Hospital leaders, legislators agree on hospital spending bill in Delaware

Hospital leaders and legislators compromise on HB 350 in Delaware. l PHOTO COURTESY OF MARTHA DOMINGUEZ DE GOUVEIA/UNSPLASH

DOVER — Health care leaders and legislators have reached a compromise on a bill that seeks to regulate hospital spending in the First State after months of divisive debate.

Delaware Healthcare Association (DHA) President and CEO Brian Frazee released a public letter of support to the General Assembly Monday afternoon, stating that the DHA now “stands neutral on HB 350 and will no longer actively oppose the bill at this time.”

House Bill 350 would create the seven-member Diamond State Hospital Review Board to review hospital budgets in Delaware and require compliance with health care spending benchmarks set by the Delaware Economic and Financial Advisory Council (DEFAC) Health Care Spending Benchmark Subcommittee; hospitals that act solely as psychiatric or rehabilitation facilities are exempt from the new legislation. Nemoursis exempt from the 2025 reference pricing provision that caps charges until the board is formed, reflecting the mix of children and adult patients.

According to Frazee’s letter, amendments to the bill “reduce the immediate harm to our state’s hospitals and healthcare systems, and their employees and patients. . .”

Specifically, the amendment filed just minutes after the letter was released addresses several of the concerns held by hospital leaders. House Substitute 2 to HB 350 now removes the ability by the board to seize hospital assets if they exceed revenue expectations or otherwise fail to meet the budget approved or modified by the board, mandates that the board includes one member from each county and adjusts some of the pricing and reporting requirements to make the process more manageable for the state and the hospital systems.

The legislation will now work in conjunction with House Bill 395 which was introduced on May 7 seeking to replace the pricing mechanism restricting hospital systems from charging more than 250% of Medicare pricing with a growth formula model some health care services already use.

The changes, he explained in his letter, “prevents an immediate $360 million cut from Delaware hospitals and health systems.”

Hospitals will still be required to submit detailed budgetary reports with growth rates “set at either 2% growth over the previous year or the Core Consumer Price Index plus 1% over rates from the previous year, whichever is higher” for 2025 and 2026. The board will then start comparing hospital pricing to the benchmarks in 2027.

A hospital that exceeds the benchmark will be required to submit a performance improvement plan that details specific strategies, adjustments and next steps proposed by the hospital to rein in costs, along with a timetable for implementation, allowing hospitals to adjust their own costs without additional state intervention.

“I want to thank the hospital systems, members of the General Assembly, and the Delaware Department of Health and Social Services for collaborating on a piece of legislation that will combat rising health care costs that are having a significant impact on Delaware families and state taxpayers,” Governor John Carney said in a prepared statement. “The revised House Bill 350 will help lower the growth of healthcare costs in our state, while making sure we’re protecting healthcare quality. I look forward to signing it into law.”

Editor’s note: a previous version of this article incorrectly stated that Nemours would be exempt from HB 350. It will be exempt from the price cap portion of the bill. We regret the error.