Could freestanding birth centers and bundled payments slow spiraling costs for maternal care – and decrease C-Sections?

March 27, 2018

Written by Malini Nijagal, MD, MPH, University of California, San Francisco, Bhargav Raman, MD, Carrum Health, Jeff Durkin, Healthcare Data Engineer & Sach Jain, CEO, Carrum Health | February 22, 2018

The steady rise in C-sections from 21 percent of births in 1996 to 32 percent today is a major quality and cost problem.

The trend has been associated with a significant increase in serious maternal complications without the expected improvement in neonatal outcomes. This suggests that up to 10 percent or almost 400,000 U.S. pregnant women annually may undergo C-sections that are not only unnecessary, but are also potentially harmful. And because C-sections cost healthcare payers nearly 50 percent more than vaginal deliveries, these unnecessary surgeries also represent needless spending.

Bundled payments have the potential to improve quality and lower the costs of healthcare – and by extension, to maternal health. The episodic nature of pregnancy and childbirth lends itself well to bundling: Designing a bundled payment initiative that safely reduces C-section deliveries would be a win from both quality and cost perspectives.

But how can bundled payments be leveraged to efficiently and effectively decrease C-section rates and improve pregnancy care? Most existing maternity care bundled payments financially reward providers who decrease costs while achieving quality goals, thereby encouraging avoidance of unnecessary interventions. Other payment initiatives have piloted a “blended payment” model, which involves reimbursing hospitals a single rate regardless of birth route (vaginal or C-section). Under this arrangement, facilities that perform more C-sections would no longer bring in more revenue.

However, it’s not clear how much these changes will impact clinical practice and reduce cesarean deliveries. A recent analysis of Arkansas’ statewide bundled-payment initiative, the first of its kind in the United States, noted a “small but statistically insignificant decline in the C-section rate.” A blended payment pilot was successful in reducing “low-risk” C-section rates from 27-32 percent to 22-24 percent across three hospitals; however, based on our review of the data, no reduction was observed when Minnesota implemented a similar blended payment model in its Medicaid program from 2009-2012.

Freestanding birth centers: Low C-section rates, good outcomes

Rather than trying to influence provider practice around cesarean deliveries, a more effective approach may be to steer patients towards providers that already demonstrate low C-section rates and good outcomes. This is where Freestanding Birth Centers comes in. Not only do FBCs have much lower than average C-section rates compared to most hospitals, but they also perform vaginal births at a significantly lower cost.

In addition, because they provide prenatal care and birth in the same facility, their structure is well suited to paying for professional and facility care as a bundle. In this context, a bundled payment initiative that encourages low-risk women to deliver in FBCs, rather than in hospitals, may be a promising, scalable and efficient mechanism to provide high-quality care at a lower cost.

Payer-led initiatives not as effective

Since 2012, broad public health and professional efforts to reduce cesarean deliveries in hospitals have dropped rates by only 1 percent – from 32.9 percent in 2009 to 31.9 percent in 2016. The impact of payer-led initiatives is likely to be limited for several reasons. First, physicians generally view cesarean delivery as a decision made to optimize the safety and outcome of a specific mother and baby dyad, and will be wary of payers trying to influence birth choices through financial incentives.

Second, unlike hospitals, physicians are usually not reimbursed much more when they perform C-sections. While it is important to eliminate the current system that financially rewards institutions that have high C-section rates, this change may not have a substantial impact on provider practice. Finally, even if bundling and financial incentives could influence delivery route decisions, payers must have enough members (and, in turn, financial impact) in a particular health system to bring about changes in practice.

At FBCs, C-sections are less frequent – and cost less

Nationally accredited freestanding birth centers, which perform less than 1 percent of all deliveries in the United States, deliver the full continuum of pregnancy, childbirth and postpartum care at a much lower cost than hospitals, and with excellent outcomes.

