Hospital CEOs don't like Delaware plan to rein in health care costs

Leaders of every hospital in Delaware say they do not support the health secretary's plan to create a benchmark to rein in health care costs, believing it will turn into a spending cap that limits the hospitals' access to care. 

Delaware Healthcare Association President Wayne Smith, on behalf of the CEOs, wrote in a letter to Gov. John Carney that the organization "will not support the benchmark without a fundamental reset of this process, including consideration of what other options exist for addressing rising health costs in Delaware."

In the fall, the state began efforts to reduce health care costs. State officials want to create a benchmark rate, which would define what they believe is a more reasonable growth percentage.

The benchmark would be a growth rate goal. The state would use that number as a guideline when making funding and payment decisions. 

Health care costs currently consume 30 percent – or $1 billion – of the state's budget and are on track to double in the next decade. As health care costs grow, state officials say it is getting harder to pay for other government services, such as schools, prisons and police.

Jonathan Starkey, a spokesman for the governor, said Carney does not agree with the letter. Last year, the governor conducted 20 town halls on budget issues and 10 roundtables with small businesses. At every meeting, Delawareans raised concerns about the cost of health care, Starkey said. 

"It’s clear to everyone that we pay too much for health care, and we don’t have the results to show for it," he wrote in an email. "Governor Carney believes it’s past time to take action to address that issue." 

The letter, which was sent to the governor on March 28, was supported by the CEOs of Beebe Health System, Bayhealth Medical Center, Christiana Care Health System, Nemours Children's Health System, Nanticoke Health Services and Saint Francis Healthcare. 

“We think the state made a mistake with not initially sitting down with those who know the most about health care," Smith said. 

"That would include consumers, as well as providers and insurers, to say ‘What makes the most sense in terms of trying to drive costs or moderate costs.' To basically spring a price control regime on the system and assume that was going to work without having that type of engagement discussion ignores the real downsides… and risks associated with a top-down control strategy." 

With a benchmark in place, hospitals will have to "curb" certain services, Smith said.

Health Secretary Dr. Kara Odom Walker disagrees with this assessment. She said the benchmark is not a cap for how much hospitals can spend. It's a non-punitive target for how much the state should spend on all areas of health care, she said. 

“This is not something about top-down control," she said. "This is about transparency of information. This is not about a cap or a penalty. It’s not a control. It’s not a proposal around bureaucracy. It’s really giving the public greater information about what we are spending in health care and giving greater insight about what’s going on in all areas of health care spending.”

The letter criticized Walker for not attempting to "genuinely engage the citizens of Delaware." Smith wrote in the letter that stakeholders were never asked "whether this policy is suitable for Delaware."

"Until there is better communication regarding the policy direction represented by a benchmark or other systemic reform initiatives, Delaware policy-makers risk supporting a measurement concept without an understanding of the potential real-world consequences," the letter said. 

The state has held a series of public summits in the fall in which national experts talked about rising health care costs. It also recently launched an advisory committee, which will provide feedback to Walker on how the state should measure health care costs. Hospital representatives are members of the group. 

Smith told The News Journal that these presentations only featured "outsiders to Delaware" and that there hasn't been an opportunity for "give and take" between the state and stakeholders. 

Walker disagreed, saying the state has been "incredibly open and transparent through the last year." She said the state has asked for public comment several times a month about the benchmark.

She said she has met with every hospital CEO, the Medical Society of Delaware, the Delaware Health Care Commission and representatives from the pharmaceutical industry several times about the benchmark. Walker said all of the benchmark summits and advisory meetings have been broadcast via Facebook Live.  

In the letter, the hospital CEOs support the idea of focusing on areas the "state directly controls," specifically Medicaid and the state employee health plan. 

The state spent about $1.6 billion this past year on health care, about half of which went toward the state health plan. This covers 124,000 state workers, retirees and their families and other groups including the University of Delaware and municipal workers. The other half covers the state's share of Medicaid costs for the poor, disabled and elderly. 

While Walker said she agrees that collaboration is necessary to reduce health care costs, it has to be beyond Medicaid and state employee benefits. Delaware needs to look at the entire system of care, she said.

"If we do nothing to change this health care spending rate we will be in a crisis situation," Walker said. "We will be completely unable to problem solve collaboratively." 

Contact Meredith Newman at 302-324-2386 or at mnewman@delawareonline.com. Follow her on Twitter at @merenewman.