146147Cost Outcomes and Finances of Freestanding Birth Centers

VICTORIA G. WOO AND NEEL T. SHAH

LEARNING OBJECTIVES

Upon completion of this chapter, the reader will be able to:

1.  List elements of birth center care that contribute to lower cost care for low-risk women

2.  Describe challenges birth centers and birth center clients face with insurance coverage and negotiations

3.  Discuss long-term cost savings due to improved health measures and reduced societal costs associated with birth center care

Approximately 98% of the nearly 4 million births a year (Martin, Hamilton, Osterman, Driscoll, & Matthews, 2017) occur in the hospital (MacDorman, Declercq, & Matthews, 2013). In fact, childbirth is among the most common reasons for hospitalization in the United States (Moore, Witt, & Elixhauser, 2014). Hospitalization is costly. One night in the hospital can cost more than an entire week at a luxury hotel. As a result, health care delivery reform efforts have focused on ensuring that healthy patients have access to health care services in alternative settings. For childbirth, birth centers can provide a high-quality and affordable solution for well-selected patients.

Although the cumulative cost of hospital birth is very hard to quantify, Truven Health Analytics Marketscan Survey (2013) examined average payment for a maternal and neonatal birth episode for both Medicaid and commercial payers. For an uncomplicated, normal vaginal delivery, the average payment covering facility and professional fees for a commercially insured 148mother was $18,329, whereas the average payment for a Medicaid-insured mother was $9,131 (Truven Health Analytics Marketscan Survey, 2013). The facility fee, or hospital fee, comprised almost 60% of payments.

Hospital facility fees tend to be high due to the high overhead that hospitals carry, and can range from $1,189 to $11,986 (Xu et al., 2015). This overhead may include the cost of maintaining expensive imaging equipment, operating rooms, and blood banks, all of which are often passed on to the patient or payer whether they use these services or not. For childbirth, high staffing ratios (often approaching similar nurse-to-patient ratios as the intensive care unit) lead to even greater costs.

In many parts of the country, expensive facility fees may present a barrier to accessing care. Because hospital labor and delivery units are so costly to operate, many rural hospitals have stopped offering maternity services (Andrews, 2016). In broad swaths of the United States, it is not uncommon for pregnant women to travel for several hours to receive care. In fact, 50% of U.S. counties currently do not even have a qualified provider (including obstetricians, midwives, and family practice physicians who attend births; Salamon, 2012).

At the time of this writing, the United States spends more than $3 trillion on health care annually, which amounts to nearly one out of every five dollars spent in the economy (California HealthCare Foundation, 2014). Despite spending considerably more than other peer countries, we rank last in the Organization for Economic Cooperation and Development on key health indicators, including maternal mortality. The goal of improving our health care system can be summarized by the “triple aim”: (a) improving the individual experience of care, (b) improving the health of populations, and (c) reducing the per capita costs of care for populations (Berwick, Nolan, & Whittington, 2008). Many believe that birth centers may provide a unique opportunity to achieve the triple aim in maternity care.

BIRTH CENTERS AS A LOWER COST ALTERNATIVE

Freestanding birth centers are an attractive solution for delivering care to the plurality of low-risk mothers at a substantially lower cost. These potential savings can be attributed to four factors: (a) difference in facility costs (leading to differences in payments per birth episode); (b) difference in staffing; (c) differences in intervention rates, especially in the case of cesarean births; and (d) differences in patient population.

