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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