The Real Cost of Early Elective Deliveries

The Real Cost of Early Elective Deliveries


What if I told you that across the country there’s a procedure being performed on pregnant women that makes their newborns more likely to end up sick and in a $3,000-a-day Neonatal Intensive Care Unit (NICU)?

Too outrageous to believe?

It’s true.

Early elective delivery ‚ when labor is induced 3 to 4 weeks early without medical necessity , is on the rise in the U.S. According to a report released in January 2011 by the Leapfrog Group, between 1992 and 2003 the number of these births increased from 19% to 29%. Seven hospitals across the country perform these deliveries on 100% of women without medical necessity, and over thirty others perform them 50% of the time or more.

The American College of Obstetricians and Gynecologists (ACOG) has long recognized the risks associated with inducing labor when it is not medically needed. One retrospective study found that infants born at 37 weeks are nearly 23 times more likely to suffer severe respiratory distress than those born between 39 and 41 weeks. ACOG thinks this is unacceptable.

So why do hospitals do it? Experts see a few possible explanations:

  1. Obstetricians deliver but don’t care for newborns. They move quickly from birth to birth, and lack a complete understanding of the complications associated with early deliveries.
  2. Natural deliveries are difficult to anticipate. Nature can be fickle and tends to ignore the schedules of busy physicians. Patients may simply agree because they see little harm in early deliveries.

There’s yet another incentive worth pondering. It’s prefaced by a big green $, and followed by plenty of zeros. NICUs – where many pre-term babies end up – are highly profitable for hospitals. John Lantos, a former Chief of General Pediatrics at the University of Chicago, recently wrote in Health Affairs:

The NICU – which represented nearly 4 percent of total admissions [for the hospital] ‚Äì had generated 11 percent of the net revenue. Since most of the academic medical center’s divisions either barely broke even or lost money, that meant that a staggering 69 percent of the net profits of the entire hospital system came from the 4 percent of hospital admissions to the NICU.

In other words, healthy, full-term babies are not nearly as profitable as preemies. The average cost of caring for a premature baby is $41,610 versus just $2,830 for a full term baby. A clear line can be drawn between more early term births and more days spent (and dollars generated) in the NICU. Increasing the numbers of preterm births creates a perceived need for additional NICU beds, thereby increasing the need to fill those beds. A self perpetuating cycle quickly emerges.

Such a cycle can be broken, as illustrated by Intermountain Healthcare. This Utah and Idaho-based health system reported a 30% rate of early induced labor in 2001 before introducing a protocol that explicitly urged doctors to avoid performing early inductions unless medically necessary. At first, some obstetricians didn’t see a problem. Convincing them required bridging the‚ “information gap,” between what doctors thought they knew and the evidence-based reality. When presented with data from their own patient base ‚ which showed a lot of babies in distress ‚ obstetricians fundamentally changed their practice patterns.

By 2004, Intermountain’s rate of early elective deliveries had plummeted to 5%. They have since brought this rate even lower to 2%. A New York Times article on Dr. Brent James, the chief quality officer at Intermountain, noted that Intermountain’s protocol had reduced the number of babies who ended up in the NICU.

Maybe it’s time to start thinking about babies first and changing the way we pay for births. Simply put, as hospitals reduce their early elective deliveries, they’ll see reduced NICU profits. Intermountain is a capitated health system, so there is little incentive to provide unnecessary care. The fee-for-service model of most American medicine still encourages doing more, even when more medicine doesn’t translate to better health. Bundling payments for birth might be one way to discourage hospitals from performing early elective deliveries when they’re not medically necessary. Although bundled payments require risk adjusting to account for the mother’s health, they would serve as a check against doing more than what’s really needed. Early elective deliveries involve more care at a very great cost – a baby’s health.

(This post originally appeared on The New Health Dialogue,a blog from New America’s Health Policy Program.)

Vanessa Hurley is an analyst for New America’s Health Policy Program. She earned her bachelor’s degree in English from Dartmouth College. Ms. Hurley also holds a Master of Public Health degree from The Dartmouth Institute for Health Policy and Clinical Practice.

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26 Comments on "The Real Cost of Early Elective Deliveries"


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Oct 1, 2011

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Sep 1, 2011

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Great Article, And good information about the Early Elective Deliveries.
This is very dangerious the women and her child. Early elective delivery ‚ when labor is induced 3 to 4 weeks early without medical necessity . Your right,such a cycle can be broken, as illustrated by Intermountain Healthcare.
Thank to u, this is a really nice post…
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Apr 7, 2011

I just found out that a recent survey found that the leading reason (accounting for about 25% of early births) was caregiver concern that the mother was overdue. About 19% were medical inductions, another 19% were due to the mother’s desire “to get the pregnancy over with,” and the final one (17 percent) came from concern about the size of the baby.

Katherine Henderson Doula
Mar 22, 2011

As a woman living in an area with a high rate of induction without medical need, which, inevitably leads to cesaerean. I can say that, had I not been fully educated on the matter, I would have given in to the severe bullying I received from my OB’s office to induce 3 weeks early! I had the time, the energy and the passion to fully research this matter before I came to a decision. Unfortunately, many other women do not have those luxuries. The doctor says “I think we should induce” and the mother takes that as “Doctor’s orders” and not as “Doctor’s opinion”. It’s easy to pass the buck onto the patient but doctors don’t do much to make it well understood that a patent’s decisions are a patient’s own responsibility. That is very dangerous ground to tread in litigious times such as these. One would think a doctor would stress their role as more for the purposes of advisement, rather than authority. A strong understanding of patient responsibility would do so much to cut lawsuits off at the pass.