Lower Cost for Birth Episode

149Approximately 45% of births in the United States are paid for by Medicaid. Due to higher facility costs, Medicaid reimbursement for a normal spontaneous vaginal delivery in a hospital is almost twice the rate reimbursed to a birth center ($3,998 versus $1,907 on average in 2009; Rohde & Machlin, 2012; Stapleton, Osborne, & Illuzzi, 2013). One prospective cohort study examined births in 79 midwifery-led birth centers and calculated a savings to state Medicaid programs of $27.25 million in facility fee payments for their 13,030 cumulative births compared with hospital births (Stapleton, Osborne, & Illuzzi, 2013). Others have more conservatively calculated that birth centers are able to achieve at least a 16% reduction in costs for every woman cared for at a birth center when compared with “usual care” (Howell, Palmer, Benatar, & Garrett, 2014). This translates to a potential savings of $11.64 million for every 10,000 births for women insured by Medicaid. When private payments are taken into account, the differences remain equally stark. Even with transfer rates of up to 62% from birth centers to hospitals, planned hospital births were still more costly (Stone & Walker, 1995). A formal cost-effectiveness analysis that took hospital transfers and potential complications into account validated the claim that birth centers may provide both higher quality and more affordable care for low-risk women (Henderson & Petrou, 2008).

Difference in Staffing

Birth centers and hospital labor and delivery units are staffed very differently. Staff on labor and delivery units care for a much broader range of women than those at birth centers. Birth centers are an option for healthy low-risk women, whereas labor and delivery units must accommodate all comers. Labor and delivery units also maintain the capacity to perform emergency surgery, and, in some cases, manage multiple obstetric emergencies simultaneously. Although all labor and delivery units are required to have anesthesiologists either in the hospital or within close range of the hospital, birth centers are not (the average salary of an anesthesiologist was $258,100 in May 2015 according to the U.S. Bureau of Labor Statistics [2016a]; see Table 6.1).

Nursing requirements also differ between the two facilities as a result of their differences in scope and capacity. On the hospital labor and delivery suite, nurses staff the unit 24 hours a day, and most hospitals require a minimum number of nurses to be present, regardless of volume, to be able to assist in case of an emergency. Many birth centers, on the other hand, 150call in staff when a woman is in labor and being admitted to the center. A prevalent model at many birth centers is to have a midwife present through most of labor, and then, once delivery is close, the nurse is called to come in from home to assist. The nurse is then responsible for postpartum care until the woman is ready to be discharged, typically 6 to 8 hours after the birth. Because of the smaller patient volumes, and difference in minimum number of nurses required to be on the unit at all times, birth centers have a smaller nursing staff compared with hospital units (the national salary for a registered nurse in 2015, according to the U.S. Bureau of Labor Statistics [2016b], is $71,000; see Table 6.1).

The vast majority of women in the United States receive their prenatal care from an obstetrician, and give birth with an obstetrician in a hospital. In 2013, medical doctors attended 85.4% of all hospital births (Curtin, Gregory, Korst, & Uddin, 2015). Birth centers are primarily midwife led. The average salary of an obstetrician in the United States in 2015 was $222,400 (U.S. Bureau of Labor Statistics, 2016c), whereas the average salary of a nurse-midwife in 2015 was $93,610 (U.S. Bureau of Labor Statistics, 2016d; see Table 6.1). Thus, birth centers that only employ midwives and nurses as medical staff have a significant savings in cost in provider salaries.

The role of obstetricians in birth centers tends to vary by state. Some states require birth centers to have a medical director with a medical license; others do not require an MD to be involved. A birth center may even be fully staffed by obstetricians, although this is largely uncommon. For example, the University of Kansas at Wichita offers a birth center that is a physically separate building from labor and delivery, but is staffed by physicians onsite. The birth center building is connected to the hospital via an underground tunnel. The physicians include obstetric and gynecology residents at the university, family medicine residents, university-employed attending 151obstetricians and gynecologists, and private practice obstetricians (O’Hara et al., 2013). This birth center is considered a unit of the hospital, therefore the providers that are employees of the hospital are paid through their agreements with the hospital.

