Hospitals in Delaware pushing back against bill to regulate healthcare expenditure

Healthcare organizations are expressing their concerns about a newly proposed bill that aims to establish a state board responsible for monitoring hospital expenditures.

The sponsors of the proposal in Delaware’s House of Representatives are aiming to tackle the increasing cost of healthcare. The introduction of House Substitute 1 for House Bill 350 would create the Diamond State Hospital Cost Review Board. This board would have the responsibility of reviewing and approving the annual budgets of hospitals, starting from the year 2026.

When reviewing the proposed budgets of hospitals, the board will take into account various factors. These include state health care spending benchmarks, the financial wellbeing of each facility, the cost of operations, contract details, scope of services, and a comparison of costs with other hospitals in the mid-Atlantic region.

Temporarily, starting in 2025, hospitals will be obligated to limit the charges for hospital services to no more than 250% of Medicare costs, until the board becomes operational in 2026.

The substitute bill has been modified to provide clarity on the timeline for the board to issue a final budget decision. According to the revised version, the board must make this decision 90 days before the start of a hospital’s fiscal year. This change acknowledges the fact that healthcare facilities operate on different time frames, ensuring that hospitals have sufficient time to plan and prepare for their upcoming fiscal year.

The revised edition, sponsored by D-Bear’s Speaker of the House Valerie Longhurst, also grants the option to appeal final decisions to Superior Court and does not include psychiatric facilities within its scope.

On March 12, Representative Longhurst introduced House Bill 350, which underwent changes just over a week later on Thursday.

The Delaware Healthcare Association, which consists of prominent healthcare institutions like Bayhealth, Beebe Healthcare, and Christiana Care, expressed its opposition to the bill in the House Administration Committee hearing on Wednesday. In a statement released on Monday, the association criticized the proposed legislation, referring to it as a “politician-control” bill. They argued that the implementation of such a plan would pose risks to patient care and be ineffective in managing healthcare costs in Delaware.

According to a statement from Brian Frazee, the president and CEO of the Delaware Healthcare Association, it is crucial for insurers, government, practitioners, labor, medical device and pharmaceutical companies to collaborate in order to create an effective strategy for controlling healthcare costs. Frazee argues that solely targeting frontline workers and institutions, such as hospitals, doctors, and nurses, is an irresponsible approach to public policy.

The legislation is said to be similar to the policy in Vermont, where 11 out of the state’s 14 hospitals are operating in debt despite having the fifth-highest cost of care in the nation, according to the organization.

According to Mr. Frazee, the current structure is preferable over the proposed board, which would consist of five governor-appointed members with knowledge of health care policy and delivery, or business and finance. He believes that the decision-making of the board could potentially cause harm to patients and communities.

Delaware hospitals operate under the supervision of community boards, which, according to the president of the association, plays a significant role in the state hospitals’ contribution to the ” $8 billion economic engine.” This unique structure enables hospitals to address the specific needs of their communities directly.

Bayhealth President and CEO Terry Murphy has expressed his opposition to the measure, urging Delawareans to reach out to their lawmakers and voice their opposition to the legislation. In a letter to community members on Friday, Murphy emphasized the importance of taking action against the proposed measure.

“The bill undermines the power of our local community leaders and places the responsibility of spending, staffing, cost of service, investments, and other crucial aspects of hospital operations in the hands of five political appointees,” expressed Mr. Murphy.

The Bayhealth Board of Directors has always been committed to the important task of ensuring access to high-quality healthcare while also making it affordable for the patients and communities we serve. We recognize that achieving affordability requires collaboration from various stakeholders, including insurers, pharmaceutical companies, and medical device companies.

“Having political appointees solely responsible for running hospitals in Delaware will only harm, rather than benefit, the community.”

Rep. Longhurst could not be reached for comment on Monday. However, the House speaker stated upon the introduction of the bill that the state has witnessed alarming increases in healthcare costs in recent years. These escalating costs not only pose a significant threat to our state budget but also jeopardize the well-being of our constituents.

“Creating this review board is an essential measure in addressing the increasing healthcare expenses, as it allows us to find a middle ground that effectively manages costs without compromising the quality of healthcare services for the people of Delaware.”

Senate Majority Leader Bryan Townsend, a Democrat from Newark, is spearheading House Substitute 1 for House Bill 350 in the neighboring chamber.

The substitute version of the proposal lists Rep. Longhurst and Sen. Townsend as the sole sponsors. However, in the previous version, 27 Democratic members of the General Assembly, including every member of House and Senate majority leadership, had sponsored the proposal.

According to a press release by Sen. Townsend, Delaware currently ranks in the top five states in terms of health care costs but falls in the bottom half when it comes to health care results.

Hospital systems in Delaware should be held accountable for the fees they charge and the outcomes they produce, just like utilities operating in the state are required to justify rate hikes for water, electric, and cable services.

The House Administration Committee is set to hold a hearing today at noon in the House chamber on House Substitute 1 for House Bill 350.

Governor John Carney’s proposed budget for fiscal year 2025 allocates $2 billion to healthcare costs, making up $200 million more than the current fiscal year. This increase accounts for almost 40% of the overall growth from the previous year.

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