Delaware lawmakers revisit oversight of hospital spending, after a measure passed in 2024 was challenged in court by ChristianaCare.
The Senate Executive Committee took the first step toward passing Senate Bill 213 on Wednesday.
The measure proposes that hospitals share financial information with a governor-appointed board annually for review.
It’s a modified version of the 2024 law creating the Diamond State Hospital Cost Review Board, which the state’s largest hospital system said overstepped Delaware rules on state interference with a private entity’s finances.
Senate Bill 213, authored by Senator Bryan Townsend (D-Newark) has a few key components:
- Hospitals present their previous years' revenue and expenditures to the Diamond State Hospital Cost Review Board annually
- The board decides whether the hospital’s finances met Delaware’s healthcare spending benchmark
- Starting in 2027, hospitals that don’t meet state bench marks submit an outline to the board that explains its plans to meet state goals for the coming year. Hospitals in a “Meaningful Cost Containment Arrangement” with a health insurance provider or the government agency don’t have to follow this step, but do have to share financial information.
Townsend told the committee Wednesday that the law establishes groundwork for transparency.
"Civil penalties of up to $500,000 remain available for knowing failures to comply with reporting obligations..and written findings are now required, so the mechanisms that matter the most, sunlight, oversight and structured follow through, remain in place," he said.
The bill is based on negotiations between ChristianaCare and the state. Andy Lipstone, an attorney who represented the state in negotiations, said the 2024 law’s goal to promote financial transparency with hospitals is intact.
But he explained a key difference is the 2024 law mandated the state board approve hospital budgets to implement for the coming year. SB 213 is a“retroactive” look at a hospital’s finances from the previous year for review by the board.
Townsend says this still provides oversight.
“Hospitals still must provide detailed financial utilization and other information to the board every year without exception. The board evaluates that information based on actual expenditures and revenue data, meaning backwards looking to the previous year as opposed to budget projections from the coming year," said Townsend.
The parties agreed in October to suspend their legal dispute and allow lawmakers to incorporate their settlement agreement into state code. The legislature’s deadline to pass the bill is Jan. 31.
Committee Questions
Senator Spiros Mantzavinos asked Lipstone which party first expressed interest in negotiation in ChristianaCare’s case against the state.
Lipstone joined the case over the summer, he said, after the Court of Chancery rejected the state’s motion to dismiss the suit in May. Lipstone said,“that was a natural time for each side to regroup and figure out how they want to proceed in the case. So, it was right around that time, May, June, maybe beginning of July, when those discussions commenced.”
Mantzavinos said the bill revision that the state board review retrospective hospital finances makes it harder to set predictive goals that lower healthcare and insurance costs.
Lipstone said the Court of Chancery had “concerns about prospective budget approval.” He added retrospective budget information gives the state “actual numbers to look at. It will have actual data, as opposed to budget projections.”
The bill cleared the Senate Executive Committee and now heads to the Senate floor.