Differences in Cesarean Rate

The average cesarean rate in the United States was 32% in 2015, with a 25.8% cesarean rate for low risk first-time mothers (nulliparous, term, singleton, vertex; Martin et al., 2017) and a 21.8% primary cesarean rate (National Center for Health Statistics, 2015). Women who initiate care at birth centers are less likely to undergo a cesarean compared with women who initiate care at hospitals; one study of almost 50,000 women showed that women who delivered in the birth center were significantly less likely to deliver via cesarean compared with women who delivered at the hospital (OR = 0.59; p < .01; Benatar, Garrett, Howell, & Palmer, 2013). One reason for this is that only very low-risk women who are committed to achieving a vaginal birth deliver in birth centers. Patients who require cesareans or are at an increased risk for having a cesarean typically have planned deliveries in the hospital. Additional research could help further elucidate the reasons women choosing birth center care have fewer cesareans. The care model, the care providers, and the environment may have an effect.

A number of observational studies have demonstrated twofold to threefold lower cesarean rates for low-risk women who intend to deliver at birth centers (O’Hara et al., 2013). These differences persist even when the type of provider is taken into account. A study from Canada found that midwives in out-of-hospital settings have lower cesarean rates (7.2%) compared with midwives in the hospital (10.5%) when taking care of similar low-risk populations (Janssen et al., 2009).

These differences in rates of surgery have significant implications for the costs of birth centers. A 2013 study on behalf of the American Association of Birth Centers (AABC) looked at the potential cost savings birth centers could offer, taking into account the effect of intervention rates. The authors reported that, given the increased payments for facility services for cesarean birth compared with vaginal birth in the hospital, the lower cesarean birth rate potentially saved an additional $4.49 million (several others have arrived at similar estimates; Dekker, 2013). A study by Howell et al. (2014) specifically examined cost savings within the Medicaid population. They found that for a matched group of similar patients, the difference in cesarean rates in birth centers compared with 152hospitals saved Medicaid about $244 per patient, or $2.44 million per 10,000 Medicaid births (Howell et al., 2014).

In addition to a lower cesarean rate, birth centers tend to use other costly interventions less frequently, particularly with regard to anesthesia and analgesia. Use of epidurals and narcotic analgesia in birth centers is uncommon. Instead, nonpharmacological forms of pain control such as walking, massage, water immersion, and using birthing balls are more typical. Some birth centers do offer nitrous oxide (N₂O), which is a self-administered blend of 50% N₂O and 50% oxygen, a tasteless and odorless gas, which is more commonly used as a labor analgesic in other countries (Collins, Starr, Bishop, & Baysinger, 2012). A basic Nitronox nitrous oxide system costs about $5,000 (Boschert, 2013) for the equipment to the facility and lasts about 15 years. N₂O and oxygen are purchased separately from a local medical gas supplier, relatively inexpensively. Although each patient uses the gas differently (e.g., different durations of use, or different size inhalations), it is estimated that the cost is about $5 to $10 per patient. Additional consumables such as breathing circuits or masks could add another $15 to $20 to the total cost of care for the patient. Finally, the use of N₂O within birth centers tends to depend on the scope of practice in the state or municipality. Some areas require an order from an MD to administer the gas, whereas others do not have that requirement, influencing the feasibility of using N₂O in this setting (Mike Civitello, Sales Manager, Porter Instruments, personal communication, March 31, 2016).

Difference in Patient Population

Birth centers serve low-risk clients, whose need for specialists and specialist services are minimal. As a result, birth centers strive to provide care for women who will deliver term, normal weight infants. Among women who obtain prenatal care at birth centers, preterm birth is less common (11% in usual care, compared with 7.9% in birth centers; Howell et al., 2014). Average birth weight also tends to be higher at birth centers, although this contributes a small portion of the cost difference when viewed independently from staffing and intervention rates.

LONG-TERM COST SAVINGS AND HEALTH IMPROVEMENTS PROMOTED BY BIRTH CENTERS

By promoting normal vaginal birth for low-risk women, birth centers may also present long-term cost savings. Vaginal births are associated with 153decreased maternal risks in subsequent pregnancies compared with cesareans. Women are more likely to have subsequent vaginal births after an initial vaginal birth. This fact contrasts sharply with the fact that almost 90% of women who have an initial cesarean go on to have a subsequent cesarean in a later pregnancy in the United States (Curtin et al., 2015). Furthermore, subsequent cesareans are associated with a higher likelihood of serious, morbid, and costly medical complications, including placenta accreta, hysterectomy, and uterine rupture (Curtin et al., 2015).

