Why Should Delaware Care?
The Diamond State Health Cost Review board has been tasked with trying to lower the cost of care for Delawareans, who pay higher rates than many neighboring states. Hospitals and Republicans have raised concerns that the government intervention will only complicate the state’s health care system and represents an unconstitutional check against hospital boards.
Delaware’s new hospital cost review board moved closer to reality Monday after the State Senate’s Democrats unanimously voted to seat nearly the entire panel.
Despite unanimous opposition from Senate Republicans, five of the eight members of the board where approved by identical 14-6 votes by Senate Democrats. Lt. Gov.-Elect Kyle Evans Gay, who is still a seated state senator for now, was the only missing vote.
That sum ensures that a majority of the review board was nominated by Gov. John Carney, who supported the creation of the panel, rather than Gov.-Elect Matt Meyer, who will take office next month and has been more ambivalent as to his support of the proposal.
The governor only made the nominees known late last week and added them to a previously scheduled appointment hearing on Monday.
The panel, known as the Diamond State Hospital Cost Review Board, will have eight members, including seven voting members appointed by the governor and the president of the Delaware Healthcare Association, the industry association representing the interests of state health care organizations, serving as a non-voting member.
Seated Monday were:
- Richard Geisenberger, who currently serves as the Secretary of Finance for the Carney administration but will be replaced in the Meyer administration;
- Heath Chasanov, the retired superintendent of Woodbridge School District and now CEO of Kent Sussex Industries, a disabilities service provider;
- Thomas Brown, a retired longtime executive with the former Nanticoke Health Services;
- David Singleton, the former Secretary of Finance in the Minner administration and a longtime banking executive;
- Devona Williams, a longtime corporate consultant and former chair of Delaware State University’s board.
Gov. Carney will leave the last two appointments to the board to Meyer, who will take office on Jan. 21, according to a report by Delaware Public Media.
What is the Diamond State Cost Review Board?
Perhaps the most contentious bill heard this past legislative session was House Bill 350, which created the board to review hospital budgeting and revenues to determine whether they can trim costs.
That push was predicated by exploding costs of care in Delaware, particularly for state employees covered by taxpayers and overseen by legislators.
Delaware’s commercial hospital prices are among the highest in the nation, with inpatient facility services costing 281% of Medicare rates while outpatient costs 369% of Medicare rates, according to a 2022 RAND report on health care costs nationwide. The state ranked in the top 12 for both.
How to reduce those costs has become the sticking point, with health leaders placing blame on the rising costs of pharmaceuticals and provider compensation in a tight mid-Atlantic market. Lawmakers believe the not-for-profit health care systems’ bottom lines are too fat, and too much of that profit is going back into the same system rather than lowering costs to consumers.
Hospital administrators put up a full-court press in opposition to the bill, which essentially takes away some of the decision-making powers of each hospitals’ board of directors.
Approval of the board means that the public will get rare looks at budgets, financial information and utilization rates that haven’t previously been available.
Gov. Carney signed it into law in June after health systems and legislators brokered a compromise.
The biggest change included 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.
The final deal also prohibited the seizure of assets from health care systems and requires the review board to have members from all three counties.
Less than a month later, however, ChristianaCare sued the state in an attempt to prevent the board from coming into effect, arguing that the law “violates federal constitutional rights through the take-over of private hospital governance and budgets.”
What does the board do?
HB 350 will require hospitals to submit detailed budgets and financial information to the Diamond State Hospital Cost Review Board each year. They are tasked with ensuring that Delaware’s largest hospitals align their pricing within annual benchmarks set by the state.
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.
What did the Senate say?
The simple fact that nominees were even considered in an extraordinary session of the State Senate in the lame duck period of Carney’s final term was a point of contention in the debate. The Delaware Healthcare Association pressed its public opposition to such a vote last month while state employee unions backed the nominations.
On Monday, all six Senate Republicans chose to not vote on the Diamond State Health Cost Review Board nominees. Senate Minority Leader Gerald Hocker said that he respected each of the nominees, but that he was not voting out of principle.
“I didn’t agree with HB 350. I know it’s tied up in court. I think we should wait until after the court decision,” said Hocker, who serves on the charitable foundation for Beebe Healthcare. “I hate to see government stepping in and telling a private nonprofit how to spend and operate when they have the ability to put their own board in. I think as a whole, they’ve done a great job.”
On the other hand, Senate Democrats largely ignored the controversy and characterized the vote as typical government motion.
“It’s the ongoing work of the legislature,” said State Sen. Darius Brown (D-Wilmington) during the floor vote. “The legislation is a joint effort and partnership between both chambers of the legislature and the administration.”
Questioning during an initial hearing in the Senate Executive Committee, which screens nominees to state positions, was polite and short. Geisenberger, who is perhaps best known to legislators, received the most questions, particularly around how he saw the responsibilities and powers of the board.
“I think there are a lot of concerns that have been expressed … that are probably overblown. I think a really careful reading of the statute is that this is a pretty narrow set of authorities that have been given this board,” he said. “There is a trade off between cost and quality and reliability, and … if we’re exceeding the benchmark, because we’re trying to promote quality and reliability, I personally don’t see this board saying, ‘Well, let’s sacrifice those things.'”
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David Singleton serves on the board of advisors for Spotlight Delaware. Advisors have no role in the editorial decision-making of Spotlight Delaware. For more information, see our Boards page.
