How Delaware Senate approved a modified hospital cost review board bill and what's next

A compromise bill creating a hospital cost review board was approved along party lines Thursday in the Delaware Senate after weeks of conversations between lawmakers and health care providers focused on bringing down health care costs.

An agreement between providers and state lawmakers to create the Diamond State Hospital Cost Review Board to ensure Delaware’s largest hospitals align their pricing within annual spending benchmarks set by the state was struck earlier this week, allowing House Bill 350 to move forward with amendments.

The bill, which requires hospitals to submit detailed budgets to the board each year for review, was approved in a 14-7 vote Thursday by the legislative body. It will now go back to the state House of Representatives for a vote.

Although the Delaware House approved the bill in late April, the significant changes the legislation has recently undergone require a new vote on the measure.

Key revisions to the legislation approved Thursday include:

• Incorporating a more flexible price index in the beginning years as proposed by House Bill 395.

• Giving “greater certainty around the role and operations of the Diamond State Hospital Cost Review Board.”

• Instructing the board to compare hospital pricing to the annual Delaware Health Care Benchmark set by a subcommittee of the Delaware Economic and Financial Advisory Council.

• Directing the spending benchmark subcommittee to review the “methodology used to develop” the benchmark with “an eye on incorporating more macroeconomic trends.”

Senate changes to the bill also provide greater geographic parity among members of the cost review board; streamline potential penalties for hospitals; direct the board to develop regulations around the improvement plan process; and give clarity around the budget information hospitals must submit and public hearings that must be held, among other changes.

Republicans criticize process, bill

Republican state senators lambasted the legislation during debate on the floor Thursday, arguing that stakeholders should have been brought into the conversation before the bill was introduced and suggested the move is an “attack” on hospital systems.

“It disturbed me greatly when one hospital told me two days ago that before House Bill 350 was introduced, no one from the General Assembly – not from this chamber, not from the other chamber – picked up the phone and called them to discuss and understand the hospital costs,” Senate Minority Whip Brian Pettyjohn said. “Is this collaboration? Is this a partnership?”

Democratic Sen. Trey Paradee questioned the rates that Delaware hospitals are charging for services in comparison with hospitals in other larger cities like Baltimore and Philadelphia.

“When I see that our hospitals are billing at a rate that exceeds places like Hopkins and Jefferson and Penn, etc. – do you think they’re not dealing with challenges in Baltimore and Philly?” he said. “You think they don’t have people showing up at their emergency rooms and people on Medicaid? They all have the same challenges.”

Some lawmakers asserted the state is hypocritical because it wants hospitals to meet a spending benchmark, yet Delaware doesn’t meet its own benchmarks and questioned why hospitals were targeted when there are other drivers for health care costs.

“Why are we focusing our efforts first on the sector of health care that operated at a net loss last year?” Pettyjohn said.

Senate Majority Leader Bryan Townsend, who sponsored the bill, stressed in his comments ahead of the vote that hospitals aren’t the only drivers of costs, but studies have shown that they do “comprise a large percentage of total health care spend” and cost increases in Delaware.

“This bill addresses that issue,” Townsend said. “There is more that we have to do. We absolutely have to tackle the issue of prescription drug costs.”

Enforcing a spending benchmark

While the board will be responsible for ensuring hospitals adhere to spending benchmarks, there are several steps that would be taken before the seven-member board could influence a hospital’s budget.

If a hospital exceeds the benchmark, it would first 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,” according to state lawmakers.

If the improvement plan doesn’t control prices, then the review board could extend the timeline for the improvement plan or require the hospital to modify its budget.

These decisions can be appealed to the state Superior Court.

Hospitals could also face a civil penalty of up to $500,000 should an entity knowingly fail to provide information or adhere to the “standards, procedures, and deadlines related to the budget review process.”

And if a hospital “fails to maintain its approved budget,” the cost review board “may do any” of the following, according to the revised bill:

• Factor the amount of net revenues exceeding the budgeted amount of net revenues in the hospital’s budget for the forthcoming year.

• Allow the hospital to retain surplus funds if the excess was achieved while the hospital stayed within its budget.

• Allow the hospital to retain surplus funds generated primarily by volume in excess of what was projected for the year in question.

• Impose a penalty on the hospital up to the net revenues exceeding the budgeted amount of net revenues, which shall be paid to the Community Health Fund.

Got a tip? Contact Amanda Fries at afries@delawareonline.com. Follow her on X at @mandy_fries.

This article originally appeared on Delaware News Journal: Delaware hospital cost review board bill with changes passes Senate