Why Should Delaware Care?
Delaware sets what are called health care spending benchmarks annually in an attempt to keep hospital costs down and limit the burden on taxpayers. A board meant to hold hospitals within those limits recently lost its ability to enforce hospitals found in noncompliance.
A group of state revenue analysts will vote on Wednesday to determine the level at which they predict health care costs will burden Delaware taxpayers in 2027.
A subcommittee of the Delaware Economic and Financial Advisory Council, better known as DEFAC, sets what is called the “health care spending benchmark” in an attempt to manage hospital spending that is passed down to taxpayers.
Delaware is one of eight states that set health care industry benchmarks. In 2018, then-Gov. John Carney created Delaware’s system by signing two executive orders.
Since then, Delaware has blown past its spending benchmarks almost every year they have been in effect. In December, DEFAC approved the 2026 benchmark at 4.9% after months of debate and outside litigation surrounding an oversight board meant to hold Delaware’s hospitals accountable to that spending level.
That lawsuit, filed by ChristianaCare in 2024, challenged the authority of the board to modify and veto budgets that overshoot the health care spending benchmark. Ultimately, the lawsuit was settled after lawmakers passed a bill diminishing the board’s ability to use budget modification as an enforcement tool.
It is unclear at what level DEFAC officials are considering setting the 2027 benchmark on Wednesday.
And after the legal settlement, there is no enforcement mechanism to restrain health care systems, insurers and pharmaceutical companies to the benchmark rate.
Health care spending in Delaware increased 9.1% between 2022 and 2023 to nearly $11 billion, according to an annual assessment released by the Delaware Department of Health & Social Services in May 2025.
That increase was nearly three times the state recommended benchmark rate of 3.1%.
Leading those rising costs were inpatient hospital services and prescription drug benefits after rebates, each totaling about $2 billion, while outpatient hospital services ranked third at about $1.7 billion.
History of benchmark enforcement
In 2024, the Delaware legislature passed House Bill 350, which established the Diamond State Hospital Cost Review Board. The law would later be signed by former Gov. Carney.
The board was tasked with reducing hospital spending in Delaware and health care systems accountable to the benchmark. The law also gave the board the power to veto hospital budgets it deemed excessive.
Prior to the law’s passing, the state’s hospital systems blitzed the statehouse, attempting to lobby lawmakers against the bill. Ultimately, that effort failed.
Shortly after HB 350 was signed into law, ChristianaCare sued the state. In its lawsuit, the hospital called the review board “draconian,” saying its ability to reject hospital budgets violated the state’s corporate charter.
State lawyers denied those claims. In court filings, they further said ChristianaCare’s arguments amount to an “army of strawmen” designed to halt the regulations.
Following an attempt by the state to dismiss the lawsuit, a judge in Delaware’s Court of Chancery allowed the lawsuit to continue.
Touching on Delaware’s corporate-friendly ethos, the judge said the question of whether the state board’s authority over hospital budgets unconstitutionally usurps a hospital board of directors has merit.
“In Delaware, the managerial power of boards of directors is sacrosanct,” said the judge, Vice Chancellor Lori Will.
On his way out of office, Carney stacked the board with five of its seven appointed board members, leaving incoming Governor-elect Matt Meyer only two appointments.
One of those Carney-appointed members, the former Secretary of Finance and chair of the board, Rick Geisenberger, stepped down as chair after a spat with Meyer.
In a letter sent to Meyer last summer, Geisenberger recounted how he had declined the governor’s request to cancel meetings of the board, saying instead the public body was “duly authorized” by the legislature and had a responsibility to perform its business “impartially and free from undue influence.”
Soon after, the state and ChristianaCare agreed to pause proceedings on the lawsuit until Sept. 30 in “the interests of the parties and the public.” In October, the state and the hospital announced a proposed settlement agreement where the hospital said it would drop its lawsuit if lawmakers repealed the board’s budget modification power.
The review board also halted its meetings until new regulations could be passed in the statehouse. According to the agreement, the board would still operate, and current board members would remain seated.
“The core of HB 350 remains: Hospitals must present detailed budget information annually to the Board, and the Board determines compliance with the State’s healthcare spending benchmark,” the agreement said.
Lawmakers ultimately passed Senate Bill 213, which stripped the board of its budget veto and modification powers, and sent it to the governor’s desk in January, one day before a ChristianaCare-imposed deadline.
What are the new board rules?
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.
Following the bill’s signing, the board no longer has the power to modify or veto the budgets of hospitals it deems to be too profligate.
The new bill also made 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 DEFAC’s projected spending benchmark.
If a hospital’s spending exceeds the state’s projection, the cost review board now requires it to send in a compliance plan outlining how it intends to bring costs down.
The law also introduced “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.
Get Involved
The DEFAC Healthcare Spending Benchmark Subcommittee will meet at 10 a.m. on Wednesday, April 29 at the Herman M. Holloway Sr. Campus located at 1901 N. Dupont Highway in New Castle. The meeting also has a virtual option, and residents can find the agenda here.
