Hospitals, legislators reach deal on state review board

The state hospital association today announced it has reach a deal with legislators and will stop opposing HB 350.

State hospitals and legislators have reached a deal that will see House Bill 350, a bill to set up a state board that could review and force changes to hospital budgets, become law.

Based on expected amendments, “the Delaware Healthcare Association stands neutral on HB 350 and will no longer actively oppose the bill at this time,” said Brian Frazee, president and CEO of the hospital trade group, in an early afternoon press release.

“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,” the hospital statement said.

The association said it 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” and said it was reserving its rights “to remedy this legislation if passed.”

Hospital bill changes

The changes that the hospitals says were important to them include:

Swapping a plan to force hospitals to reduce existing costs by measuring them against Medicare prices for a plan that would use the area’s consumer price index. House Bill 395, which would do that, already has passed a committee hearing and is headed toward the House floor.
Allowing flexibility in the healthcare spending benchmark that hospitals will be measured against.
Requiring the state to clarify the process and important factors to be considered in the performance improvement plan process.
Removing the board’s ability to seize hospital assets.

But the amendment to the bill goes further, according to a later Democrat press release. It also:

Specifies that there must be at least 1 member of the Board from each county.
Provides clarification regarding submissions of hospital financial information.
Requires the Board to promulgate regulations clarifying the process and factors to be considered for performance improvement plans.
Adds clarifying provisions regarding the manner and timing of public hearings for each hospital to present its budget, and performance improvement plan where applicable.
Removes the penalty provision for hospitals who fail to adhere to a budget that was approved or modified by the Board. Requires that the Delaware Economic and Financial Advisory Council (DEFAC) Health Care Spending Benchmark Subcommittee, which sets the spending benchmark, consider revisions to its methodology and make a report recommending any changes to DEFAC by Dec. 31, 2024.

Carney thanked the hospital systems, legislators and Delaware Department of Health and Social Services for collaborating on legislation he said will combat rising health care costs.

“The revised House Bill 350 will help lower the growth of healthcare costs in our state, while making sure we’re protecting healthcare quality,” he said in a press release.

Republicans who had fought the bill alongside hospitals had mixed reactions to the announcement, and still aren’t happy with the bill.

“I applaud the Delaware Healthcare Association for the work that has been put into this amendment and will support its passage when brought to the floor,” said State Sen. Brian Pettyjohn, R-Georgetown. He was one of many Republicans who believe the state is sticking its nose into private business.

“With the amendment added, this will make the legislation much less damaging for our state’s non-profit hospitals,” Pettyjohn said. “That being said, I also share the continued concerns outlined in their letter.”

Rep. Danny Short, R-Seaford, says he doesn’t think he can support the bill, even with the agreement.

“While I am glad to see that there have been some major concessions and that the Delaware Healthcare Association is no longer opposed to the legislation, I will likely oppose this bill,” he said. “Even in its less objectionable form, I still find the legislation a troubling overreach of governmental authority. “

The bill establishes a new bureaucracy to further expand its authority in the private sector, he said, when it can’t even competently manage its own healthcare plans or address its own failure to rein in state spending growth.

Short, an insurance agent, said his career has focused on helping private employers find healthcare coverage for its workers.

“The supposition of the bill’s sponsors is that the hospitals are making unreasonable profits and are a major reason for healthcare cost hikes,” he said. “Collectively, our state’s non-profit hospitals actually lost money last year. In fact, one of the state of Delaware’s largest factors in rising healthcare expenses has been its inability to prudently manage the cost structure for medical services and prescription drugs.”

Carney noted the bill was supported by four unions.

“This agreement is a major breakthrough for small businesses and working families in Delaware who for years have been paying more for healthcare than people in nearly every other state,” said Sen. Brian Townsend, D-Newark, chair of the Senate Labor Committee, and prime Senate sponsor of the bill.

“By bending the curve of spiraling healthcare costs, we are helping Delawareans make ends meet in their own family budgets while ensuring that the hospital systems they depend on can continue to provide the same level of quality care,” he said.

A benchmark in this case is a specific percentage that a budget is allowed to grow.

The Democratic press release said that while the Diamond State Hospital Review Board is being set up in 2024 and 2025, the benchmark governing hospital budgets will be set at either 2% growth over the previous year or the Core Consumer Price Index 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, a panel of state officials and economists who forecast the State of Delaware’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. That allows hospitals to adjust their own costs without additional state intervention, according to the Dem release.

If the improvement plan fails to control prices, the Diamond State 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.

The association said it would continue to work to ensure state Delaware hospitals can meet their obligation and commitment to provide access to high- quality care.

It thanked Gov. John Carney’s administration, House Speaker Valerie Longhurst, D-Bear, and Townsend for the amendments.

House Bill 350, now awaiting a slot on the Senate floor agenda, would create a board that could review and demand changes in hospital budgets to make them meet a benchmark set by the state, usually somewhere around 3%.

Dems and teachers say hospitals account for 42% of state spending on healthcare and Delaware hospitals charge the most in the region.

HB 350 supporters maintain hospitals have only met the state healthcare benchmark once since it was established, in 2020, the first year of the pandemic. But under a deal cut in 2018, hospitals agreed to keep it in mind, but they were not required by law to meet it.

Legislators say that other factors contribute to rising health costs, such as drug costs and insurance premiums, also are planned to come under review.