Bending the Curve, Beginning with Birth

December 9th, 2010 by avatar

As I prepare for next week’s webinar on payment reform to align incentives with quality, I have been thinking a lot about how we pay for maternity care in this country, and the opportunities to rein in costs while improving the quality of care. I have concluded that we face both an unprecedented opportunity and an unprecedented responsibility to get serious about maternity care payment reform.

Pregnancy, childbirth, and newborn care are collectively the most common and expensive hospital conditions billed to both Medicaid and private insurers.  The national hospital bill for maternity care totaled $98 billion in 2008 – and no other condition came close to this figure. (See more facts about costs on Childbirth Connection’s updated Facts and Figures page.)   With states across the country facing budget crises, strategies that responsibly reduce the Medicaid bill for births ought to be on the table, especially if we can do so while simultaneously improving quality.  (More on that in a minute.)

What are the arguments for payment reform? They fall into a few categories:

  • We’re paying too much
  • Incentives and idiosyncrasies built into the current system virtually guarantee that we’ll continue to pay too much
  • The payment system offers no accountability whatsoever for providing high quality care. In fact, it incents poor quality care.

Although maternity care seems to have been off the radar of those debating strategies to bend the cost curve, that seems to be changing.  A flurry of recent articles and reports have demonstrated the points above:

We’re paying far more than other countries for maternity care: Citing the data in the Annual Comparative Price Report prepared by the International Federation of Health Plans, The Incidental Economist shows that average combined hospital and physician payments for a vaginal birth are nearly twice as high in the United States as they are in the next most expensive country (Australia).

We’re paying more and more each year. Facility charges for maternity care leapt from $86 billion in 2006 to $98 billion in 2008, according to data Childbirth Connection has obtained from the Agency for Healthcare Research and Quality.

The response of insurance companies thus far has been to reduce their coverage for maternity care, a move that puts families at risk of bankruptcy. Several blogs (including Midwife Connection and Better Health) have covered the persistent practice of considering pregnancy a preexisting condition and denying insurance claims for pregnant women, a reality that childbearing women will face until provisions of the health care reform law go into effect in 2014. On the Costs of Care blog, essay finalist Tarcia Edmunds-Jehu shares a story of an insured pregnant woman seeking public assistance for the first time because she faced out-of-pocket expenses for just two prenatal ultrasounds that her insurance failed to cover.

Market forces don’t reward value: Over on Running a Hospital, hospital CEO, Paul Levy, borrows some slides from David Morales, Commissioner of the Massachusetts Division of Health Care Finance and Policy, showing that the highest paid hospital receives nearly double the payment for a normal vaginal birth than the lowest paid hospital and that hospitals that charge the most are rewarded with more business – the 10 hospitals being paid the most did four times the number of births than the 10 hospitals being paid the least. And these data don’t take into consideration the proportion of births that were c-sections, a rate that ranges from 17-44% in hospitals across the state. (C-sections cost more than vaginal births.)

C-sections drive profits: In California, where a 2006 study showed that most of the variation in c-section rates among low-risk first time mothers is attributable to practice patterns, not patient characteristics, for-profit hospitals have significantly higher rates than nonprofit hospitals, according to a recent investigative report by California Watch.

Women have caught on to these perverse incentives, and are opting out in search of better care. In an opinion piece in the Washington Examiner, E.D. Kain talks about why he and his wife chose to have their second child born at home with midwives even though their insurance didn’t cover one penny. “The pre-insurance costs of a home birth ended up being pretty close to the post-insurance costs of having a baby in the hospital,” he writes, largely because “you don’t pay for the room, the bed, the doctors, or the drugs.” Kain and his wife also appreciated the personalized attention, house calls before and after birth, and the fact that they would know the midwife who would care for them in labor, “amenities” that shouldn’t be the purview just of home birth.

Aligning Incentives with Quality

So, can we reverse these trends and improve quality at the same time?  A new bill introduced in Congress last month will, if passed, establish demonstration projects to evaluate alternative payment structures for covering maternity care.  The bill requires that tested payment mechanisms measure and improve health outcomes and forbids denial of services. Tuesday’s webinar will feature a national expert who has studied payment reform models that drive quality improvement while lowering costs. Harold Miller, President and CEO of the Network for Regional Healthcare Improvement, and Executive Director of the Center for Healthcare Quality and Payment Reform, has been an active member of the Transforming Maternity Care Project. He’ll bring his insights to the issue of maternity care and present the most promising models to use payment incentives to drive improved quality. Having had a sneak peak at his slides, I’m confident that transforming how we pay for care will transform how care is delivered and experienced – for the better. I hope you’ll join us. You can register here.

