Why Should Delaware Care?
Delaware ranks as one of the top states in the nation for healthcare costs. For years, lawmakers have tried to bring prices down, often meeting fierce resistance from hospitals. A new bill meant to address those costs has been held up for months in negotiations with those hospitals.
Nearly two months after lawmakers introduced a bill aimed at bolstering the state’s primary care infrastructure, it has yet to see a vote on the Senate floor as hospital lobbyists continue to negotiate with legislators over the bill’s most contentious provision.
Delaware senators held their first debate over Senate Bill 1 — which would implement price caps on how high hospital systems can negotiate costs with insurers — in March, during an abnormally packed committee hearing. Delaware’s hospital systems descended on the statehouse in protest of the bill, saying it would decimate revenues and lead to job losses.
Multiple lawmakers decried the hospitals’ projected job loss claims, saying they are using healthcare 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, aimed at rewarding providers that keep patients healthy and away from costly trips to emergency rooms, has largely sat stagnant since then. It quietly passed through the Senate Finance Committee, which doesn’t publicly vote on bills, in April.
Senate Majority Leader Bryan Townsend (D-Newark/Glasgow), who sponsored SB 1, confirmed Wednesday that negotiations with the state’s hospital systems over amendments to the bill were ongoing, but he declined to elaborate further. He did say he anticipates an announcement on amendments soon.
Brian Frazee, CEO of the Delaware Healthcare Association, a trade group that represents the state’s hospitals, also declined to comment on specifics of the negotiations.
But he said he appreciates the opportunity to work with lawmakers to put forth “a resolution that we can all support.”
The bill currently 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 healthcare 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 healthcare 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.
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 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 — House Bill 350 — that led to a year-and-a-half long lawsuit between the state and Delaware’s largest hospital system.
Officials in Oregon, which implemented a similar proposal in 2017, told Spotlight Delaware the state realized massive savings after enacting price caps. Within a couple years, those officials said the provisions saved the state more than $112 million.
Delaware’s SB 1 also includes language that would exempt hospitals and other healthcare providers from the 250% benchmark 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.
The hearing
Up to this point, the only public debate over this bill happened in March during a Senate Health and Social Services Committee hearing.
As part of that debate, 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.
Additionally, a rift 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.
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.
It is unclear if and when the Senate will hear any proposed changes to SB 1, though lawmakers will have to move quickly if they want to send the bill to Gov. Matt Meyer’s desk before the end of this year’s legislative session on June 30.
