HB 350 compromise brokered by hospitals, lawmakers

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by Jacob Owens

This story was produced by Spotlight Delaware, a community-powered, collaborative, nonprofit newsroom covering the First State. Learn more at spotlightdelaware.org 

After months of public debate and protest, Delaware hospital leaders have reached a compromise with Democratic leadership in the statehouse on House Bill 350, which will provide new oversight on health care spending in the state.

The measure, which is scheduled for final votes this week, will head to a supportive Gov. John Carney who will sign it into law. Despite an expensive lobbying campaign by the state’s five health systems, the final deal nearly mirrors the original intent of lawmakers.

The biggest changes include a switch from a revenue cap of 250% of Medicare rates to the core consumer price index plus 1% in the interim years of the new regulatory framework. Hospital leaders said the original measure could cost systems upward of $360 million statewide, while using a CPI marker provides more flexibility.

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The final deal also prohibits the seizure of assets from health care systems and requires the review board to have members from all three counties.

“I want to thank the hospital systems, members of the General Assembly, and the Delaware Department of Health and Social Services for collaborating on a piece of legislation that will combat rising health care costs that are having a significant impact on Delaware families and state taxpayers,” Carney said in a statement announcing the deal. “The revised House Bill 350 will help lower the growth of health care costs in our state, while making sure we’re protecting health care quality. I look forward to signing it into law.”

HB 350 will require hospitals to submit detailed budgets and financial information to the Diamond State Hospital Cost Review Board each year. Made up of seven health care quality experts, appointed by the governor and confirmed by the Senate, the tasked with ensuring that Delaware’s largest hospitals align their pricing within annual benchmarks set by the state. The head of the Delaware Healthcare Association, which represents the interest of state hospitals, will have a non-voting seat on the board.

During 2025 and 2026, that benchmark will be set at either 2% growth over the previous year or the CPI plus 1% over rates from the previous year, whichever is higher.

In 2027, the Diamond State Hospital Cost Review Board will begin comparing hospital pricing to the annual Delaware Health Care Benchmark set by a subcommittee of the Delaware Economic and Financial Advisory Council (DEFAC), a panel of state officials and economists who forecast the state government’s budget projections.

A hospital that exceeds the benchmark will be required to submit a performance improvement plan that details specific strategies, adjustments and next steps proposed by the hospital to rein in costs, along with a timetable for implementation, allowing hospitals to adjust their own costs without additional state intervention.

If that improvement plan fails to control prices, the Diamond State Hospital Cost Review Board could extend the timeline of a hospital’s performance improvement plan or require a hospital to modify its budget – decisions that are appealable to the Delaware Superior Court.

Weeks of daily negotiations between House Speaker Valerie Longhurst, Senate Majority Leader Bryan Townsend and the Delaware Healthcare Association helped to broker the deal, but it doesn’t mean that hospital leaders remain in favor of the legislation despite dropping their opposition.

“While these amendments reduce the immediate harm to our state’s hospitals and healthcare systems, and their employees and patients, we have been consistent and unequivocal with the sponsors and others on our opposition to other components of this legislation,” said DHA Executive Brian Frazee in a statement to its members after confirming the compromise. “DHA remains deeply concerned about the remaining provisions in HB 350, including creating a politically-appointed oversight board with the potential to modify and approve hospital budgets. The members of DHA reserve rights to remedy this legislation if passed. We will continue our work to ensure Delaware hospitals can meet their obligation and commitment to provide access to high-quality care to our patients and the communities we serve.”

Longhurst said that legislators set out to “to alleviate the overwhelming burden of health care expenses on Delaware families while ensuring their access to quality care,” and that HB 350 delivered.

“Whether it’s residents forced to make impossible decisions between paying for needed medical care or paying their rent, or small businesses, forced to raise their prices because of spiraling costs of health care, this is an issue that touches every Delawarean,” she said in a statement. “This agreement marks a significant stride toward tackling this challenge, all while protecting healthcare workers and patients and ushering in much-needed transparency to our healthcare system.

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