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  1. avatar
    | #1

    This is very frustrating to me- my last birth was very fast and even though we were only in the hospital 20 minutes before my daughter was born, we were still charged 2400$ just for the room that I pushed her out in, and then another 900$ for the overnight stay. The ob group that I saw was another 2500$ billed to insurance. When I asked if my insurance company if they would cover the local midwife group (3000$ total), they said no, “because it was too high of a risk”. Eh? Statistics show that the risk of a homebirth is no higher than a hospital birth, so the ONLY risk is that they will pay less money! It’s a good thing for them! AAAGHGHGHG. Someone PLEASE make insurance companies pay for midwives!

  2. avatar
    | #2

    As long as hospitals continue to be paid more for interventions, they will continue to use them. If parents want real choice in birth, support your local homebirth midwives, or birth unassisted, as the situation and your desires allow. Midwives still provide superior care for less money. One of these days, the insurance companies may wake up. One can only hope.

  3. avatar
    Bonnie Anderson
    | #3

    I have long held that as long as insurance is based on worst-case malpractice scenarios, there will be more surgical births and more expense, along with LOWER QUALITY care for both mothers (c-sections) and babies (side-effects of drugs and other interventions, and including birth injuries due to the surgical method).

    If or when the insurance companies realize that paying for doulas, or even home-birth midwives will both IMPROVE OUTCOMES and REDUCE EXPENSES, then and ONLY then will the overall quality of maternity care actually improve, AND the surgery rate (c-sections) will go DOWN.

  4. avatar
    | #4

    After reading this, several thoughts come to mind. At the risk of being considered un-politically correct, may I share some experiences that have shaped my opinions of payment reform?

    1. Health care should not be totally free. People do not value what they do not have to invest themselves in. I have a huge clientele that receives free medical care. I have been forced to come in to OB triage in the middle of the night because a pregnant patient showed up asking for Maalox. I could have called in a prescription for that, but once she showed up at ER, I am required to see her and evaluate her. This costs about $1000 minimum for the hospital ER fees. When I kindly explained to the patient that she should call me first next time, as I might be able to help her over the phone and save the cost of an ER visit, she replied, “Oh, it doesn’t matter. . .I don’t have to pay for it”. Well. . .I am paying for it, and I am sorry to say that this scenario is more representative of the norm in my practice rather than an exception to the rule. Our state has another state insurance program that requires a small co-pay (about $2-5 per visit). I have noticed that far fewer of these insured patients make inappropriate visits to the ER. I have talked with ER docs who say they face the same problem and that the only way to have folks use the ER responsibly is to require them to pay SOMETHING, or donate an hour or two of volunteer work to the hospital, or some kind of compensation for the care they receive.

    2. You talk about other countries being less expensive than the USA. My husband travels every week doing medical/clinical education for cardiac surgeons and perfusionists. Last week he was in Canada. There were six beautiful new operating rooms, but only two in use. When he asked why, he was told that there are not enough staff to keep them running because pay levels are so poor. He brought home a clipping from the paper about a man who ate fatty foods to induce his own gallbladder attack so he could have it removed as an emergency, rather than have to wait for five months, which was the earliest he could be scheduled. He has talked to many of the Canadian patient and healthcare workers who are all disillusioned and frustrated with their system.

    I was visited by two Dutch midwives who wanted to talk to me about the American system of healthcare. They were shocked at the number of prenatal visits we do. “Why?”, they asked. “We see a woman four times during her entire pregnancy, unless something goes wrong.” Maybe this is one of the ways other countries can have fewer healthcare expenses. Would this work in the US, where we are constantly told that we need more prenatal care, more services, for pregnant women, rather than less?

    3. I owned my own solo practice for some years. My malpractice insurance was greater than 25% of my salary before taxes. I kept my costs as low as possible, offered a sliding scale for those who were uninsured, and accepted barter instead of payment for those who had no money. I used to think that doctors were just greedy for money and making money hand over fist. Once I opened my own practice, I found that I had to take approximately 50% of my earnings right off the top to cover all the expenses of running a business. I did a lot of tasks around the office myself because I could not afford to hire more personnel. I was busier than I wanted to be as a solo practitioner and rarely was able to take vacation (I had to pay someone big bucks to cover for me) or time with my family. I honestly don’t know how I could have kept the business solvent with lower rates.

