A handful of insurersand state Medicaid programs are experimenting with bundled paymentand similar models, sometimes incorporating hospitals and otherhealth providers as well. (Photo: Shutterstock)

The thrill of delivering newborns helped pull Dr. Jack Feltzinto the field of obstetrics and gynecology.

More than 30 years later, he still enjoys treating patients, hesaid. But now, Feltz is also working to change the way doctors arepaid for maternity care.

Feltz's New Jersey-based practice, Lifeline Medical Associates,recently partnered with the insurer UnitedHealthcare to test a newpayment model. The insurer sets a budget with the practice to paydoctors one lump sum for prenatal services, delivery and 60 days ofcare afterward. If the costs come in below that amount, the medicalpractice gets to keep some of the savings. (Hospitals aren't a partof this contract; the insurer pays them separately for theirservices.)

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"We've always been taught to take care of patients as if theywere our mothers and our daughters," said Feltz, who also leads acoalition of obstetricians called the U.S. Women's Health Alliancethat advocates for high-quality, affordable care. "But now we haveto take care of our patients as if they were our mothers and ourdaughters, and as if it was our money."

This new program, announced in May, is a first step by theinsurer to bundle physician payments for maternity care into asingle flat fee that covers all care and procedures. A handful ofinsurers and state Medicaid programs are experimenting with similarmodels, sometimes incorporating hospitals and other healthproviders as well.

By moving from paying for maternity care in a piecemeal way torelying on bundled payments, insurers and doctors say they hope tocut costs and improve the quality of care for pregnant women. Thelump sums are also seen by doctors and insurers as a possible wayto improve outcomes, including driving down the number of cesareansections in the United States.

About one-third of all deliveries in the U.S. occur throughC-sections, even though the World Health Organization estimatesthey are medically required in only 10 percent to15 percent of births. The ratevaries dramatically among individual hospitals.

These surgeries can increase the risk of infections or othermedical problems for the mother and baby. And they are moreexpensive than a vaginal delivery.

"The way we've been doing things is just not justifiable," saidDavid Lansky, a senior adviser at the Pacific Business Group onHealth, a San Francisco-based coalition of private andpublic organizations that collectively purchase health care for 10million Americans. "The shift we're talking about is to say someoneis accountable for all the care that needs to be provided tosupport a family through this experience."

The professional association that represents obstetricians,however, is approaching the new payment strategy with cautionbecause it could expose doctors to financial risks.

And even fans of such a model acknowledge there are stillsignificant obstacles to be worked out before this sort of flat-feesystem could be implemented broadly.

The bundled-payment model is relatively new in maternity care,and its structure can differ by insurer. Some insurers could pay asingle amount to one doctor, who uses that to cover the hospitalcare. Other plans can opt to negotiate a separate contract with thehospital. Insurers can choose to pay doctors before or afterpatients receive services. The length of care, eligibility andservices included in the bundle can also vary.

Patients generally are not even aware their care is beinghandled under a bundled payment.

In traditional coverage, insurance payments for some women aredelivered as bundled payments for portions of their prenatal care,said Suzanne Delbanco, executive director of Catalyst for PaymentReform, an organization that helps advise employers and otherorganizations that buy health coverage. However, the latest versionis different because insurers are adding quality measures thatincrease accountability and additional services, such as deliverycosts, to the bundle.

UnitedHealthcare began testing the option with Feltz's practiceand another in Texas. The insurer said it hopes to expand to asmany as 20 practices by the end of the year. Cigna and Humana arealso piloting bundled maternity care programs. A few Medicaidprograms, including those in Arkansas, Ohio and Tennessee, haveexperimented with it.

Expanding the rarely used model to include maternity care couldrepresent a major shift in health care finance. Births were themost common cause of hospitalizations among patients discharged in 2016, according to government data.

"Maternity care is kind of the sleeper of health care services,"said Dr. Neel Shah, an assistant professor of obstetrics,gynecology and reproductive biology at Harvard Medical School.

The pivot in payments is being made as the quality of maternitycare in the United States comes under renewed scrutiny. Anestimated 700women in the U.S. die each year because of pregnancy-relatedcomplications, the federal Centers for Disease Control andPrevention reported. The rate of deaths in the U.S. is worse thanthat of many other affluent countries, NPR and ProPublica reported in 2017.

And C-sections cost more. In the Denver area, for instance, theaverage vaginal delivery costs $7,716 while the average C-sectioncosts $14,274, according to 2019 data from the Health Care CostInstitute. On average, commercial and Medicaid insurers pay 50%more for C-sections than for vaginal deliveries, according to a2013 report by Truven Health Analytics, a health industry consultinggroup.

Lansky's group tested bundled payments for births in 2014 inSouthern California. According to their report, the rate ofC-sections in first-time, low-risk pregnancies dropped by nearly20% in less than one year among the first three participatinghospitals.

However, some of the bundled-payment models fall short ofaspirations. Tennessee saved money in 2017 after adopting thepayment model for Medicaid beneficiaries. But the rate ofC-sections remained unchanged, according to a report by the Medicaid and CHIP Payment and Access Commission(MACPAC), a nonpartisan advisory group for Congress.

In Ohio, where the Medicaid program covered complicatedpregnancies as well as those that were low-risk, bundling paymentsinto a lump sum for OB-GYNs cost the state more than expected, theadvisory group found.

Bundling raises other concerns, too. Because somebundled-payment programs assign the total cost of care to a singlephysician, the financial burden falls on that physician. Dr. LisaHollier, the immediate past president of the American College ofObstetricians and Gynecologists, is concerned that these models maydiscourage team-based care.

If the physician providing prenatal care overlooks a problemthat a different doctor must treat during delivery, for example, itwouldn't be fair for the OB-GYN delivering the baby to bear thefinancial burden, Hollier said.

How payers define a low-risk pregnancy is also unclear, shesaid. If the target price for the suite of services in the model isnot risk-adjusted for the cost of treating conditions likegestational diabetes, she said, doctors could be penalized fortreating these patients.

Gestational diabetes occurs in up to 10% of pregnancies in theU.S. annually, according tothe CDC, and patients with the condition need additional tests,checkups and insulin.

Julianne Pantaleone, national director of bundled payments andstrategy at UnitedHealthcare, said the insurer, as it works throughits pilot program, will not penalize physicians for providing carebeyond the initial budget.

The lack of robust data systems built for bundled payments alsoposes a potential barrier to successfully adopting the model, saidBlair Barrett Dudley, a senior manager at the Pacific BusinessGroup on Health.

Insurers and doctors need real-time data to ensure they aremeeting the model's quality measures. However, these informationbanks are expensive to build, Dudley said, and many of the existingones aren't structured for this payment structure.

Feltz agreed that getting such data will be imperative to asuccessful bundled payment program. Without the information, hesaid, "it's like launching a ship and not knowing where it's goingto go."

Kaiser Health News isa nonprofit news service covering health issues. It is aneditorially independent program of the Kaiser Family Foundation,which is not affiliated with Kaiser Permanente.

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