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Delaware hospital cost review board bill sparks debate

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Health care leaders are speaking out as legislators discuss rising hospital costs and statewide spending in Delaware, notably a bill that creates a politically-appointed cost review board.

HS 1 to HB 350 was heard at Delaware’s Legislative Hall in Dover by the House Administration Committee Wednesday, March 27. PHOTO COURTESY OF ADOBE STOCK

DOVER — Health care leaders are speaking out as legislators discuss rising hospital costs and statewide spending in Delaware, notably a bill that creates a politically-appointed cost review board.

House Bill 350 as originally proposed would effectively remove budgetary authority from local-led hospital boards of directors for every hospital system in Delaware, giving that authority to a newly proposed five-person board. 

Hospital leaders argued that they were not brought into the conversation prior to the bill’s introduction and emphasized that utilizing the single statewide board would disconnect the decision-making process from the communities the individual hospitals are meant to serve.

According to lawmakers, the Diamond State Hospital Cost Review Board would be geared toward reducing hospital spending in the First State and improving compliance with state health spending benchmarks which were established through an executive order by Governor John Carney in 2018. 

The five board members would include three members as appointed by the Governor, one as appointed by the speaker of the House of Representatives and one as appointed by the president pro tempore of the Senate. Once appointed, they would be tasked with reviewing and approving hospital budgets for every hospital in the state of Delaware regardless of ownership. 

House Substitute 1 to HB 350 was subsequently submitted to clarify some of the provisions in the bill, exclude hospitals that act solely as psychiatric facilities and amend deadlines to reflect the fact that the various hospitals around the state may have differing fiscal years. 

Hospitals that fail to comply with directives from the proposed board would have significant financial penalties. The bill also proposes the establishment of the Community Health Fund in which some of the penalties could be paid into, “. . . in an amount up to the net revenues exceeding the budgeted amount of net revenues.” That fund would be managed and invested by the state treasurer. 

“Our job as legislators is to. . . discuss and ultimately create solutions to difficult problems facing our constituents,” bill sponsor and Speaker of the House Valerie Longhurst (D-Bear) said while introducing the bill to the House Administration Committee on March 27.

Carney allocated $200 million to address health care inflation in benefits for state employees, as well as $93.9 million to take on the state group health insurance plan shortfall. Lawmakers have since proposed a flurry of bills to attempt to slash statewide health care spending in this session.

Committee member Rep. Lyndon Yearick (R-Camden/Woodside) pointed out the bill’s fiscal note which starts at $657,482 for the first year, a price tag Longhurst said would cover administrative and employee related costs for the endeavor.

She contended that higher health care costs are a serious problem faced by constituents across the state along with statewide budget concerns. This argument was echoed by many who offered comments during the committee on both sides of the aisle. 

Carney also addressed the health care spending issue this week.

“The cost of it is going up twice the rate of the GDP growth. . .If you have expenses that are growing faster than your economy, that’s a problem,” he said during the Delaware State Chamber of Commerce’s 2024 Spring Manufacturing & Policy Conference on Thursday.

Looking at the numbers

Health care spending accounts for 42% of spending in the state budget, Longhurst told the Committee while advocating for HB 350, adding that it cannot continue in the years to come. 

“We’ve waited for these benchmarks to level out in the last five years and they have not done that. So we are taking this measure because we have to get a hold of that,” she said passionately during the meeting.

The yearly spending benchmarks were set in 2018 by the Health Care Spending Benchmark Subcommittee under the Delaware Economic and Financial Advisory Council (DEFAC). At the time, that panel suggested that health care costs in the state should not increase more than 3.8% in 2019, 3.5% in 2020, 3.25% in 2021 and down to 3% through 2023. With benchmarks set, the Delaware Health Care Commission to track real-time spending against those benchmarks.

The Benchmark Trend Report Dashboard published by Delaware’s Department of Health and Social Services (DHSS) cites a 5.8% increase in health care spending in 2019, followed by a 1.2% decrease in spending in 2020. A 11.2% increase in health care spending in Delaware was reported for 2021. 