    4. May I say the dirty word–“tort reform”? Until we institute a system in this country that does not punish OB providers for acts of God or unpreventable complications, we cannot hope to see a meaningful reduction in hospital/physician/midwife rates or insurance rates. One woman from Britain told me they have a system that pays a reasonable amount to parents whose baby is injured at birth through no fault of the provider. She said the system is similar to our vaccine injury fund. The vaccine company cannot be sued, but there are funds to help with medical costs for a child who has severe and longterm damage due to a vaccine.

    I am not saying I know any of the answers to the healthcare dilemma. I have lots more questions than I do answers. It is multi-faceted problem that will require a multi-faceted solution.

  5. | #5

    An article on economic disincentives by Susan Hodges can be found on the Citizens for Midwifery website at http://cfmidwifery.org/resources/item.aspx?id=32. It was written in 2004, but none of the underlying issues have changed. If anything, they have intensified.

  6. | #6

    Nicholas Fogelson, MD, over at Academic OBGYN, recently posted his thoughts(http://academicobgyn.com/2010/12/08/an-argument-for-coverage-of-lactation-consultation/) on health care insurance coverage (or lack thereof)—specifically for outpatient lactation consultation services. Be sure to read the comments after his post, as they provide nice clarification on the role of the IBCLC.

  7. | #7

    Hey all –

    Its interesting to hear the idea that homebirth midwives provide “superior care for less money”, as this has not been my experience at all. I won’t get into the “superior care” issue, but in every situation where I have been privy to financials, homebirth midwives make far more money than OBs for pregnancy care.

    An OB may charge $2000-$3000 for pregnancy care (or even more, it hardly matters), but what one charges has basically no impact on what one collects. Insurance pays what insurance pays, and that’s usually in the $1200-$1500 range. Homebirth midwives on the other hand have no contracts with insurance companies, and they get to set their fees at whatever they like. The ones I know charge $3000, and they get $3000. Unlike physicians, who are basically at the mercy of the insurance companies, homebirth midwives enter into a real business relationship with their clients, who independently decide if the services the midwife is providing is worth the price they ask.

  8. | #8

    I agree with Janelle’s comments. In my experience with home birth many of the couples paid out of pocket for their care. They participated in their care, made dietary changes–chose healthy life styles. As a consequence there were less complications. the cost of care was less.

    In Illinois the doctors that have provided home birth care in the past, have run into financial difficulty with malpractice insurance. These doctors do far less c-sections and bring in less revenue. Despite the difference in their type of practice they, have to pay the same malpractice fees as hospital based doctors.

  9. | #9

    @Dr. Nicholas – what you say may be true; I paid the midwives about $3000 or so out of pocket for each of my pregnancies/births, and don’t know what I might have paid an OB. However, midwives are not there just for the prenatals (which in my experience take about an hour, whereas most women say that their OB visits are about 5-15 minutes — probably more time with the nurse, though, doing the actual weighing and measuring and such), but also there for the duration of the labor, which may be several hours or even a day or more. Very, very few OBs will labor-sit, especially like that; and in fact, I think most women are prepared for their doctors to basically show up only after they start pushing, with some L&D nurses saying that doctors want to be called only at the last minute, *just* to receive the baby.

    Also, many midwives provide supplies at home-births which would ordinarily be charged for at the hospital. And hospital charges for births are several thousand dollars at a minimum in most places [although I have heard of some pre-payment plans that are as little as a couple grand].

    Do you not think that doctors could refuse to take health insurance? It’s true that many home-birth midwives (not all, but probably most) cannot and/or do not (my first midwife, a CNM in IL did take insurance, actually); but considering some of the stories I’ve heard of insurance companies ultimately refusing to cover the costs/charges/fees of a home birth, I don’t blame midwives for making the patient pay them directly, and then having the patient get reimbursed for their expenditures. But back to the first question of the paragraph — you imply that doctors *must* take health insurance, while midwives “can set their fees for whatever they want.” Not exactly the case; doctors could refuse to take insurance, and could likewise set their fees for whatever they want. Why don’t they, in general? I would assume it is that they have discovered (or at least they believe) that they get more money/patients if they accept insurance than if they don’t. I think that if doctors aren’t making enough money by accepting insurance, then they can fairly easily not accept insurance. In fact, I’ve heard of a few doctors doing this. John Stossel had a show on this probably a few years ago — you can check his archives and see if it’s still up — but he interviewed a doctor who was making more money when he stopped taking insurance, because he only needed a secretary to make appointments, rather than a team of insurance/billing people who spent months trying to get paid for services rendered; and he was certain that what he was charging, he was going to receive. But he tended to charge less than what most doctors did, mostly because of the reduction of overhead. And one FP who is somewhat local to me, does not take insurance, but charges a set fee of $2500 for attending a vaginal birth, or $3000 for a C/s, although hospital charges and anesthesia are of course extra.

