Why Should Delaware Care?
Delaware ranks as one of the top states in the nation for health care costs. For years, lawmakers have tried to bring prices down, often meeting fierce resistance from hospitals. A new bill hoping to tackle the issue cleared its first hurdle toward becoming law this week, but it still faces powerful and well-funded opposition.
Delaware senators held their first debate Wednesday — during an abnormally packed committee hearing — over a bold health care reform proposal that would prioritize investments for primary care and is aimed at preventing costly trips to emergency rooms.
But even though the bill made it out of committee, it still must overcome powerful and well-funded opposition.
Delaware’s hospital systems descended on the statehouse in protest of Senate Bill 1, the primary care reform bill that would also implement price caps on how high they can negotiate costs with insurers, claiming the bill would decimate revenues and lead to job losses.
Multiple lawmakers decried the hospitals’ projected job loss claims, saying they are using health care workers as “pawns” in an effort to maintain profits.
“Your campaign of fear, threatening the elimination of 4,000 jobs, is just disgraceful,” said State Sen. Ray Seigfried (D-Wilmington), who is a former ChristianaCare employee and executive of 25 years.
The bill, introduced by Senate Majority Leader Bryan Townsend (D-Newark/Glasgow) earlier this month, has the support of the state’s insurance department, the Medical Society of Delaware and the Mid-Atlantic Association of Community Health Centers.
At the center of the hospital systems’ campaign against SB 1 is a provision that would regulate the rate at which insurers carrying plans for state employees and some commercial plans regulated by the Department of Insurance can reimburse hospitals for covered services. Those changes would also apply to the state’s Medicaid plan.
Essentially, the state is seeking to drive down its own health care spending by capping how much money insurance providers will pay hospitals, which hold a majority of the market share in the state, for their services.
If passed as is, it could save the state hundreds of millions of dollars on medical costs.
By taking aim at how high Delaware health care providers can negotiate their prices with insurers in addition to making those insurers spend 11.5% of their medical costs on primary care, the state hopes to better compensate providers proactively working to improve Delawareans’ health outcomes.
One physician, who has practiced in Delaware for more than 35 years, said the state’s primary care infrastructure is in “dire straits.”
Dr. Jim Gill said independent primary care physicians are currently reimbursed far below the proposed price caps, and that SB 1 is not about giving primary care doctors more money.
Instead, he said the law allows primary care doctors to receive higher reimbursements for care they do during office visits, as well as care they do in between visits, which he said goes frequently unreimbursed.
“Let’s face it, no one went into primary care for the money, but we need enough funding to fully care for the people of Delaware,” Gill said.
During Wednesday’s committee hearing, a rift also emerged between doctors working in hospital systems and independent practitioners.
Independent doctors and the Medical Society of Delaware, which represents all licensed state physicians, said they were in support of the bill because primary care is underfunded, while hospital doctors said they were against the bill because of the impacts it could have on their programs.
After a nearly three-hour hearing, senators moved the bill out of committee. It will next be heard in the Senate Finance Committee, but is likely to see a vote by the full Senate.
A spokesperson for Gov. Matt Meyer did not respond to a request for comment on his stance on SB 1. He has yet to publicly comment on the bill.
The hearing
Wednesday’s hearing opened with testimony from private practice physicians, the state’s insurance commissioner, outside experts and some hospital representatives.
Richard Henderson, of the Medical Society of Delaware, said SB 1 comes after years of discussion about how to improve primary care in the state. While he said the bill is “not perfect,” he said it would bring down costs and improve people’s health.
“The data both then and now is clear and unequivocal,” Henderson said. “Independent primary care practices improve outcomes and reduce the overall cost of care.”
Henderson also said the bill is “critical” to the survival of independent practices and will create an environment that attracts physicians to the state.
Dr. David Tam, the CEO of Beebe Healthcare in Lewes, also testified at the committee meeting. He aimed his criticism of the bill at the impact it would have on his hospital because of its share of Medicare patients.
Under SB 1, hospitals and providers would be barred from charging more than 250% of what the federal government reimburses for Medicare. But Medicare typically underpays physicians for their services.
Since his hospital serves a large share of Medicare patients from a growing elderly population in Sussex County, Tam said the new price cap on other insurance would make it difficult to cover losses from treating Medicare patients.
Admonishing hospital advocates’ tactics
During the hearing, multiple legislators admonished the Delaware Healthcare Association, a lobbying group for the state’s hospitals, because of messaging it has used to oppose SB 1.
Specifically, the lawmakers homed in on statistics the group has used threatening the loss of 4,000 health care jobs if the bill passes.
During the hearing, Townsend also said the Delaware Healthcare Association had handed out maps to legislators with dots representing where health care workers lived in their districts. While he said he does not know if the hospital systems knew about this, he called the move “inappropriate” in an interview after the hearing.
Still, he said the needs of their constituents and the precedent set in other states by similar legislation is something that supersedes some of that opposition.
“I think that [the] need of everyday Delawareans who are suffering from high health care costs trumps a map that a lobbyist wants to put in our face,” Townsend said.
Brian Frazee, CEO of the Delaware Healthcare Association, said his organization was not “using” the workers. He said health care employees “understand the impact of these different policies” and advocated with the organization.
When asked about the maps, he told Spotlight Delaware the group did share those maps with legislators, but that it is not uncommon. He said the intent of the maps was to show that there were people in their districts paying attention to the issue.
“We have a lot of health care workers that are very important,” Frazee said. “And like other advocacy groups, we wanted legislators to understand the impact of some of these decisions on their constituents.”
Delaware’s hospital industry is one of the state’s largest employers. Frazee said in a text message after publication that staffing accounts for 60% of hospital budgeting, and that the hospitals don’t want to be put in a position where they have to make cuts.
What’s in the bill?
One provision in the bill would introduce reference-based pricing to medical services covered under both insurance for state employees and some commercial plans regulated by the Department of Insurance. Essentially, this would limit the amount of money a provider could be reimbursed by insurers, tying that amount to a predetermined benchmark.
Under Delaware’s proposal, that benchmark would cap reimbursement rates at 250% of what the federal government pays providers through Medicare.
For services covered under the state’s health plan that do not have a Medicare rate to compare to, like pediatrics, the state would be able to set those rates through the State Employees Benefits Committee.
The bill would “conservatively” save the state more than $280 million over the first five years of implementation, the Department of Insurance said in a press release after announcing the bill.
Frazee, of the hospital association, pointed to that Medicare benchmark, saying it was a provision lawmakers tried, and failed, to introduce in previous legislation that led to a year-and-a-half long lawsuit between the state and Delaware’s largest hospital system.
Efforts to introduce a 250% Medicare benchmark into Senate Bill 1 are a “blatant attempt” to slip in provisions that were removed from House Bill 350, the recently amended law that put an end to the state’s most recent fight with hospitals over health care costs.
Senate Bill 1 also includes language that would exempt hospitals and other health care providers from the 250% requirement if they use a “global budget model” that is approved by the state insurance department.
Global budget models set annual fixed prices for inpatient and outpatient procedures, meaning hospitals are paid on the front end to deliver services at a cost set by their previous Medicare and Medicaid reimbursements from previous years.
In neighboring Maryland, the state implemented global budgeting for all of its acute care hospitals in 2014, according to a report from Mathematica.
After being voted out of committee, SB 1 now awaits consideration in the Senate Finance Committee. A hearing date for that committee has not been set.
Editor’s Note: This story originally reported that SB 1 would next head to a State Senate floor vote, but the bill actually will first head to another committee hearing. We regret the error.