Bundled Payment

Negotiating Maternity Care Bundles

January 17, 2017 1:08 pm

“Some version of bundled payments is going to be the standard approach for low-risk maternity care,” says Sean Blackwell, MD, head of an OB/GYN group that implemented one of the nation’s first bundled payment pilots.

As his practice enters the second year of a bundled-payment pilot for maternity care, Sean C. Blackwell, MD, chair and professor in the Department of Obstetrics, Gynecology and Reproductive Sciences at McGovern Medical School at UTHealth in Houston, thinks he is glimpsing the future.

“Some version of bundled payments is going to be the standard approach for low-risk maternity care,” says Blackwell, who also serves as chief of service for obstetrics and gynecology at Children’s Memorial Hermann Hospital. “Whether or not it will be a successful approach is a different story, but with payment reform and value-based purchasing advancing, we need to be ready to compete with these new models.”

Members of Blackwell’s OB/GYN group deliver nearly 10,000 babies each year. Part of UT Physicians―an independent practice that includes more than 1,000 providers―the group is participating in a pilot with Community Health Choice (CHC), a Medicaid HMO that pays for about 50 percent of the births in the greater Houston area.

It is one of relatively few pilots experimenting with new ways to pay for maternity and newborn care. However, look for others to emerge soon as payers, providers, and purchasers seek to carry out the recommendations of the Health Care Payment Learning & Action Network (HCPLAN).  

The collaborative network of stakeholders is working to align payment approaches across and within the public and private sectors of the healthcare system. HCPLAN’s clinical episode payment work group believes maternity care, elective joint replacement, and coronary artery disease are the three best opportunities for episode-of-care, or bundled payments. It issued recommendations in Accelerating and Aligning Clinical Episode Payment Models , a white paper published last year by Mitre Corp.

Blackwell’s group agreed to participate in the CHC pilot, which started in 2015, to figure out how bundled payments could work for maternity and newborn care. Because the physicians had a good working relationship with CHC leaders, Blackwell and his colleagues felt the pilot offered a low-risk opportunity to start learning.

“In talking with other physician business leaders around Houston and with OB/GYN leaders across the United States, there are a lot of theories and concepts but right now no one has a track record,” he says. “It sure feels like the learning curve is just going to be tremendous—and I would like us to fail fast and get smarter.”

How the Pilot Works

The pilot uses a baseline budget for an episode of care based on two years of CHC claims for maternity/newborn care. Key parameters of the contract include the following.

  • A maternity care episode with three components: pregnancy, delivery, and newborn.
    • A pregnancy episode begins up to 270 days before delivery and ends at delivery.
    • The delivery episode starts three days before birth and ends 60 days after discharge.
    • The newborn episode begins at birth and runs through 30 days after discharge.
  • Upside-only shared savings for the provider in first year, with upside and downside risk in the second year.

See related tool: Contracting Parameters for Maternity Bundle Pilots

Insights from the Front Lines

The first year of the pilot offered several lessons about the complexity of paying for maternity/newborn care through episode-of-care payments, Blackwell says.

Definition of the bundle. The CHC pilot primarily included only physician-related services. “At face value, it was fine,” Blackwell says. “It’s the prenatal care, the delivery, and the postpartum care, which made sense.”

However, physician costs account for only 10 to 15 percent of the total costs associated with mother and baby care. Hospital costs must be included in the bundle to effect real change in care delivery and costs, he says. Also, pharmacy and laboratory testing, particularly genetic testing, should be included in the bundle. “You’ve got to find a way to manage those costs,” he says.

Data transparency. CHC developed its episode-of-care model by analyzing historical claims data. “Although administrative data is highly useful to study costs and utilization, it’s extremely different than clinical outcome data—which health plans generally don’t have access to—that is needed to measure quality and health outcomes,” Blackwell says.

Payers and providers will have to share data so each party can understand the other’s perspective, which will be key to creating a bundled-payment approach that works for both.

Value of data. Until this pilot, Blackwell and his colleagues had no way of knowing how the costs of their services compared to the costs of other components of maternal and newborn care.

“That was very revealing,” he says. “It is amazing the small amount of dollars that get allocated to doctors’ appointments in the office versus the amount of dollars that get allocated toward genetic tests, laboratory tests, or imaging.”

That information can be used to reconsider what constitutes value in maternal care. “When you think of all the good things that doctors, midwives, nutritionists, diabetes educators, and lactation consultants can do to improve outcomes, we have to redesign the care and the reimbursement model so those things are appropriately valued and people can invest in them,” he says.

