Delaware’s healthcare costs are among the most expensive in the country according to data from Delaware Health and Social Services, with per-person healthcare spending about $12,899 and emergency room costs around $1746.
Delaware House Bill 350 seeks to limit hospital cost growth in Delaware by establishing Diamond State Hospital Cost Review Board. HB350 was signed by The Governor on June 13, 2024. Since 2019 Delaware has annually set statewide healthcare spending trend benchmark in range of 3 to 4% based on overall economic growth measures. From 2019 through 2022 Delaware healthcare spending trends have exceeded the benchmark in each year except for 2020.
Delaware HB 350 was created in the model of Vermont Green Mountain Care Board which works to improve access affordability and quality of healthcare in Vermont.
Diamond State Hospital Cost Review Board will have 7 members: 6 appointed by the Governor and confirmed by the Senate, and the Executive Director of the Delaware Healthcare Association. Starting in 2025 for the 2026 hospital fiscal year (FY), hospitals in Delaware are required to submit information to the Board, including the upcoming year’s budget with all changes from the previous year, revenue data and other financial details. The Board will utilize this information to review budgets and discuss budget proposals with hospitals. The Board will compare each hospital’s budget changes to a “spending benchmark.” set by the Delaware Economic and Financial Advisory Council (DEFAC) Health Care Spending Benchmark Subcommittee.
If the Board finds that a hospital’s actual annual healthcare cost growth exceeded the spending benchmark, the Board may require the hospital to submit a performance improvement plan which identifies the causes of the high healthcare cost, as well as come up with specific solutions to improve the performance within 12 months.
If, at the conclusion of the performance review plan timetable, the plan was unsuccessful, then the Board may either extend the timetable, require a new plan, or require participation in the budget approval process. The budget approval process will start with budgets being submitted in 2025 for the 2026 calendar year. ChristianaCare has filed a lawsuit seeking declaratory and injunctive relief related to Delaware House Bill 350 (HB 350), asserting the law is unlawful and infringes on ChristianaCare’s fundamental state and federal constitutional rights and is an infringement that threatens ChristianaCare’s simple yet profound mission: to care for the community.
Amendments that I suggest
- Limit the board’s power to advisory roles or to make its intervention in budgets more transparent and narrowly tailored to cases where there is clear evidence of excessive cost growth that isn’t addressed through internal hospital adjustments.
- Limit the type of information that hospitals are required to disclose to the board, ensuring that only relevant financial and cost data is shared, rather than proprietary business strategies.
- Lawsuit mentions the potential overreach in terms of the state’s authority to require performance improvement plans. An amendment could offer more flexibility in the timeframe and implementation of these plans, allowing hospitals more leeway to propose solutions that are realistic and in line with their financial models.
- Instead of focusing solely on penalties or forced compliance, the state could emphasize collaboration between hospitals and the board by providing incentives for hospitals that demonstrate efforts to reduce costs and improve quality to foster a more cooperative relationship.
- Learning from other states: Connecticut’s Governor Lamont signed an Executive order #5 in Jan 2020, charging the Office of Health Strategy (OHS) to benchmark total healthcare expenditures growth in the state. In this model they have a Steering Committee with senior stakeholders and experts, and technical team with experts in healthcare economics and policy who hold public meets and come up with regular updates on cost growth, quality benchmarks and spending.
- The Medicare Payment Advisory Commission (MedPAC) gives detailed overview of how Medicare payment system functions and also suggests alternative payment models like population based and episode-based payment model which can offer strategies to manage hospital budgets in Delaware.
HB 350 seeks to address critical issues of rising healthcare costs and transparency, but it also presents challenges, particularly around the balance of power between private hospitals and the state. By making targeted amendments it’s possible to address both the state’s goals and the concerns raised by hospitals while still achieving the law’s goals of controlling health care costs and improving quality in Delaware.
Dr. Vamshi Kaveti is a practicing Internal Medicine Physician in Delaware.