    Anyway, an interesting topic. Midwives’ fees are, like everything else in the free market, checked and balanced by two factors: the minimum they need in order to survive financially, and the maximum that their clients would be willing to pay. They could technically charge $10,000 a birth, but would hardly find anyone willing/able to pay that. Likewise, they could attend births for free, but that gets to be an expensive hobby very quickly!

  10. avatar
    | #10

    @Nicholas Fogelson, MD

    This is only my experience, Dr. Fogelson, but I did contract with insurance companies when I worked as a home birth midwife.
    Any provider, physician or midwife, can set their fees at whatever price they wish. The rub comes where you sign a contract to be a preferred provider with an insurance company. By signing, you are agreeing to accept the “usual and customary fee” as determined by the insurance company. You are not permitted to know, prior to signing, what this fee is. You also sign that you agree not to bill the patient for any difference in what the insurance company considers reasonable and what your fee is (with the exception of billing for the patient deductible). I have had insurance companies pay anywhere from $1400 for the global fee (this covers all prenatal care, labor, delivery, and postpartum to six weeks) to $3400. Most paid in the range of $1800-2200.

    While it may appear that midwives are getting more in their pockets than doctors, this is not necessarily the case. The doctor bills for the global fee, but generally does not attend the patient personally through the entire labor. As a homebirth midwife, I did not have a full complement of support staff to assist me. There were no RNs to labor manage and call me when it was time. There was no lactation consultant, or neonatal nurse practitioner to do the newborn exam. I did home visits for the first three days postpartum, and saw the patient and baby at one, two, four, and eight weeks postpartum.

    Because I was contracted with a number of insurance companies, I was required to carry malpractice insurance, which took a huge bite out of my income. My insurance was lower than an OBs, but so was my income.
    I was not trying to get rich, but did need to make enough to support my family.

    Another difference between home birth midwives and OBs–there would be no way I could carry the patient volume that an OB can, simply because it is more labor intensive to attend births at home, especially as a solo practitioner. This also naturally limited my income and influenced what I could charge. At the time I was practicing, I charged $3400 global, which was the same as all the OBs in the area were charging. I also accepted barter (got my circuit panel replaced for one baby I delivered, and a wall in my house removed for another baby), and I offered a sliding fee scale for those who had no insurance, where the charge was based on the patient’s income.

    I do think that using midwives as first-line care providers in the hospital setting would be more cost effective, because one deck OB could supervise many midwives, whose salaries are about 1/4 to 1/2 of a physicians.

  11. | #11


    Great comments. No question doctors could opt out of insurance, but at this point no one does that. That would be a pretty big leap of faith, given that in the current environment you would be asking patients to come to you and pay cash for a service that they get through their insurance at other equivalent providers. To be successful you would need to demonstrate that you provide a service that patients value enough to pay for. Not being involved in contracts actually allows one to provide those services, however (ie home visits, extended phone calls, email consultation…) Theoretically an OB could even do homebirths (though I doubt there would be a malpractice carrier that would cover them).

    I’ve thought a lot about such issues, and as a young physician have considered taking the plunge myself. For now I am an academic, well insulated inside the bowels of a large teaching institution, and collecting a salary relatively irrespective of my collections.

  12. | #12

    @Nicholas Fogelson, MD
    And this, Dr. Fogelson, is exactly what many/most home-birth midwives face, perhaps by choice, but probably by necessity — asking their clients to find them w/o being on an insurance “provider list”, and then to pay cash, possibly much more cash, than they might pay out-of-pocket through their insurance.

    Home births and birth-center births do cost the final payer(s) less than do hospital births, esp. C/s. While the doctor may get less after all is said and done than a midwife, if the patient were having to pay entirely out-of-pocket for all fees and services, an out-of-hospital midwife is much cheaper than an in-hospital anybody

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