Accountable entity. The physician practice, rather than the hospital, should be the accountable entity, in Blackwell’s view. “They are the ones making the decisions that are going to affect outcomes, as well as cost and quality, so you have to have the physicians to captain the ship here,” he says.

But the fact that physicians account for a small minority of total costs associated with maternity/newborn care makes it difficult to hold them accountable for the entire enterprise. “You have to have physician leadership and buy-in, but at the same time, physicians only represent 10 to 15 percent of the total cost,” Blackwell says. “And you can’t undercut their reimbursement and get their buy-in at the same time.”

What constitutes quality. “Negotiating about what measures are important and what measures are going to put you at financial risk is going to be the hardest part of negotiating with the health plan,” Blackwell says. “Something that they think may be very important may be incredibly unimportant to you.”

Health plans are unlikely to have in-house OB/GYN expertise to advise them on OB-specific measures. Thus, they may try to apply well-validated general quality measures to maternal and newborn care in ways that do not make sense from the obstetrician’s perspective.

For example, health plans typically like HEDIS measures, such as access to care. “I, as a physician, don’t have control as to when a woman first comes to see me, so how can that be a quality measure for physician care?” Blackwell says.

Similarly, CHC used vaccination rates for newborns as a quality measure for the pilot. While Blackwell understands the importance of that measure, it is not relevant to his work. “That pertains to the pediatrician, and then also, it is under the control of the patient” or, in this case, the baby’s parent, he says. “I think it’s important for a quality measure to be something that everybody agrees is important or it’s something that an OB/GYN physician can control.”

Alignment strategy. Most of the babies delivered by obstetricians in the UT Physicians practice are cared for by pediatricians and neonatologists that belong to the same group. Likewise, anesthesiologists from UT Physicians are part of the care teams for mothers and babies. But the bundled payment pilot did not necessarily resonate with those providers, because their services were not paid for as part of the bundle.

“I reached out to the pediatricians to tell them about the pilot and the measures that we were being evaluated on, but they didn’t necessarily have any skin in the game,” Blackwell says. “You’ve got to align across all the physician specialties that are going to touch a maternity bundle.”

Where the savings will be found. The biggest single opportunity: neonatal intensive care unit utilization (NICU). “The number of babies that go to the NICU, what level of NICU the baby goes to, and how long the baby spends in the NICU affects the cost of a maternity bundle the most,” he says.

Premature births are the primary reason babies go to the NICU. While OB/GYN physicians can positively impact outcomes by decreasing the frequency and severity of prematurity, there are tremendous cost-reduction opportunities at a NICU level that also need to be addressed with value-based purchasing, Blackwell says. “Given the nature of reimbursement for NICU care, especially in free-standing children’s hospitals, there is not an alignment needed for balancing cost and quality,” he says. “My hope is that value-based care, not just volume-based care, will also be applied to NICU reimbursements.”

Cesarean section rates are the second biggest cost driver, but the idea that physician behavior and practice alone can address the overutilization of cesarean deliveries oversimplifies the situation, Blackwell says. “There certainly is an opportunity to decrease unnecessary cesarean deliveries and therefore improve health and costs,” he says. “However, this phenomenon includes societal and patient expectations as well as the medico-legal industry.”

The need for a team. Blackwell’s team includes the practice’s chief financial officer and chief operating officer, as well as other clinical and administrative leaders. Small OB/GYN practices may be at a disadvantage in this area because they might not have the administrative infrastructure to negotiate and succeed in bundled-payment contracts. “A single person can’t drive this and be effective,” he says.

Data-collection costs. Health plans do not have the clinical data needed to assess outcomes and quality measurement; administrative data is inadequate for this purpose. In order for us to participate in this pilot, we had to collect and provide that data. Blackwell’s practice is devoting 2 FTEs just to data collection for the pilot. “You need to build that cost into any pilot,” he says.

Future Plans

Despite the many challenges, Blackwell thinks bundled payments for maternity and newborn care have a high probability of becoming the new reality, and physicians must learn to succeed in a new payment model. Iterative learning through pilot projects that offer little or no downside risk to physicians is a good way to get started.

Lola Butcher is a freelance writer and editor based in Missouri.

Interviewed for this article:

Sean C. Blackwell, MD, chair and professor, the Department of Obstetrics, Gynecology, and Reproductive Sciences, McGovern Medical School, UTHealth, and chief of service, Obstetrics & Gynecology, Children’s Memorial Hermann Hospital, Houston.


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