DOVER – The newly established Diamond State Hospital Cost Review Board met for the first time Tuesday to discuss future proceedings as they work to enforce lower health care costs in Delaware.
Board members Dr. Devona Goeins-Williams, Heath Chasanov, David Singleton, Brian Frazee and Chair Richard Geisenberger attended the meeting which was held inside Delaware State University’s Bank of America building. Thomas Brown was absent from the meeting.
According to Delaware Code, the board will eventually consist of seven voting members, each earning a $35,000 yearly for their commitment to the board while the chair earns $40,000 per year. Frazee, the president of the Delaware Healthcare Association (DHA), sits on the board as the only non-voting member.
Three new potential members have been nominated by Governor Matt Meyer with Senate hearings scheduled for March 12. Those nominees include Gary Ferguson and Thomas Sweeney. Both were present, either in person or virtually, during the first board meeting.
The first board meeting lasted about an hour and a half and primarily focused on an overview of House Substitute 2 for House Bill 350 which was the bill that established the group, as well as a look into Delaware’s healthcare spending and quality benchmarks which were originally created via executive order in 2018 under former Governor John Carney’s administration, followed by House Bill 442 in 2022 which codified the process.
“Delaware was the second state at the time to create a benchmark, the first being Massachusetts,” Delaware Health and Social Services Director of Health Care Reform and Associate Deputy Secretary Steven Costantino said during the meeting. “Now, I think there are eight, ten states that have taken on this initiative.”
The health care spending benchmark is set by the Delaware Economic and Financial Advisory Council (DEFAC) while the Delaware Health Care Commission (DHCC) analyzes the benchmarks, including quality benchmarks. Under former Gov. John Carney the health care spending benchmark was created to cap the annual per-capita rate of growth for spending and has been on a steady decline while actual health care spending continues to stay above those numbers.
In 2019, the first year of the benchmark, it was set at 3.8% growth, while the results sat at 5.8%. The following year, the benchmark decreased to 3.5% and Delaware’s health care spending per capita growth rate dipped to -1.1%. Many say this dip was due to the COVID-19 pandemic as hospitals and community members tried to stay away from disease.
In 2021, as people tried to return to normalcy, routine procedures came back into play – the health care spending benchmark was again lowered to 3.25% per capita growth while the actual results sat around 11.2% growth. In 2022, numbers started to go down again with a health care spending benchmark of 3% and an actual growth of 6.3%.
Results from 2023 have not been released yet, but the health care spending benchmark was set at 3.1%.
Looking forward, Geisenberger said the formula by which the health care spending benchmark is set has been changed to adjust to inflation, so the new 2025 and 2026 benchmarks will go up, rather than down.
The 2025 benchmark, as an example, is set for 4.2% to accommodate two years of inflation, Geisenberger told the group.
But, while the benchmark initiative has been a shared goal for those several states, seeking both better outcomes and price tags, Frazee says Delaware remains the only state with a review board such as the Diamond State Hospital Cost Review Board which seeks to control some of the budgetary elements of how hospitals function by forcing the benchmark into action.
“I felt like the meeting was informative and interesting. I think it displayed the lack of stakeholder process in developing this legislation,” Frazee told the Delaware Business Times afterwards. He added that the situation, including pending litigation from some of the hospital members of his organization seeking clarity on the constitutionality of the board, is now a “. . . messy, complex and confusing charge as it relates to the logistics.”
Those logistics include annual reporting requirements by all Delaware hospitals except psychiatric facilities and hospitals which receive 45% or more of its revenue from Medicaid.
After a review of each budget hospital’s submission, if it is found that the hospital’s annual cost growth has surpassed the spending benchmark, the board will notify the hospital and could require the submission of a performance improvement plan within 45 days. From there, the plan will again be assessed by the board during an approval process, according to board documents.
A hospital that successfully meets its budget goals for three consecutive years may no longer be required to participate in the budget approval process, according to a presentation made to the board.
Hospitals that knowingly fail to provide required documentation and adhere to the benchmarks could face civil penalties of up to $500,000.
Frazee explained to DBT that DHA members are nervous about the future implications House Bill 350 and the Diamond State Hospital Cost Review Board will have on Delaware’s nonprofit hospital systems
“The other thing I think it [the board meeting] reminded us of is just how much authority this board has to one, hold only hospitals accountable to a health care spending benchmark where pharmaceuticals are driving a majority of the expenses there and then go through the process and then have the ability to step into the private governance of the private hospital and take it over,” he said. “I mean, we’re talking about them taking over the hospital. If you take over the budget, you take over the hospital.”
Dr. David Tam, chair of DHA’s board and CEO and president of Beebe Healthcare, echoed Frazee’s concerns during an advocacy luncheon at Legislative Hall immediately following the first Diamond State Hospital Cost Review Board meeting.
“In Sussex County, we have the distinction of being the fastest growing county and not just in Delaware, but in the country. . . 65% of our people are on Medicare or Medicaid down there. And so you can imagine how everything that’s happening at the federal level, how that is raised a level of uncertainty with what we’re trying to do as we continue to grow,” Tam said to a room filled with advocates and legislators.
Tam added that amidst providing quality care for patients, the finances that make the hospitals operate efficiently is also important for the growth that needs to happen.
“The Commonwealth Fund [an independent health care research firm] came out just last week and said if the Medicaid cuts as projected occur, every state will lose health care jobs. In fact, Delaware was projected. . . to lose 800 health care jobs. . . [from federal cuts],” he expanded.
He told legislators that while hospitals continue to navigate new challenges as they arise, health care leaders are continually willing to support efforts to improve costs in Delaware by working collaboratively.