Shorter recovery periods after low-intervention vaginal birth may also have an impact on economic productivity. Compared with normal vaginal births, women who have cesareans report more exhaustion, lack of sleep, and bowel problems; in addition, they are more likely to be readmitted to the hospital within 8 weeks of the birth (Thompson, Roberts, Currie, & Ellwood, 2002). Savings are realized by the health care system when there are lower readmission rates and fewer visits for postsurgery problems or complications. Additional savings are realized by society because the faster recovery time allows women to be able to care for themselves and their children sooner following vaginal births. A vaginal birth may also allow either the women themselves or their family members to take less time off of work.

High intervention or cesarean births may also have cost implications for the neonate. Even in full-term infants, cesareans may pose risks of increased likelihood of respiratory distress and breastfeeding complications (Neu & Rushing, 2011). There is also some association between mode of delivery and development of childhood disease, particularly asthma, allergic rhinitis, celiac disease, diabetes mellitus, and gastroenteritis (Neu & Rushing, 2011). The hypothesis is that there could be some sort of causal relationship between cesarean delivery, shift of microbiota in the neonate, and childhood disease state, although it is not yet well understood. Nonetheless, childhood asthma is one of the top five most costly children’s diseases in the United States each year (Soni, 2014).

Birth centers also place a high emphasis on breastfeeding, which has been shown to have numerous benefits for mother and baby. A report assessing breastfeeding practices in the United States was published in June 2008 by the Centers for Disease Control and Prevention (CDC). Researchers sent surveys to both birth centers and hospitals asking about breastfeeding practices. The response rate was high for both parties (greater than 80% for both), and researchers assigned each facility a score from 0 to 100, with 100 representing the most favorable practices toward breastfeeding. When researchers compared mean total score, birth centers scored 86, whereas hospitals scored a 62, indicating that birth centers appeared 154to be doing a much better job at promoting breastfeeding (National Center for Chronic Disease Prevention and Health Promotion, 2014).

The higher breastfeeding rate that birth centers support may also have long-term cost implications. Using breast milk substitutes has been associated with higher rates of childhood diseases, including gastrointestinal infection, lower respiratory tract infections, acute otitis media in infants, and necrotizing enterocolitis in preterm infants (Pokhrel et al., 2015). Nonetheless, it is unclear whether increased breastfeeding in low-risk women would reduce the burden of disease, and any potential savings are challenging to quantify. An economic analysis from the United Kingdom suggests that programs that support exclusive breastfeeding may result in net savings by reducing the incidence of associated childhood diseases (Pokhrel et al., 2015).

FINANCIAL BARRIERS AND CHALLENGES AT BIRTH CENTERS

Despite their empirically demonstrated value, new birth centers face significant initial hurdles in surmounting the initial start-up costs. Initial start-up costs can be thought of in three broad categories: (a) physical/structural costs (fixed costs); (b) accreditation and licensing costs; and (c) staffing costs, which have been discussed in more detail in the previous paragraphs (see Chapter 13).

The physical/structural costs for birth centers range widely depending on the birth center. Some owners choose to build their own structure, whereas others renovate an already existing building. Additional fixed costs include large equipment (showers, beds, and so forth). These numbers differ vastly across the country, and can be challenging to obtain. For this chapter, we spoke to the founder of the Minnesota Birth Center (MBC), Steve Calvin, MD, and his administrative director, Tricia Balazovic, who estimated that it costs them about $500,000 per room in terms of physical start-up costs. Typical start-up costs for birth centers from the group of birth center owners we spoke to appeared to range from slightly under $1 million to almost $2 million, depending on the size and location of the birth center.

