Using Payment Reform to Improve the Value of Maternity Care

March 19, 2014
Suzanne F. Delbanco, PhD

The American Journal of Accountable Care, March 2014, Volume 2, Issue 1

Catalyst for Payment and Reform examines how different payment models can help change the way we pay for and measure quality of maternity care, and thus improve health outcomes for babies and mothers.

Figure 1

Despite some recent exciting news from The Leapfrog Group about how hospitals have finally achieved lower rates of early elective deliveries, the United States still has a long way to go when it comes to improving maternity care. The rate of early elective deliveries is going down, on average, across the nation, but far too many individual hospitals and specific regions still have unacceptably high rates. The current rate of Cesarean deliveries (C-sections) in the United States has been steadily growing (), and remains dangerously high at almost 33%1 (inductions of labor contribute to this rate). Also, there often are built-in financial incentives for unnecessary medical intervention during delivery, which can negatively impact health outcomes for infants. These trends have a profound impact on both society and the economy, resulting in poorer care for an increasingly high price.

Nationwide in 2010, average commercial insurer payments for all maternal and newborn care were $18,329 for vaginal births and $27,866 for C-sections. These payments are approximately 100% more than what Medicaid pays for the same care.2 From 2004 to 2010, average commercial insurer payments for all maternal care increased by 49% for vaginal births and 41% for C-sections. 2 And from 2004 to 2010, average out-of-pocket payments for all maternity care covered by commercial insurers increased nearly 4-fold for both vaginal births (from $463 to $1686) and C-sections (from $523 to $1948).2

The Power of Payment

We know that how we pay for healthcare creates powerful incentives to healthcare providers to deliver care in certain ways. Today, the financial incentives baked into how we pay for maternity care do a poor job of motivating providers to deliver care that adheres to evidence-based guidelines or to eliminate inappropriate and wasteful services. In fairness, while providers seldom make clinical decisions based solely on how they will be paid, changes to payment methods can compel providers and delivery systems to put new policies and procedures in place to help measure and deliver better care. For instance, “hard stop” policies prohibiting early elective deliveries permit hospitals to stop a physician from admitting a woman for an early elective delivery unless they document the medical necessity of the procedure. Hence, it is not surprising that changing how we pay for maternity care can improve health outcomes. At our “National ‘Virtual’ Summit on Maternity Care Payment Reform” held March 3rd, 2014, Catalyst for Payment Reform (CPR) took an in-depth look at a variety of payment models designed to yield desired results.

Models of Risk

The payment models discussed during the Summit represent a spectrum of financial risk for providers. The end of the spectrum with the least risk features “upside only” payments, or payment added financial risk. On the opposite end of the spectrum are models of “downside only” risk, in which providers are at financial risk for needing additional resources to care for a patient. Also included are “2-sided risk” models in which healthcare providers have the opportunity for both financial gains and losses.

Upside Only (Pay-for-Performance)

WellPoint, a Blue Cross and Blue Shield Association managed care company, shared design details about its “upside only” model, called the Quality Insights Hospital Incentive Program (Q-HIP). Under this program, hospitals can earn enhanced fees for meeting metrics related to reducing early elective deliveries, reducing unwarranted C-sections, and reducing healthcare associated bloodstream infections in newborns.

Downside Only (Nonpayment)

Figure 2

BlueCross BlueShield of South Carolina and the South Carolina Department of Health and Human Services (SCHHS), which administers South Carolina’s Medicaid system, along with the support of many other stakeholders, partnered to engage providers in quality improvement activities, and then all agreed to stop paying for early elective deliveries. The program, called the Birth Outcomes Initiative, has reduced unwarranted early elective inductions by 50% (), decreased neonatal intensive care unit admissions, and saved the SCHHS more than $6 million. South Carolina is the first state in the nation in which the Medicaid administrator and the largest commercial insurer have collaborated to establish a policy of nonpayment for early elective deliveries. CPR authored a case study on the Birth Outcomes Initiative late last year.3

