Legislation–SA1 to SB213– has been introduced by Senator Bryan Townsend to amend the original bill pertaining to hospital budget review. The amendment exempts long-term acute care hospitals from certain budget review requirements, clarifies hospital financial reporting standards to the Diamond State Hospital Cost Review Board, and adds new accountability measures related to cost-containment agreements. It also requires hospital CEOs to formally certify compliance with those agreements, mandates reporting of any breaches or changes, and makes minor technical and grammatical corrections to existing law.
This Amendment does all of the following: (1) Exempts long-term acute care hospitals from the budget submission and review procedures adopted in the Hospital Budget Review Act, House Substitute No. 2 to House Bill No. 350 (152nd General Assembly). (2) Makes technical corrections to lines 52 through 54 of this Act to clarify the intent to require hospitals to report expenditures, revenues, and other financial information for the most recently completed fiscal year to the Diamond State Hospital Cost Review Board, redlined against the fiscal year immediately preceding it. This is consistent with the structure of this Act and reflects the intent of the parties who negotiated the term sheet reflected in this Act. (3) Requires the hospital’s chief executive officer to attest in writing that the hospital is not in breach of any material provision of, has not received a waiver of any penalties during the term of, and the penalties and risk provisions of the Meaningful Cost Containment Arrangement have not been modified during the term of the Meaningful Cost Containment Arrangement. (4) Requires the hospital to report to the Board any breach, receipt of a waiver of any penalty under, or negotiation of new terms of the Meaningful Cost Containment Arrangement during an applicable benchmark compliance year. (5) Makes a technical correction to line 124 of this Act to correct grammar in the existing law.
AN ACT TO AMEND TITLE 16 OF THE DELAWARE CODE RELATING TO HOSPITAL BUDGET REVIEW.
The Hospital Budget Review Act, House Substitute No. 2 to House Bill No. 350 (152nd General Assembly), enacted in 2024, (“HB 350”) created the Diamond State Hospital Cost Review Board (“Board”) in an effort to bring greater transparency and accountability to hospital spending in Delaware. HB 350 requires hospitals to submit their budgets to the Board annually, disclose financial and operational information, and comply with the State’s healthcare spending benchmark. HB 350 also authorizes the Board to prospectively approve or modify hospital budgets and imposes penalties for non-compliance. Shortly after HB 350’s enactment, ChristianaCare filed suit in the Court of Chancery, alleging principally that the prospective budget approval and modification authority granted to the Board violates the Delaware Constitution. The litigation raised broader constitutional and policy questions about the balance between State oversight of health care spending and the autonomy of private, nonprofit hospitals.
On September 30, 2025, the State and ChristianaCare signed an agreement pausing ChristianaCare’s lawsuit and setting forth the framework for this Act that, if enacted, will fully resolve the case. Under the agreement, the State admitted no fault. This Act incorporates the each of the terms of that agreement. HB 350 has 4 main components.
First, hospitals must present detailed budget information annually to the Board. Second, the Board must determine whether the hospital has complied with the State’s healthcare spending benchmark. Third, if the hospital misses the benchmark, it must submit a Performance Improvement Plan (PIP) for approval by the Board. Fourth, if the hospital fails to submit an approved PIP or achieve its objectives, then the Board may prospectively approve or modify the hospital’s budget. This Act addresses constitutional concerns by eliminating the Board’s ability to approve or modify hospital budgets, while preserving the first 3 components of HB 350 with certain modifications and enhancements. First, under this Act, hospitals still must present detailed budget information to the Board each year. However, the Board will evaluate hospitals based on actual expenditure and revenue information for the most recent year, rather than prospectively approving future budgets. As with HB 350, hospitals must report financial information, including costs of operations, revenues, assets, liabilities, and expenditures, scope and volume of service information, and other information deemed relevant by the Board.
This Act also requires hospitals to outline changes in year-over-year results and describe the actions it will take in the coming year to meet the benchmark, and further requires the Board to adopt a Uniform Reporting Manual for Budget Submissions to ensure the consistency of information provided by hospitals. Hospitals must provide labor costs by units of service and budget category, salary reporting is narrowed to officers, directors, key employees, and highest-compensated employees, and certain categories, such as payer contract information and three-year capital budgets, are no longer required. Second, HB 350 required the Board to determine annually whether each hospital has met the State’s healthcare spending benchmark. That requirement remains, but this Act expressly requires the Board to issue written findings of fact and determinations as to whether each hospital: (1) has met the benchmark; and, if applicable, (2) has satisfied the elements of the hospital’s Benchmark Compliance Plan (BCP), which replaces the PIP; and (3) is participating in a Meaningful Cost Containment Arrangement (MCCA). Further, the Board may also make policy recommendations to the Delaware Health Care Commission or the General Assembly regarding how to better align hospital budgets with the benchmark, while promoting efficient and economic operations and maintaining the ability of hospitals to meet hospitals’ financial obligations and to provide quality care. Third, beginning in 2027, hospitals that fail to meet the benchmark must submit a BCP for the Board’s approval. As with HB 350, if the BCP does not meet the criteria established by the Board, the Board may require the hospital to amend and resubmit the BCP. If a BCP is required, the Board will examine and determine in writing the following year whether the hospital has satisfied the BCP’s elements. However, if the hospital demonstrates that it is subject to an MCCA, then the hospital is not required to submit to the BCP process for that year. MCCAs are contracts between hospitals and payers (including, in some cases, federal or state governments) that are designed to reduce healthcare costs by holding the hospital financially accountable for controlling healthcare spend for a specific population – including downside risk. However, even if a hospital has an MCCA and therefore is not required to adopt a BCP, it still must present its detailed budget information to the Board every year so that the Board may determine whether it has met the benchmark. A hospital’s adoption of an MCCA does not exempt it from that process, only the requirement that it adopt a BCP—and only for one year. Civil penalties of up to $500,000 for knowingly failing to comply with reporting standards remain in effect.