Another start-up cost is incurred with the decision to seek accreditation. The Commission for the Accreditation of Birth Centers (CABC) is a national accreditation body specifically focused on birth centers (see Chapter 8). It sets forth a set of specific safety and practice requirements that must be met in order to achieve accreditation. Birth centers apply for accreditation every 3 years, after initial accreditation. The cost 155is approximately $4,000 in fees for every accreditation cycle, and the operational costs of compliance are challenging to quantify. There is also the option to receive accreditation through The Joint Commission or the Accreditation Association for Ambulatory Health Care. Accreditation under these bodies is for accreditation as an ambulatory center, and is not specific to being a freestanding birth center. Some states offer licensure as well through the Department of Public Health, which certifies that the birth center is meeting a certain standard of safety codes. The California Department of Public Health offers licensure to birth centers, deemed “alternative birthing centers.” Their fee per year in 2014 was listed as $2,380.19 (California Department of Public Health, 2016). Accreditation and licensure requirements vary by state. Some states require both, some require just one, and some require neither. In Minnesota, for example, birth centers are required to be accredited in order to be licensed.

After initial start-up costs are paid for, birth centers must also turn their attention to volume, which plays an important role in whether birth centers are able to create an operating margin, and ultimately provide societal cost savings. A study by Stone, Zwanziger, Hinton-Walker, and Buenting (2000) examined the importance of economies of scale and found that volume played a significant role in whether birth centers were cost-effective in delivering full prenatal care to low-risk pregnant women, compared with prenatal care provided by a traditional medical model. Sixty-nine subjects were enrolled in a freestanding birth center group and 77 subjects were in the traditional medical center group. In the freestanding birth center group, prenatal costs were higher (mean difference $751; p < .001), whereas the costs for the birth itself were less expensive ($1,472; p < .01). When costs for the entire maternity care episode were totaled, there were no significant differences between groups ($6,087 versus $6,803). Sensitivity analysis demonstrated that the freestanding birth center group could be more cost effective than the traditional medical center group if it increased its volume (Stone et al., 2000). Birth center providers spent notably more time with each patient than the providers in the traditional medical care model, and thus saw substantially fewer women in a given time period.

Once operating at scale, birth centers are often challenged by the need to coordinate with higher acuity facilities. Birth centers plan for a certain number of women to be transferred to the hospital, which is an anticipated and expected part of the business (Stapleton et al., 2013). Birth is not predictable. According to Dr. Calvin, his center plans for about 15% of patients to require some kind of hospital-based intervention to give birth and require transfer. First-time mothers are much more likely to require 156transfer than mothers who have had previous successful vaginal births. In a study from the United Kingdom comparing outcomes for women who delivered in the hospital compared with women who planned out-of-hospital births, 45% of British first-time mothers who intended to give birth at home ultimately were transferred to a hospital obstetrical unit during the course of labor (Birthplace in England Collaborative Group, 2011). If the transfer rate is high, the result is lost revenue for birth centers and can be costly. As Dr. Calvin explains, there are multiple scenarios for billing and insurance reimbursement in this model. The providers are reimbursed for their professional fees via a “maternity global fee,” or a lump payment from insurance companies that provides payment for prenatal care, delivery care, and postpartum care. When a birth takes place at the birth center, there is also a facility fee. Newborn charges are also billed for both professional and facility fees.

If clients risk out of a birth center birth during the antepartum period, they will be directly admitted to the hospital for labor; if the nurse-midwife attends the birth, the “maternity global fee” is still applicable; however, the birth center is no longer able to bill for the facility and newborn fees. If patients are transferred from the birth center to the hospital during the intrapartum period, a reduced facility fee rate is assessed. In the event that the nurse-midwife transfers care to an obstetrician in either the antepartum or intrapartum period, the “maternity global fee” is broken. The birth center then receives some reimbursement for the prenatal care provided, but the fee for delivery goes to the provider that attends the birth. Thus, both parties end up making less money than if one of them had covered the whole pregnancy experience for that patient (the birth center may receive a fraction of the facility fee for the portion of time the patient labored there). Like all childbirth facilities, birth centers may face financial disincentives to transfer. Birth centers that are integrated within a hospital delivery system may not face this disincentive.

