

WASHINGTON
a Washington corporation

By:

 

Medrice Coluccio
Chief Executive, Providence Health 
ServiCes-Southwest Washington

OLYMPIA BEHAVIORAL HEALTH LLC
a Washington limited liability company

 

y:
its Sole Member, BHC Fairfax Hospital, inc.
Ron Escarda
Chief Executive Of?cer

IV. SIGNATURES

Each individual signing this document on behalf of each respective Party represents that he or
she is authorized to bind that respective Party to this Agreement.

Dated this I 1th day of December, 20l7.

US HEALTHVEST, LLC
a Delaware limited liability company

By: 
Dr. Richard Kresch
Chief Executive Of?cer

 

VEST TI-IURSTON, LLC
a Delaware limited liability company

By:
Its Sole Member, US l-IealthVest, LLC
Dr. Richard Kresch
Managing Member

 

WASHINGTON STATE DEPARTMENT OF

HEALTH
an agency of the State of Washington

By:
Nancy Tyson
Executive Director, Health and Facilities
and Certi?cate of Need

 

UNIVERSAL HEALTH SERVICES, INC.
a Delaware corporation

 

 

By:
Debra K. Osteen

Executive Vice President and President
Behavioral Health Division

BHC FAIRFAX HOSPITAL, INC.

a Tennessee corporation

By:

 

Ron Escarda
Chief Executive Of?cer

PROVIDENCE HEALTH SERVICES-
WASHINGTON

a Washington corporation

 

By:

Medrice Coluccio

Chief Executive, Providence Health 
Services-Southwest Washington

OLYMPIA BEHAVIORAL HEALTH LLC
a Washin on limited liability company

By. 4/4491",

Its Sble Member, BHC Fairfax Hospital, Inc.
Ron Escarda
Chief Executive Of?cer

 

IV. SIGNATURES

Each individual signing this document on behalf of each respective Party represents that he or
she is authorized to bind that respective Party to this Agreement.

Dated this dayof December, 2017.

US HEALTHVEST, LLC

a Delaware limited liability company

By:
Dr. Richard Kresch
Chief Executive Officer

 

VEST THURSTON, LLC

a Delaware limited liability company

By:
Its Sole Member, US HealthVest, LLC
Dr. Richard Kresch
Managing Member

 

STATE DEPARTMENT OF
HEALTH
an agency of the State of Washington

By:

 

Nancy Tyson
Executive Director, Health and Facilities
and Certi?cate of Need

UNIVERSAL HEALTH SERVICES, INC.

a Delaware corporation

By:

 

Debra K. Osteen
Executive Vice President and President
Behavioral Health Division

BHC HOSPITAL, INC.

a Tennessee corporation

By:

 

Ron Escarda
Chief Executive Of?cer

PROVIDENCE HEALTH 


a Washington corporation

By?lom Om

 

MedfleeColuccio
Chief Executive, Providence Health 
Services?Southwest Washington

OLYMPIA BEHAVIORAL HEALTH LLC
a Washington limited liability company

By:

 

Its Sole Member, BHC Fairfax Hospital, Inc.
Ron Escarda
Chief Executive Officer