Mar 22, 2011

I got the impression that the author was not saying women are being induced early in order to fill NICU beds. I read her as saying the money generated by a full NICU gives hospitals little incentive to encourage their OBs to stop inducing early with no medical necessity. As in, it isn’t a nefarious plot, just a vicious (profitable) cycle.

Mar 22, 2011

Well put Paige, I think you have hit the nail on the head. Although I doubt there is indeed a ‘nefarious’ plot at work, the ridiculous profit that NICUs bring into hospitals certainly acts as a disincentive for change!

Cheryl Kohout
Mar 21, 2011

You have a whopping logical fallacy in play as you attempt to paint a nefarious picture of NICU administrators:

You say “Obstetricians deliver but don’t care for newborns.” Fine, they are just trying to schedule their day.

But then you posit that as a profit center, hospitals need to fill NICU beds. Well, how does that happen if OBs deliver but don’t care for newborns?

Mar 21, 2011

I know that a lot of OBs like their patients to fit into their schedule, but I really hope they aren’t THIS stupid and selfish! I sincerely hope that not one person who cares for pregnant women is so dumb that they don’t know delivering a baby early for no good reason can do more harm than good. If they do, they should have their medical licences revoked!

Danielle Irizarry
Mar 20, 2011

As a midwife that has worked with an extremely high risk population of women in NYC, I can echo the sentiments of many of the other professionals on this thread in saying that early inductions (what I refer to with my patients as “social inductions”) have ABSOLUTELY nothing to do with peds/NICU.

All those on this thread who work L&D can actually affirm that we do our damnedest to avoid dealing with peds at every cost. The number one thing I strive for with every patient that I manage antepartally & intrapartally is to have a healthy mother and baby.

I do appreciate the author of the article pointing out the connection between social inductions & increase NICU admissions. That’s a discussion that I feel needs some attention in this country, with the rising c-section rate & the goal of reducing the primary c-section rate, as discussed by the NIH Consensus Guidelines on VBAC. What I don’t appreciate is the insinuation that OB/Gyn providers increase their social induction rate in order to generate NICU dollars.

OB/Gyn providers increase their social induction rates because of the excessive malpractice premiums in this country. Let’s have THAT discussion–because I feel it’s the elephant in the room. OB/Gyn providers (Docs and midwives included–which this article didn’t include. Thanks), in order to generate enough reimbursements find themselves increasing their scheduled procedures procedures (inductions, OR cases for the MDs) so they may have more time in the office seeing more patients. For some providers, this helps generate more & create a more livable lifestyle. Is this right? Or fair? Reasonable? Of course not.

However, is it fair that the litigious nature of our society has been governing the way we practice ? And is it fair that providers who have years of experience have to close their obstetrical practices because they can’t afford malpractice premiums? No.

So- before we label OB/Gyn’s as the bad guys, let’s look at the whole picture and the huge umbrella of malpractice & low reimbursement rates by health insurances that we are all standing under.

And one more point that the article didn’t address: utilization of midwifery care in the reduction of NICU admissions. Midwifery care is statistically proven to lower medical intervention, hence lowering NICU admissions. It is also statistically proven to be more cost effective. Many other developed nations with largely better neonatal M&M utilize midwifery care for healthy, low risk women & leave the complicated stuff to the OB/Gyn docs. That’s something that needs some attention in this society, where healthcare reform & the cost of healthcare are major issues for the future of this country.

Jason Talenter
Mar 19, 2011

While hospitals may make more money for NICU deliveries, there’s no way that the hospital is going to the OBs and telling them to deliver early so they can make more money. Nor do the NICU doctors talk to the OBs.

The decision for elective/early deliveries is 100% the responsibility of the pregnant mother an the OB/GYN doctor or midwife. The hospital and the NICU have absolutely nothing to do with it.

These are shoking allegations and you’d better have some ammo to back it up when you make these kinds of outrageous claims.

The reason elective early deliveries are too common is because OB/GYN docs and mothers like a set schedule and dont want nature’s uncertainty to interfere. Thats the ONLY reason this happens.

Feb 11, 2011

One thing that needs clarification is that Intermountain Healthcare is not a capitated health system.

Feb 11, 2011

its some crazy term I found on an old insurance policy from the 40s, old people sure use to talk funny

Tom Leith
Feb 11, 2011

What’s that Nate? A “medical necessity” standard in MEDICAL INSURANCE? That’s just crazy talk.

Feb 11, 2011

to resolve James’ issue and quickly put an end to it how would everyone feel if Insurance companies denied any delivery charges that were induced early without medical necessity? This would keep all hospitals on an even playing field preventing doctors from shoping facility and wouldn’t require any changes to contracts, reimbursement methods, or anything else. This could be rolled out and effective next monday.
The only thing it would require is the media and politicians not turning around and blasting insurance companies for doing it.
Easy problem with a very easy fix as long as people agree it is the thing to do.