HOW BIRTH CENTERS ARE CURRENTLY FINANCED

Given the substantial cost of having a baby, the majority of patients prefer to deliver in a venue where their insurance is accepted. Thus, in order for birth centers to attract customers, they need to negotiate with insurers for reimbursements. Currently, these negotiations end up occurring on a center-by-center basis with rates differing by insurance plan, state, and birth center. Actual rates of reimbursement are considered proprietary 157information and therefore challenging to obtain. However, negotiating a rate that allows for financial solvency is key for freestanding birth centers to be able to remain in business, and many birth centers have successfully negotiated with private payers. Cara Osborne, SD, CNM, the founder of the birth center chain, Baby + Co, believes that this necessitates negotiating with the leadership of the insurance company to help them see the overall value of birth centers as potential cost savers as opposed to negotiating with the individual sales representatives, whose goal is to negotiate the lowest possible rate. Dr. Calvin of the MBC also reported that these negotiations are supported by making a strong clinical case as to why freestanding birth center births actually save insurance companies money. He shares evidence that birth centers maximize the likelihood of a normal spontaneous vaginal birth for the patient using a low intervention approach, resulting in cost savings for insurance companies. If insurance companies can see birth centers as an asset to their business to help decrease overall expenses associated with birth, he believes they can be convinced to reimburse at a rate that allows the birth center to be sustainable.

Medicaid

Almost 50% of births in the United States are covered by Medicaid (Howell et al., 2014). Negotiating reimbursement rates with Medicaid to cover births in birth centers expands access for women interested in delivering in birth centers. Prior to the introduction of the Affordable Care Act (ACA) in 2010, there was not a unified approach to reimbursing freestanding birth centers. Section 2301 of the ACA provided a definition for a freestanding birth center and required states to provide separate payments to providers who provide prenatal care, labor and delivery, and postpartum care in these centers. The law allowed a grace period for states needing to enact legislation to implement the requirements, but was in effect immediately. Because the reimbursement rate is at the state level, funding differs widely by state. It is uncertain how possible changes to the ACA will affect birth centers. Some states pay a facility fee for services rendered in the birth centers; others only pay for professional services provided. Certified professional midwives (CPMs) are reimbursed as birth attendants in some states; others only pay for births attended by certified nurse-midwives (CNMs). Differences also exist in whether prenatal care provided at the centers is reimbursed, or if payment is limited to labor and birth care. Reimbursement policy varies as well. The Kaiser Family Foundation has a comprehensive website, which summarizes benefits, 158coverage, and reimbursement methodology by state for freestanding birth centers, and demonstrates the wide variation across states (see their website: http://kff.org/other/state-indicator/medicaid-benefits-freestanding-birth-center-services/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D). As the website notes, some states establish global payment rates for services or a fee schedule and pay on a fee-for-service basis; other states pay based on a percentage of the rate for the same service in a hospital setting.

The wide range in reimbursement rates by state has impacted birth centers’ ability to accept Medicaid-reimbursed patients. For many centers, their state reimbursement rate is so low that accepting women insured under Medicaid is not economically feasible, thereby limiting access to many women who might otherwise be eligible for birth center care. However, some states (such as Minnesota) have a higher reimbursement rate, allowing centers to more feasibly accept patients insured by Medicaid. At the MBC, the vast gap between commercial and public program reimbursement rates led staff to initially limit the Medicaid-to-private patient ratio in the first 18 months of operations. Once the center became profitable, it was able to expand the number of patients who were insured under Medicaid.

The Midwife Center for Birth and Women’s Health in Pittsburgh, Pennsylvania, had a slightly different approach. Christine Haas, CNM, the executive director of the center, explained:

Stay updated, free articles. Join our Telegram channel

Join