More recent reports on health care spending are not available on the website yet.

“While the increase in per capita health care spending is significant, it was not surprising as this figure reflects Delaware’s health care market rebounding from the reduction in health care spending and utilization in 2020 caused by the COVID-19 pandemic,” then-DHSS Secretary Molly Magarik said last year when unveiling the 2023 benchmark report.

“We know many Delawareans delayed preventive health care services or procedures at the height of the pandemic in 2020. As individuals started to return to schedule those services in 2021, we anticipated that the spending growth would increase as well,” she added. “While we must continue to view these data in context of the extraordinary circumstances faced during the pandemic, the benchmark will continue to be a valuable tool in comparing health care spending year over year, and driving targeting initiatives to improve health care delivery.”

During the committee meeting this week, Longhurst remained concerned with the trajectory of health care spending trends. 

“Health care in Delaware has met the benchmark in just one year and that was in 2020 when COVID brought spending way down across the board. Every other year, health care spending has far surpassed the benchmark set by the state, including the year of 11% growth in health care costs [in 2021],” she said. “The question is why? Because we, despite setting the goal, have no mechanism in the state to help to meet those targets.”

Community and collaboration

Delaware Healthcare Association President and CEO Brian Frazee told the Delaware Business Times that health care leaders share concerns raised by legislators, but remain fiercely opposed to the legislation as it is written. 

“Our local community leaders know what’s best for their local hospital,” he told DBT. “We really would like to be a part of a collaborative approach here, to discuss the challenges, and we’re hoping that we can do that.”

Frazee told DBT that health care leaders have already proven their willingness to collaborate in the current legislation session by working with Sen. Sarah McBride to develop Senate Bill 13 and establish the Hospital Quality Assessment. That bill offers a possible path for additional Medicaid funding already afforded to other states with a similar facility assessment tool. 

Rep. Paul Baumbach also sponsored a bill through collaborative efforts with DHA and other health care leaders this session which would bring Delaware in line with 31 other states. House Bill 326 would require non-profit hospitals “to provide the state and public with an annual report outlining their community benefits spending.”

“We share the concerns of higher costs. We see it every day. We want to work together for Delaware,” Frazee told DBT.

According to DHA, hospitals in Delaware paid out just under $1 billion in community benefit spending in 2022, more than half of which covered unpaid costs of public programming. 

Unique and creative solutions like finding funding opportunities and improving individual health outcomes are what could happen, he and other leaders contended in the committee meeting, if healthcare professionals were afforded a seat at the table to discuss the specificity behind increased hospital spending. 

“It’s our hope that we can collaborate. This bill was introduced with no collaboration. I’m hoping that all of the comments that were made promoting collaboration come to fruition, but to date, there hasn’t been any of that,” Bayhealth Senior Vice President & Chief Strategy Officer John Van Gorp told DBT after the committee meeting.

DHA contended that collaboration between legislators and health care leaders on HB 350 or healthcare spending benchmarks hasn’t been an option for quite some time. Then-DHA President and CEO Wayne Smith wrote a letter in 2018 that criticized the benchmark tool which was quickly and quietly passed through a joint resolution at the time.

Frazee told DBT that he hopes the time has come for the conversation to change with added collaboration from this point forward.

Like the health care leaders in attendance, both Reps. Kerri Evelyn Harris (D-East Dover) and Melissa Minor-Brown (D-New Castle) thanked Longhurst for “taking on” such a controversial piece of legislation.

“We all want the right thing for Delaware and people coming to the table,” Harris said, adding that the collaborative nature spoken about by many “is what’s going to be what moves us forward.”

She continued, stating that “facts, not fear mongering,” is what would be needed for changemakers to come up with ways for the legislation to be stronger.

HS 1 to HB 350 was released from the House Administration Committee and currently awaits the House Appropriations Committee before it can be seen on the House floor.

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