Two-Sided Risk

Hoag Memorial Hospital Presbyterian (Newport Beach, California) partnered with Blue Shield of California (BSCA) to develop an accountable care organization (ACO) focused in part on improving maternity care. Physicians, the hospital, and BSCA worked together to gather data on practice patterns and outcomes and also put processes in place, including a hard stop for early elective deliveries. When providers achieve goals, they share in the savings; but they also have shared financial risk. Capitalizing on this opportunity, they have realized savings in the millions of dollars and reduced their C-section rate. Hoag and others are now working with the Pacific Business Group on Health on a program that will pay a “blended” payment rate for vaginal and C-section deliveries. The program is designed to incrementally reduce preventable, low-risk, first C-section deliveries to 23.9%, which is a goal of Healthy People 2020, a US Department of Health and Human Services initiative.4

The Employer Perspective

The members of CPR—large employers and other healthcare purchasers that include Medicaid and public employee and retiree agencies—are extremely interested in these types of pilots and programs. Maternity care remains an area of extremely high spend for many large employers and especially for state Medicaid agencies. A recent survey released by Truven Health Analytics found that during the 5-year period of 2006 to 2011, employer healthcare costs increased by an average of 4.3% per year, driven largely by spending on preventive health services: osteoarthritis (except spine); multiple sclerosis; childbirth (C-section); and complications of surgical and medical care.5

Aligning with the evidence base and eliminating unnecessary interventions results in better health outcomes and reductions in spending, and employers and other purchasers know this area demands their attention. Employers are also interested in strategies they can use to engage consumers—and that includes expectant mothers. By combining education with information on the quality and price of various providers with financial incentives through benefit and network designs, purchasers and payers can incentivize consumers to seek care from high-value providers, maximizing their own benefits as well as the impact of payment reform models.

Employers are eager to educate consumers about what constitutes high-quality maternity care. Shared decision-making programs can help guide consumers through the options available to them, including whether to seek a C-section during a pregnancy that poses questionable risk. Organizations have created a variety of tools—like the “Less Than 39 Weeks Toolkit” provided by the March of Dimes—designed to educate consumers about the dangers of early deliveries.

Which Model Is Best?

While there isn’t a model that will work for every market, CPR’s hypothesis is that payment methods may be most powerful when there is some potential downside financial risk for providers. If this hypothesis holds true, pay-for-performance models will have better results when they morph into “shared risk” arrangements. However, for markets in which providers are unable or unwilling to accept financial risk, an upside-only model may be the only starting place to initiate any change in practice patterns. Steps taken to remove the financial incentives for performing unnecessary intervention during labor and delivery will help align the evidence base with practice, ultimately improving health outcomes for infant and mother as well as helping to contain costs.Author Affiliations: Suzanne Delbanco, PhD, is the executive director of Catalyst for Payment Reform. Dr Delbanco serves on the coordinating committee of the Measures Application Partnership for HHS, HFMA’s Healthcare Leadership Council, the National Commission on Physician Payment Reform, and the Health Care Incentives Improvement Institute board, and participates in the Healthcare Executives Leadership Network.1. CDC fast facts: births—method of delivery. US Centers for Disease and Prevention website. http://www.cdc.gov/nchs/fastats/delivery.htm. Updated February 25, 2014. Accessed March 2, 2014.

2. Truven Health Analytics. The cost of having a baby in the United States. http:// www.catalyzepaymentreform.org/images/documents/Baby.pdf. Published January 2013. Accessed March 2, 2014.

3. Catalyst for Payment Reform. Using education, collaboration, and payment reform to reduce early elective deliveries: a case study of South Carolina’s birth outcomes initiative. http://www.catalyzepaymentreform.org/images/documents/ birthoutcomes.pdf. Published November 2013. Accessed March 1, 2014.

4. US Department of Health and Human Services. MICH-7.1: reduce cesarean births among low-risk women with no prior cesarean births. HealthyPeople 2020 website. http://healthypeople.gov/2020/topicsobjectives2020/TechSpecs.aspx?hp2020id= MICH-7.1. Accessed March 1, 2014.

5. Truven Health Analytics study identifies leading drivers of employer health benefits. Truven Health Analytics website. http://truvenhealth.com/news-and-events/ press-releases/july232013. Published July 23, 2013. Accessed March 1, 2014.