Horizon, Newark's University Hospital Announce Value-Based Effort for Pregnancies

The value-based care initiative comes at a crucial time for the safety-net hospital: the vast majority of pregnancies are covered by Medicaid and some are covered by charity care. The latter funding source is being cut in the proposed New Jersey state budget.

New Jersey’s largest health insurer and a teaching hospital in its largest city today launched a value-based care partnership, whose first task will be curtailing C-sections, which are down from their peak but still occur more often than they should.

Under the collaboration, Horizon Blue Cross Blue Shield of New Jersey will bring its Episodes of Care for Pregnancy and Delivery to University Hospital in Newark, which serves a diverse population and has educated generations of medical students.

The initiative will bring value-based care to one of the state’s key safety net hospitals at a time when Horizon has been under fire over OMNIA, a tiered health plan and population health alliance. Aimed primarily at the individual and small group markets, OMNIA had more than 234,000 enrollees through late February, according to figures announced by Horizon. University Hospital is not included in OMNIA’s preferred tier, which so alarmed some legislators they proposed a law to require the hospital’s inclusion in preferred tiers in the future.

With today’s action, however, Horizon said it was willing to pursue valued-based payment models with safety net hospitals that are outside OMNIA’s preferred tier. “Safe and healthy maternity care is a top priority for University Hospital, so Horizon is pleased that our initial focus will be on developing a program with them that provides incentives for getting expectant mothers and their children off to a healthy start,” said Robert A. Marino, Horizon chairman and CEO.

While the collaboration will extend to other areas of care, both Horizon and the hospital emphasized the early focus on expectant mothers. “Value-based care is clearly a model whose time has come and we’re excited to join Horizon at the forefront of bringing the benefits of this approach to our patients, the residents of Newark and the surrounding communities,” said John N. Kastanis, president and CEO of University Hospital. “Expectant mothers have unique health challenges that, if left unaddressed, can quickly lead to greater health risks for both patients—mother and baby.”

Episodes of Care (EOC), sometimes called bundled payments, are among the newer, alternate payment models that shift rewards from payments for procedures to incentives for getting a patient well; or, in the case of pregnancy, a successful, problem-free delivery.

In an EOC, the insurer pays providers to manage a healthcare event from start to finish, including a prescribed time of aftercare. Because providers will be paid a set fee no matter how many services a patient uses, there is more incentive to coordinate care, ensure good follow-up after discharge, and keep the patient from returning to the hospital. Hospitals and doctors meeting certain quality and cost targets receive bonuses, or “shared savings.” CMS is pushing Medicare providers and states to pursue alternate payment models to hold down the cost of healthcare.

Horizon’s Episodes of Care model has had early success in maternity and newborn care. The insurer announced previously than an earlier test produced a 32% reduction in C-sections; this result is key, since New Jersey hospitals reported an average C-section rate of 28.1% to The Leapfrog Group for 2015. While this is a large drop from 2011, it’s still above the target of 23.9% called for in Healthy People 2020, a national set of healthcare goals from the Office of Disease Prevention and Health Promotion.

Why Value-Based Care Matters in Maternity Care

There are few areas where bringing down healthcare costs are more important than maternity care. For many women, having a baby is the only time they are ever stay in a hospital, and the cost between a regular delivery and a C-section is huge. As Suzanne F. Delbanco, PhD, discussed in The American Journal of Accountable Care, bringing value-based care models to maternity care is crucial: In 2010, the average commercial payment was $18,329 for a vaginal birth and $27,866 for a C-section, while Medicaid pays about half.1

In recent years, health plans have pushed back against C-sections that are not medically indicated. In 2014, South Carolina became the first state where the Medicaid administrator and the largest commercial insurer mutually agreed to not pay for early elective C-sections.1 A 2015 analysis of data from 9350 sets of mothers and newborns by Witt, et al, found that 25.8% of the women had a C-section, and that for 11.6% of them, it was not medically indicated.2 In New Jersey and elsewhere, a huge factor driving this problem is the fear of a lawsuit if something goes wrong.

At University Hospital, value-based care in maternity is arriving at a crucial time. According to a hospital spokeswoman, most of the maternity patients are covered by Medicaid with some through charity care; very few have commercial insurance. Thus, the opportunity for shared savings comes just as Governor Chris Christie is eyeing cuts in charity care in the state budget. While the Christie administration argues that having more people insured through Medicaid makes charity care less necessary, this fails to account for New Jersey’s low reimbursement rates, which have been found to deter providers from accepting Medicaid patients.

New Jersey’s Challenge With C-Sections

University Hospital’s C-section rate is slightly above the state average at 29.3%, according to the 2015 survey by The Leapfrog Group; however, that report found the hospital had shown “some progress” in getting closer to national targets. Overall, New Jersey has made substantial progress from the years when its C-section rate was at 38%.

High rates of C-sections in New Jersey are affected by a host of factors, including higher than average rates of multiple births and the fact that women in New Jersey give birth at older ages than US averages. As reported previously by The American Journal of Managed Care, New Jersey had the highest rate of twins and the second-highest rate of triplets in the country, based on the most recent CDC data available.

Mothers in New Jersey tend to give birth later, with more having their first child in their 30s and more giving birth in their 40s. CDC data from 2013 show that among the states, New Jersey had the fourth-highest fertility rate for women in the 35-39 year-old age group (64.1 per 1000) and the sixth-highest for women in the 40-44 year-old age group (13.1 per 1000). The biggest fertility “bubble” in New Jersey comes in the 30-34 year-old age group, when the rate reaches 116.7 per 1000; nationally, it occurs in the 25-29 year-old age group, when the rate is 105.5 per 1000.

The 2015 study by Witt, et al, found a number of factors associated with having a C-section when it was not medically indicated, including just living in the Northeast. Among first-time mothers, predictors for both medical indicated and non-indicated C-sections included older age, obesity, delivering multiples, and having a chronic condition, such as diabetes or COPD.1

According to Horizon spokesman Kevin McArdle, the insurer does not consider a woman’s age by itself a risk factor; however, age is associated with confounding issues such as gestational diabetes, which can cause macrosomia, in which the baby is enlarged and a C-section is needed.


1. Delbanco SF. Using payment reforom to improve the value of maternity care. Am J Account Care. 2014; 2(3):36-38.

2. Witt WP, Wisk LE, Cheng ER, et al. Determinants of Ceserean delivery in the US: a lifecourse approach. Matern Child Health J. 2015; 19(1):84-93. doi: 10.1007/s10995-014-1498-8

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