State Sen. Bryan Townsend (D- Newark) told the Health and Social Services Committee that Senate Bill 1 gives hospitals a choice: adopt a global budgeting model, or caps on reimbursements it receives from insurance providers.
“The system is not working,” Townsend told the committee. “We have to steer it in a direction of wellness and more reasonable prices.”
Senate Bill 1 does a few things:
- extends provisions of SB 120, which passed in 2021 and mandated increased primary care investment. This includes a requirement that insurance providers appropriate an increasing rate of medical spending to primary care:7% by 2022, 8.5% by 2023; 10% by 2024; 11.5 % by 2025.
- Townsend calls for a “staggered approach,” to implementing SB 1over the next few years. Most immediately, it would apply the already existing primary care investment requirements to state employees and Medicare recipients.
- Then, the proposal’s price cap of 250% of Medicare reference pricing on hospital inpatient and outpatient services start three years in, if the bill passes. That applies to providers who don’t opt to follow a global budget model approved by the State Employee Benefits Committee
“It's not overnight that the hospitals would have to make that decision with regard to which route to take that works best for them,” Townsend said. To him, SB 1builds from legislation the state passed over the last five years that established the Primary Care Reform Collaborative, the Office of Value-Based Health Care Delivery, groundwork for alternative payment models, and the Diamond State Hospital Cost Review Board.
Providers and hospitals speak out
Brian Frazee, president and CEO of the Delaware Healthcare Association, a lobbying group that represents the state’s hospitals, spoke at the committee hearing against SB 1.
His organization agreed with the Primary Care Reform Collaborative’s October vote to extend SB 120, which also capped hospital price growth to match inflation (core CPI plus 1%).
“This was the compromise,” Frazee said. “We originally did not support the price caps in that bill. But ultimately we supported it as a way to move forward with the understanding that we had a consensus path forward.”
SB 1comes on the heels of the state’s settlement with ChristianaCare this year. The hospital system sued the state in 2024 over legislation that established the Diamond State Hospital Cost Review Board and review over hospital budgets.
The state and hospital settled this year. The General Assembly passed a bill walking back the board’s ability to conduct prior review of hospital budgets.
“Having the SEBC control some of our rates is similar to the concept of a cost review board controlling our budgets,” Frazee said.
He added hospitals will be subject to an unprecedented level of transparency with the Hospital Cost Review Board's establishment.
Townsend doesn't expect SB 1 to run into the same issues.
“It's a very different legal mechanism or legal framework here that shouldn't invite the same kind of legal challenge,” he said.
Path Forward
The Senate Health and Social Services Committee released the bill for consideration by its larger body.
The day afteritscommittee hearing, Gov. Matt Meyer said he’s watching its movement, but made no commitments to supporting the measure.
“Let's be clear, there's a health care crisis in our community,” he said. “...There's talk of amendment, there's talk of additional public input. We're watching it, and we'll see what happens as it goes through the legislative process.”
