Value Based Payment

Analysis: How a union’s plan could foreshadow changes in maternity care nationwide

August 28, 2019 9:49 pm

The Wall Street Journal recently reported that the health fund of Local 32BJ of the Service Employees International Union (SEIU) will request that area hospital systems provide information on rates of maternal harm and apply that information to a newly created program promising higher-quality, higher-value care.

“The union is self-insured through an independent fund, which fully pays and has access to all claims for its 200,000 plan participants, who work in the city’s service sector as cleaners, property maintenance workers, security officers and more,” said the Journal article. “Hospitals selected to participate in the health fund’s network would commit to better health outcomes for mothers, including lowering the number of women who have unnecessary Caesarean births, episiotomies or suffer other short- or long-term consequences after birth. In turn, hospitals would be advertised by the fund to its members. Eventually, the plan includes entering into direct contracts with facilities for a bundled rate for labor and delivery services.

Union officials hope their plan could serve as a model for other employers that provide insurance. 32BJ’s health fund pays for roughly 1,300 births a year, costing almost $23 million.”

The article also reported that the fund’s analysts said the claim data showed the following:

  • The cost of a vaginal delivery in 2017 at New York City hospitals ranged from $10,549 to $30,105 for participants.
  • Birth by Caesarean delivery for the same period and region ranged in cost from $16,073 to $40,118.
  • Health outcomes from the births varied. A severe maternal morbidity rate for participants was in line with averages for all of New York City.
  • The episiotomy rate for health fund participants was greater than 25%, roughly double the statewide rate. According to a widely used target rate, an episiotomy should only occur in 5% of births.
  • According to 2017 data from the Centers for Disease Control and Prevention, the C-section delivery rate in the United States is 32%; in New York state it is 34.1%; and in New York City the rate is 33.7%.
  • The C-section rate for 32BJ Health Fund participants is 41% in New York.


It’s not surprising that a large union health plan would take steps to address obstetrics spend for labor and delivery. In a 2016 white paper, the Health Care Payment Learning & Action Network (CP-LAN) identified maternity care as one of its top three priorities – along with elective joint replacement surgery and coronary artery disease.

What’s surprising is that more employers (and for that matter state Medicaid plans) haven’t already done this, given the associated costs.

“Maternal and newborn stays account for more than 20% of all hospital stays, making childbirth the most common reason for hospitalization in the United States,” according to a 2018 Managed Care article.

“Pregnancy, labor, and birth account for seven of the top 20 most expensive hospitalized conditions and account for 15% of all costs for commercial insurers,” the article said. Where it’s occurred thus far, changing the payment model for maternity care has been effective.” The article also noted:

  • Horizon Blue Cross of New Jersey has seen elective C-section rates fall by one-third for the 300 providers participating in its program.
  • “In South Carolina, Medicaid early elective deliveries dropped from nearly 10% of births to less than 3% in the four years after the program and Blue Cross Blue Shield of South Carolina stopped paying for elective inductions and C-sections before 39 weeks’ gestation,” according to a 2016 Health Affairs blog post.

I expect to see more employers follow the lead of Local 32BJ’s and state Medicaid programs to implement both episodic payment models for pregnancy and non-payment for elective, pre-term C-sections. As these payment models become the norm, it will shift services from higher-reimbursing C-sections to lower paying normal deliveries. While this will reduce revenue, it will also reduce length of stay, free up surgical suites and decrease NICU utilization.


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