Earlier this week, the State of Delaware and ChristianaCare announced an agreement that pauses ongoing litigation over a controversial law that placed the budgeting authority of Delaware’s private non-profit hospitals under state control.
House Substitute 2 for House Bill 350 (as amended) passed the General Assembly last year in a contested vote that broke mainly along party lines, with Republicans in opposition. Then-Governor John Carney and House and Senate Democrats leveraged their control of the lawmaking process to enact the legislation despite the concerns expressed by healthcare providers. The measure was signed into law in June 2024.
Under the law, hospitals must submit their operating budgets, capital budgets, recent expenditures, and workforce development efforts to the seven-member Diamond State Hospital Cost Review Board for annual review.
Hospitals with budgets exceeding a benchmark targeted growth rate set by the state or not meeting other performance parameters are required to fashion an improvement plan. The law allows the board to coerce compliance by imposing fines of up to $500,000 on hospitals that fail to conform.
ChristianaCare filed a lawsuit in Chancery Court last summer seeking to overturn the statute. The complaint asserted that the law violates Delaware’s general corporation statutes and the state constitution by seizing the decision-making authority of private non-profit hospitals and giving it to an “unelected and unaccountable” state board. All of Delaware’s general acute care and pediatric hospitals are nonprofit.
The complaint also argued that the law contradicts the U.S. Constitution by taking over private hospital governance and budgets, forcing them to disclose confidential information, and unfairly targeting them.
The agreement announced on Wednesday could settle the case.
The agreement includes the following items:
- The governor and ChristianaCare will work with legislators to draft and enact legislation reforming the current law. The legislation must be enacted by the end of January 2026 or the parties may return to litigation.
- Hospitals must continue disclosing detailed spending and revenue data; financial information including costs of operations, revenues, assets, liabilities, rates, charges, units of service, and wage, salary, and other labor costs; service utilization data; and other information central to the board’s mission to determine whether hospitals have met the annual healthcare spending benchmark.
- The authority granted to the state board to approve and modify hospital budgets will be eliminated.
- Hospitals that don’t meet the growth benchmark must still submit a Benchmark Compliance Plan (BCP). However, willing participation in proven practices that lower healthcare costs may exempt hospitals from this requirement.
Additionally, ChristianaCare will negotiate in good faith with the governor, other hospitals, and other stakeholders this fall on a health care worker loan forgiveness investment.
If the terms of the agreement are met, the litigation will be dismissed.
To read the complete agreement, click here.
