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Bill to regulate health care costs passes House

Katie Tabeling

A bill that would create a board that would oversee hospital financials – and may require those who don’t fall into the health care spending benchmarks to submit a performance plan or require all budgets to go through the board for approval – has passed the House.|  PHOTO COURTESY OF ADOBE STOCK

DOVER — Despite weeks of lobbying from hospital leaders and after hours of debate, the Delaware House of Representatives passed a bill late Thursday night that would require the state’s largest hospitals submit budgets to a newly-created board,with the goal to keep health care costs within the state’s long-established health spending benchmarks.

The final vote on House Bill 350 was 21 to 16 and fell along most party lines with four legislators absent. The debate lasted four hours and was cut short by a rarely-used rule that can move to final vote if five people called for a floor vote.

HB 350 would effectively create the Diamond State Hospital Cost Review Board in which seven members would review financial information from hospitals to try and curb rising health care costs. The board would compare hospitals annual costs to the state’s health care spending benchmark. That benchmark, which was set by the Delaware Economic and Financial Advisory Council in 2018, varied between 3 and 4%. 

Delaware hospitals have met that benchmark once  — in 2020 when the COVID-19 pandemic delayed preventative and elective treatments.

Recent amendments to the bill have now established that hospitals who exceed that threshold would have to submit a performance improvement plan, instead of granting the board power to approve or deny budgets. Hospitals who fail to meet that plan may have to submit future budgets for the board’s approval. The board would delay any decisions on budgets until 2026 after receiving hospital financial information the year before.

For and against HB 350

House Speaker Valerie Longhurst (D-Bear) fiercely defended the bill on the House floor, noting that hospitals account for 42% of all health care spending in the state, or $3.5 billion in 2021.

“That’s a 9.3% increase since just 2019. That doesn’t account for pharmacy costs, primary care visits or specialists. Delaware hospitals profit 40% more than the national average,” Longhurst said. “This legislation is not about punishing hospitals, but rather ensuring our constituents are able to access quality and affordable health care . . . and to put a system in place to slow down skyrocketing costs.”

The proposal has been decried by opponents as a “politician-controlled board” that would fail to control costs in the long run. Delaware Healthcare Association (DHA) President and CEO Brian Frazee testified that health care benchmarks reflect the entire industry, not just hospitals. He said that a recent report found that pharmacy and long term care drove the spike in 2021.

“Hospitals are just one piece of that, and yet under this bill, we’re going to be the ones accountable to meet those benchmarks,” Frazee said. “We as an industry are still willing to work with the sponsors on figuring out a way to have accountability in a way that makes sense.”

The DHA has met with Longhurst on the bill and has proposed requiring hospitals have price transparency, audited reports and other information to the state Healthcare Commission as well as more collaboration on health care affordability, among others. As an organization, the DHA has publicly published several similar reports in recent years on its website such as a health equity report in 2022, statewide hospital utilization reportsand community benefits reports.

Longhurst told legislators that, despite their meetings, DHA’s goals were constantly changed after these meetings were held.

Oversight questions

Legislators who were against HB 350 argued that it would add undue stress to hospitals with more regulation. Rep. Byran Shupe (R-Milford) also pointed out six of the seven board members would be appointed by the governor. The bill also states that those positions would be up for Senate confirmation.

“This is definitely government overreach by putting authority into this bill of taking over the hospitals if they deem necessary,” Shupe said. “Delaware has put into practices here that have diminished competition here in Delaware and the competition is what is going to drive down costs.”

According to the DHA, Delaware hospitals are losing $200,000 per family medicine practitioner recruitment, and $800,000 per speciality position, coming to a staggering $30 million.

House Majority Leader Rep. Melissa Minor-Brown (D-New Castle) also argued in favor of having more direct say in who sits on the board, mainly to keep health equity in check. She read an email sent by ChristianaCare leadership to its staff which asked its employees to come to the legislative hall and call their legislators in opposition of the bill.

In part, the email reviewed by the Delaware Business Times, stresses HB 350 would reduce access to care for vulnerable communities, erode financial stability, constrain ChristianaCare’s ability to grow to meet the future and make it difficult to attract staff. 

“We would be forced to make drastic cuts to services across our organization, including long standing programs that serve populations that have historically been underserved by the medical community,” the email reads.

ChristianaCare also said in the staff email that it could experience a $180 million reduction in funding as soon as 2025. Its health care system is the second-largest employer in the state according to DBT records.

“My concern with that type of language being put out there,  it makes me concerned that someone does need to be at the table, because I’m afraid Black and Hispanic folks would be the ones who would face [these cuts],” Minor-Brown said.

Other amendments

HB 350 was amended to exempt rehabilitation hospitals as well as those who derive 45% or more of their revenue or whose patient population has 5% or less Medicare patients from the 2025 reference pricing provision. That means, for example, Nemours Childrens’ Hospital is now exempt from submitting financials.

Other amendments grant hospitals a chance to appeal the board through the state’s Superior Court and adjust the deadline for a board decision on a budget 90 days before a hospital’s financial year begins.

The bill also caps hospitals from charging more than 250% of Medicaid costs to patients for services next year.

Even with the opposition from the DHA and major hospitals, Gov. John Carney has signaled that he supports HB 350 and may sign it when and if it appears on his desk. In a prepared statement on the bill, he noted that his recommended budget for Fiscal Year 2025 included more than $2 billion in health care spending alone, or $200 million more than last year.

“Rising healthcare costs are having a real impact on Delaware families, and state taxpayers,” Carney said in a statement. “Those kinds of cost increases are just not sustainable. Working together, we can take action that lowers health care costs for Delaware families and taxpayers, while protecting and improving health care quality. If we fail to address this issue, health care spending will crowd out funding for public schools, affordable housing, child care, and other priorities important in the lives of Delawareans. That’s just a fact.”

Editor’s note: this story has been updated to include Gov. John Carney’s statement.

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