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Hospital cost review board bill heads to Senate floor for final vote

Members of the healthcare community hold signs in protest of House Bill 350 to establish a hospital cost review board on Tuesday outside of Legislative Hall.
Sarah Petrowich
Delaware Public Media
Members of the healthcare community hold signs in protest of House Bill 350 to establish a hospital cost review board on Tuesday outside of Legislative Hall.

The Senate Executive Committee votes to send a bill establishing a hospital cost review board in Delaware to the Senate Floor for a final vote.

The bill was met with a heated three-hour debate two weeks ago on the House Floor, where it eventually passed on a near party-line vote after Democratic representatives used a special procedure to cut debate short.

House Speaker Valerie Longhurst's (D-Bear) and Senate Majority Leader Bryan Townsend's (D-Newark) legislation would establish the Diamond State Hospital Cost Review Board, which would begin reviewing and approving hospital budgets in 2026.

Longhurst says the creation of the board is an attempt to curb rising healthcare costs in the state by requiring hospital budgets to be reviewed in their compliance with spending benchmarks.

The spending benchmark has fluctuated between 3% and 4%, but she notes healthcare spending has surpassed that mark every year except for 2020, continuing a trend that was seen prior to 2018 when the benchmarks were established.

According to the state's fourth annual benchmark trend reported presented last week, per capita health care spending in Delaware increased 6.3% in 2022 to $9,657, outpacing the 3% growth rate benchmark.

In a statement, the Delaware Department of Health and Social Services (DHSS) says: "The 6.3% per capita increase in 2022 is significant, but there was an expectation of some continuing health care spending rebound effect in the post-pandemic period. Moving forward into 2023 and beyond, DHSS expects Delaware’s health care market to be in a steadier state."

Under this bill, if hospitals initially fail to meet the benchmark, they would be required to develop an improvement plan. If that doesn’t yield progress, a hospital may be required to submit its budget for approval.

As a last resort, the board could impose a penalty on the hospital in an amount up to the net revenues exceeding the budgeted amount of net revenues. This money would be paid into a "Community Health Fund."

DHSS Deputy Director of Healthcare Reform David Bentz says the bill is an effort to improve transparency within hospital spending.

“There’s been no mechanism for the state to engage with hospital partners, to work with them on ways to control their costs and to start moving positively towards the benchmark, and we’ve developed House Bill 350 with that goal in mind," Bentz says.

Members of the healthcare industry argue the board is government overreach and allows an appointed body, over healthcare professionals, to make decisions on nuanced hospital budgets.

According to the bill, appointed members of the board must have "knowledge of healthcare policy, healthcare delivery, or business, finance, or accounting," with the eighth member being the president and CEO of the Delaware Healthcare Association (DHA), who will not have voting powers.

Hospital spending makes up about 40% of the state’s overall healthcare costs, but DHA President and CEO Brian Frazee argues the review board puts an unfair strain on hospitals compared to other cost drivers.

“I think it’s important to remember that the healthcare benchmark is the healthcare benchmark. It’s not the hospital benchmark. So we are going to be held significantly accountable to the healthcare benchmark that includes costs that are outside of hospitals’ wheelhouse and control," Frazee says.

Another concern from the healthcare community is the bill's temporary provision requiring hospitals to not charge more than 250% of the cost of care charged to the Medicare program for any service for 2025 and 2026, until the board is created.

Healthcare leaders argue this cost constraint could lead to staff and programming cuts.

At Tuesday's committee hearing, Townsend noted House Majority Whip Kerri Evelyn Harris (D-Dover) introduced a new bill that will replace that provision with one based on a more flexible consumer price index.

Senate Minority Whip Brian Pettyjohn (R-Georgetown) argues that provision should be discussed as an amendment to the current bill, rather than banking on passing Harris's bill later in the session.

Over 20 members of the public spoke in opposition of the bill, including leaders from Nemours, Bayhealth, Christiana Care, TidalHealth Nanticoke and St. Francis.

The bill is expected to be heard on the Senate Floor later this month. If passed there, it would head to the governor for his signature.

Before residing in Dover, Delaware, Sarah Petrowich moved around the country with her family, spending eight years in Fairbanks, Alaska, 10 years in Carbondale, Illinois and four years in Indianapolis, Indiana. She graduated from the University of Missouri in 2023 with a dual degree in Journalism and Political Science.
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