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.

Published: December 08, 2010

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