Innovative Medicaid Payment Program for Pregnancy, Delivery, and Newborn Care Yields Important Lessons

Innovative Medicaid Payment Program for Pregnancy, Delivery, and Newborn Care Yields Important Lessons

Findings from Texas pilot published in NEJM Catalyst

NEWTOWN, CT – October 18, 2016 – Year one of an ongoing pilot program in Texas takes an innovative approach to paying for and evaluating Medicaid births: it unifies pregnancy, delivery, and newborn care into one episode with one budget, instead of treating them as separate experiences. This may seem intuitive, especially for anyone who has experienced pregnancy, childbirth, and newborn care. But in American health care, it is far more common to pay for these services separately, and measure their quality independently.

Budgeting all three segments of care together encourages coordination among providers, and rewards clinicians for delivering care in one segment, for example prenatal care, that yields savings and produces strong outcomes in another segment. Lessons from the Texas pilot, published today in NEJM Catalyst, can help other states design their own bundled payment programs for maternity episodes.

Raising quality and lowering costs for births are important goals for any state, as Medicaid pays for roughly 50 percent of all U.S. births. Harm to mother and child from unwarranted C-sections, premature births, and other causes of low birth weight have long-term consequences for these patients and society at large.

These were the motivations for Community Health Choice (CHC)—a nonprofit Medicaid HMO that provides care for 50 percent of the infant births in Greater Houston—to design, implement, and measure a maternity-care bundled-payment pilot program.

“Like the rest of the health care sector, we know that paying for uncoordinated services based on volume isn’t the way to bring quality and affordability to the system,” says Karen Love, CHC’s senior vice president for strategic planning and partnerships. “That’s why we instituted the maternity bundles pilot, and we’re getting strong results we can build on for continuing success.”

Important lessons learned from the case study include:

• Linking the data and records of mothers and babies is essential. CHC linked a mother’s member ID and her newborn’s ID so that episode costs could be tracked, but many states do not.

• Creating the expected delivery costs by blending C-section and vaginal-delivery costs (weighted by historical C-section rates) ensures that C-section deliveries always exceed the budget and vaginal deliveries do not. This creates an explicit potential incentive to reduce unwarranted C-sections.

• Tracking quality in scorecards requires thoughtful engagement with the providers. Even though most of quality measures collected for the pilot were common to both providers, the scorecard categories had to be adjusted to accommodate data-extraction capabilities.

Year one of the pilot did not produce substantial savings, mostly because the participating health systems were not required to bear a financial penalty when they went over budget. That’s expected to change in the pilot’s second year and beyond, when downside risk will be introduced. The authors of the case study describe stop-loss caps that, once downside risk is involved, will limit the effect of very high-cost cases that often are beyond the control of physicians and hospitals.

The case study is A Process for Structuring Bundled Payments in Maternity Care. It is available online at

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Media Contact:
Cary Conway