Hospital cost review board passes Delaware House in 21-16 vote. What the legislation does (2024)

The Delaware House of Representatives on Thursday approved a bill in a 21-16 vote, with four people absent, to create a hospital cost review board.

When first proposed, the measure received considerable pushback from doctors and other health care providers, who argued that the “politician-controlled” model would harm patient care and fail to control costs.

Despite changes to the original House Bill 350 – which included adding the executive director of the Delaware Healthcare Association as an "ex-officio" member to the board and an “interim step” before requiring hospitals to submit budgets – health care advocates say the changes do not go far enough for stakeholders to support the measure.

The Delaware Healthcare Association – representing several hospitals across the state – presented alternatives to the bills’ sponsors, but they were ultimately rejected, association CEO and President Brian Frazee said.

“We share your concerns around health care costs, which is why we offered the sponsors alternative approaches that address health care costs comprehensively and focus on transparency without threatening quality, access and the health care workforce,” he said in an email to House members on Thursday. “Unfortunately, we were unable to reach agreement on an alternative in such a short amount of time.”

Delaware lawmakers spent over three hours debating the proposal, questioning whether the bill went through the proper legislative process; why it doesn't target one of the main drivers of health care costs – pharmaceutical drugs; and what level of financial information is necessary for hospitals to turnover to get an accurate fiscal picture.

Early in the debate, a motion was made to table the vote on the bill, but it ultimately failed, 23-16, with two absentees.

The bill proposed by House Speaker Valerie Longhurst creates the “Diamond State Hospital Cost Review Board,” which would consist of a seven-member board, with six of those members appointed by the governor and confirmed by the state Senate. The healthcare association's representative would be a seventh, "non-voting" member.

Amendments to the bill included providing an “interim step” of creating a performance improvement plan prior to requiring proposed budget submissions; excluding psychiatric and rehabilitative facilities; and making other adjustments to what facilities the bill would impact.

Alternatives proposed by health care advocates

Frazee said the healthcare association proposed three alternatives to a cost review board, including:

• Explore contracting arrangements for state employee benefits.
• Require hospitals to send detailed price transparency, audited cost reports and other financial information to the Healthcare Commission.
• Establish a longer term, collaborative effort with stakeholders to identify and propose ideas “that not only address health care affordability, but also aim to address Delaware’s health care challenges more broadly.”

“Unfortunately, these ideas were rejected by the sponsors,” he wrote in the email to legislators.

Longhurst described weeks of talks with the healthcare association, often on the verge of coming to an agreement, only for things to fall apart.

"Numerous times we believe we had an agreement, but then the goalposts would be moved," the House speaker said, adding that the group attempted to renegotiate a deal the night before the bill's vote. "At a certain point you have to ask if each party is negotiating in good faith, and I'm really not sure if that’s the case anymore."

Frazee said the organization also proposed an “additional regulatory structure, oversight, and enforcement of the health care benchmark.” This would “hold hospitals accountable for meeting the benchmark by authorizing a state-run board to require hospitals missing the benchmark to undergo a performance improvement plan approved and enforced by the board.”

The latest version of House Bill 350 incorporates a performance improvement plan as an “interim step” before requiring a hospital to submit a proposed budget for approval or modification by the board, according to the bill’s synopsis.

Frazee pointed to the fact that nine other states, including Delaware, have a health care benchmark, but the provisions don’t include “the authority to control a hospital’s entire budget and seize their assets.”

What the bill does

The Diamond State Hospital Cost Review Board will be responsible for reviewing hospital budgets and related financial information annually.

MORE: Hospital review board, health care provider tax among proposals to reign in Delaware costs

Hospitals will be required to submit yearly budgets, audited financial statements and related financial information. If a hospital fails to meet the state’s budget benchmark for cost increases, it would be required to come up with a performance improvement plan, according to the bill.

“If the board and the hospital cannot agree on an improvement plan or where the hospital fails to successfully implement a performance plan, the board may require the hospital to have its future budget approved by the board,” the bill reads.

Some of the amendments include:

• An opportunity to appeal through the Superior Court.
• Excludes psychiatric facilities and exempts rehabilitative hospitals.
• Adjusts the deadline for the board to issue a final decision on a budget to 90 days before the state of a hospital’s fiscal year.
• Exempts hospitals that derive 45% or more of their revenue, or whose patient population has 5% or less Medicare patients from th 2025 reference pricing provision.

The bill also dictates that until the board begins operations, hospitals cannot charge more than 250% of Medicare costs to any payer for services in 2025.

BACKGROUND: Delaware hospitals say cost review board proposal a 'non-starter' for providers

Frazee cautioned lawmakers that the bill, as is, would have “devastating consequences” for Delaware.He also warned that the Medicare provision could “invalidate the agreement” they reached with state Sen. Sarah McBride to bring “more than $100 million of new federal funding into our Medicaid program” through a tax on hospitals with Senate Bill 13.

Got a tip? Contact Amanda Fries at afries@delawareonline.com, or call or text her at 302-598-5507. Follow her on X at @mandy_fries.