Why Should Delaware Care?
Spending by Delawareans on the cost of healthcare has exploded in recent years, with the total spend rising more than 5% annually. Taxpayers are hit twice by those rising costs, because they cover the insurance costs of state employees who make up the single largest bloc of patients in the state.
A state board that has long faced challenges from the state’s health systems voted on Tuesday to finalize regulations meant to increase oversight of hospital spending.
But as those board members finalized their regulations, they changed some language to accommodate concerns raised by the state’s hospital lobby.
The Diamond State Hospital Cost Review Board, which was formed in 2024, has only recently begun to find its footing after a lawsuit challenging its existence was settled earlier this year.
While the board held firm on many of its draft regulations, it ultimately agreed to change some provisions the hospitals argued revealed too much about their business dealings.
Overall, the board will require hospitals to present and be able to explain their financials annually, as the state has seen hospital spending grow year over year. This would include some data about their workforce development, revenues, and other spending details that have, until now, gone without oversight.
Brian Frazee, who runs the state’s hospital lobby, also sits on the cost review board as a non-voting member. And on Tuesday, he defended many of the changes his organization proposed.
He argued that requirements to break down financial data for each commercial insurer that deals with a hospital would violate contractual agreements between the hospitals and carriers.
Additionally, his organization had raised concerns about communications between hospitals and auditors prior to final determinations made about their finances.
Ultimately, the passing of these regulations represents the board’s first major step toward hospital oversight. The regulations, at least in the short-term, will guide how Delaware aims to tackle rising healthcare costs that not only burden patients, but the state, too.
What happened during the meeting?
Board members opened the meeting with discussion of the regulations, as well as feedback from the state’s hospital lobby, the Delaware Healthcare Association. Discussion of the regulations took up most of the meeting.
Hospitals will still be required to share much of the information they would have been before. However, the board will allow healthcare systems to aggregate much of data, instead of breaking down costs more specifically.
One of the key concerns raised by the hospitals was a requirement for them to break down cost data by individual insurance carriers, something the hospital lobby requested the board remove entirely.
Frazee argued during the meeting the revenue information about insurance carriers “is considered proprietary and very confidential.”
Ultimately, the board kept the provision, but allowed the hospitals to aggregate commercial-carrier-specific revenues under one tab, without naming the insurers. The data would also show separate revenues from federal payers like Medicaid and Medicare.
Another provision the hospital association raised concerns over was a requirement for hospitals to submit “reports in connection” with their annual audited financials.
Hospitals are audited annually and information about their financials are released annually to bond authorities, who will typically lend them money for large capital projects like new facilities.
An audit will usually be conducted by a major firm like KPMG or Deloitte, and in those audits, sometimes the firms will find deficiencies with the hospital’s finances.
Similar to the information about insurance carriers, Frazee’s organization argued some of those documents would be considered confidential, like communications between auditors and a hospital.
One board member, the former state Secretary of Finance Rick Geisenberger, said the board did not need to see communications throughout the process of an audit because there is not yet a concrete finding.
However, Geisenberger said during the meeting that if a hospital’s board of directors are made aware of financial issues during an audit, the state should see those communications.
“If ultimately there’s a communication from the auditor that says that there’s a weakness, that goes to the board, we need to see,” Geisenberger said during the meeting.
The board tweaked the language to remove the phrase “in connection” from the regulations, meaning hospitals wouldn’t be on the hook for the more sensitive preliminary financial communications. But the board would still be able to see final audit letters that are shared with hospital leadership.
How did we get here?
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. John Carney.
The board was tasked with reducing hospital spending in Delaware, and given 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, and HB 350 was signed into law.
Shortly after, 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, saying the regulations have nothing to do with Delaware’s corporate law. In previous 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 Meyer only two appointments. Once inaugurated, Meyer tapped two longtime healthcare professionals to serve on the board.
One of those Carney-appointed members, Geisenberger, stepped down as chair after a spat with Meyer.
In a letter sent to Meyer on June 7, 2025, Geisenberger recounted how he had declined the governor’s request to cancel meetings of the board, saying instead that the public body was “duly authorized” by the legislature and had a responsibility to perform its business “impartially and free from undue influence.”
“You have stated to me that holding any further meetings of the Board at this time would be a waste of State resources in light of recent developments and uncertainties,” Geisenberger said in a reference to the ongoing lawsuit.
Soon after, the state and ChristianaCare agreed to pause proceedings on the lawsuit until Sept. 30, 2025, in “the interests of the parties and the public.” In October, the state and the hospital announced a proposed settlement agreement.
In the months that followed, lawmakers introduced legislation amending the charter of the hospital cost review board, removing its power to modify and veto excessive budgets.
That law, Senate Bill 213, was sent to Meyer’s desk earlier this year and promptly signed to bring a formal end to the litigation.
Since then, the hospital review board has also been tasked with monitoring how the state’s nonprofit hospitals offer federally mandated free and discounted care to low-income patients.
