Why Should Delaware Care?
A recently formed hospital oversight board charged with bringing down spending in the state lost one of its principal enforcement levers following a vote on Thursday. Since an agreement between the state’s largest hospital and Delaware officials in October, the board has not met, and the future efficacy of the board remains in question.
The Delaware House of Representatives on Thursday overwhelmingly passed a bill that would bring an end to a lawsuit brought by the state’s largest hospital system over a landmark law that was designed to rein in healthcare spending.
It now heads to Gov. Matt Meyer’s desk for final approval.
Senate Bill 213 was introduced in late December as part of a proposed legal settlement between ChristianaCare and state officials. The settlement stems from a lawsuit filed by ChristianaCare in 2024 that challenged the state’s formation of a hospital oversight board with the power to modify and veto budgeted spending by private hospitals.
As part of the settlement, ChristianaCare agreed to dismiss the case as long as the state removed the Diamond State Hospital Cost Review Board’s budget veto powers.
Prior to passing the bill Thursday, the House floor hearing was relatively quiet outside of a few statements from lawmakers, and conversations about technical amendments made to the bill prior to its passage in the Delaware Senate earlier this month.
Still, some Republican lawmakers did reminisce about the fierce debates in the legislature in 2024 before lawmakers ultimately passed the original bill creating the cost review board amid ballooning hospital spending.
Among those GOP lawmakers was Rep. Lyndon Yearick (R-Camden) who said that his Republican colleagues had warned the legislature in 2024 about the state’s authority to regulate nonprofit budgets.
“We told you that this was unconstitutional,” Yearick said on the floor.
In a statement following the vote, ChristianaCare Vice President of Government Affairs Meredith Tweedie said she supports the passage of the bill and thanked the legislature for its quick passage.
“Senate Bill 213 provides a collaborative, transparent framework in which hospital systems and the state are working together to address health care affordability while still prioritizing access, quality and our health care workforce,” Tweedie said in an email statement.
The Delaware Healthcare Association, a trade group that represents ChristianaCare and other hospitals in the state, similarly thanked the legislature for its “swift action.”
The organization’s CEO, Brian Frazee, who campaigned vigorously against the creation of the board two years ago, said he believes solving health care affordability in Delaware requires “all-hands-on-deck” collaboration between the state’s leaders and hospitals.
Mila Myles, a spokeswoman for Meyer, who supported the bill’s passage, said the governor intends to sign the legislation on Friday.
She also said Meyer looks forward to working with legislators to enact an “affordability agenda that lowers health care costs for all Delawareans.”
What’s in the bill?
Before SB 213, the Diamond State Hospital Cost Review Board’s oversight would have followed a four-step process.
Hospitals would submit detailed financial documents, which board members would review. If they deemed hospital spending to be too large, they would put the facility on a “performance improvement plan.”
If a hospital failed to correct its overspending, the board could then modify or veto its budget.
When SB 213 becomes law following the governor’s signature, the board will no longer have the power to modify or veto the budgets of hospitals they deem to be too profligate. After ChristianaCare sued the state over the constitutionality of those powers, a judge was set to examine that question, should the lawsuit have continued.
The new bill also makes technical adjustments to language in the law, including renaming the performance improvement plan, a “benchmark compliance plan.”
At the center of those plans are whether hospitals keep their spending below a state projection for how much they believe health care should cost Delawareans.
If a hospital’s spending exceeds the state’s projected benchmark, the cost review board would now require it to send in a compliance plan outlining how it intends to bring it down.
The law also introduces “meaningful cost containment arrangement” plans, which are described as “contracts between hospitals and payers” meant to hold the hospitals responsible for controlling health care spending in a specific area.
Hospitals can enter these agreements and be exempt from the benchmark plans for one year, the law said. But it does not exempt them from the financial reporting requirements outlined in the law, like sharing budget information and labor costs.
The amendments are primarily technical, but the one with the most substance would require hospital CEOs to attest to whether their companies are in compliance with their meaningful cost containment arrangement plans.
Following a Senate vote on the legislation on Jan. 20, the bill’s sponsor, Senate Majority Leader Bryan Townsend (D-Newark), said that since some of these agreements may take place with non-state entities, such as insurance companies, the provision allows the state to ensure that contracts aren’t being renegotiated and that the agreements are positively impacting Delawareans.
He also said in an interview following the vote that lawmakers will consider future bills this session surrounding the approvals insurance companies give before paying for procedures.
“There’s a sickness in our health care system, where it’s not going to push itself toward wellness as much as we need it to as quickly as we need it to,” Townsend told reporters after the vote.