Large studies in the United States demonstrate no more adverse maternal and newborn outcomes for low-risk mothers who deliver in FBCs compared to hospitals. However, C-section rates at FBCs are significantly lower than hospital rates. In a study of over 15,000 women who were eligible and planned to give birth in an FBC at the onset of labor, only 6 percent had a cesarean delivery. The theory is that these low rates of C-section result from a focus on understanding the range of normal birth processes and avoiding unnecessary intervention.

In addition to achieving low C-section rates, the care delivery and payment structures allow FBCs to provide high-value and efficient care throughout the pregnancy episode. All routine prenatal, birth and postpartum care is delivered through the birth center, avoiding the challenges that traditional care delivery faces around care coordination and redundant services.

To demonstrate the potential cost savings associated with birth centers, we can consider a cohort of 1,000 low-risk mothers who qualify to deliver at an FBC at the onset of labor, and compare expected costs for care in a birth center compared with a hospital.

Based on national data of 1,000 women who start labor in a birth center, we can expect 150 to be transferred to a hospital before delivery, with 60 ultimately undergoing C-sections and the other 90 delivering vaginally.

In 2011, the average cost of birth center care was estimated to be $2,277, which includes all prenatal, birth and postpartum care except labs and ultrasounds. However, we may consider prices for pregnancy care in San Francisco Bay Area birth centers – the highest of which is $8,000 – to likely represent the upper limit of FBC costs around the country. In comparison, according to a 2012 report based on national claims data and consistent with our own claims database at Carrum Health, the average commercial payer reimbursement for prenatal, postpartum and vaginal birth care in a hospital is about $10,600, excluding labs and ultrasounds, and is about $4,000 more if a C-section occurs.

In our theoretical cohort of 1,000 women planning to deliver at an FBC, even if we assume that the FBC is paid the full fee ($8,000) for all 1,000 women that start in their care, and the hospital is paid the facility and provider fees for the 90 vaginal births and 60 C-section births they perform, the total costs for this cohort would be $9.7 million ($8 million to the FBC, $954,000 to the hospital for the 90 vaginal deliveries, and $840,000 to the hospital for the 60 cesarean births).

A hospital could not achieve this cost even if it had a zero percent C-section rate. For the same cohort of 1,000 women delivering in a hospital, payers would spend about $10.6 million even if all of those women delivered vaginally, based on the $10,600 average national reimbursement for pregnancy care with vaginal birth. A hospital that could achieve the FBC’s 6 percent C-section rate would be reimbursed $10.8 million for this cohort of 1,000 low risk women – over $1 million more than an FBC.

Potential cost savings are dramatic

It’s estimated that 85 percent, or approximately 3.4 million births in the United States, could be eligible for birth center care. If we assume that only 5 percent of women (170,000) would be eligible for and interested in care at an FBC, the costs to deliver all pregnancy, delivery and postpartum care to these women would be $1.67 billion.

The costs for the same cohort receiving traditional care with birth in a hospital would be significantly higher; if we assume that hospitals are able to achieve the same low C-section rate as FBCs (6 percent), costs of care would be $1.84 billion – almost $200 million more than at FBCs. Given the average hospital C-section rate among low-risk first-time mothers in the United States is 25.9 percent, the actual costs of care in hospitals would likely be much higher than this estimate – and therefore, the expected cost savings from providing care through FBCs even more significant.

Payers can move toward higher-value maternity care by offering FBC options
Payer-led initiatives are unlikely to dramatically reduce hospital C-section rates and cost – but bundled payments for FBCs may be able to deliver the cost savings and reduced interventions that other initiatives cannot. A bundled payment model, as well as a strategy to enlighten patients and providers on the benefits of FBCs, could deliver significant value.

By providing low-risk women the option to receive care at FBCs, payers can not only reduce costs but improve quality. In addition, they can offer women a choice that may be more appealing based on their personal values and preferences. Not all women will be appropriate candidates for care through a birth center, and many will prefer to deliver in a hospital. But with strong evidence that women are turning away from hospitals for fear of unnecessary intervention, providing FBCs as an option for care is a win-win for both payers and beneficiaries.

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