Texas Medicaid Would Restrict Some Elective Deliveries to Lower NICU Costs

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Texas health officials estimate they could save $36.5 million in Medicaid costs by curbing convenient, but risky, baby deliveries before the 39th week of pregnancy, while reining in use of expensive neonatal intensive care units.

For a variety of reasons -- some as mundane as moms-to-be wanting to guarantee that their obstetricians won't be on vacation when they go into labor, or that Grandma will be able to plan her trip to help out in the nursery -- some obstetricians agree to early deliveries, either by Caesarean section or induced labor.

However, early elective childbirth can subject newborns to many of the stresses of prematurity, which studies have shown can include blindness, underdeveloped lungs and long-term emotional, intellectual, developmental and behavioral issues.

These can include attention deficit disorder, said Dr. Frank Mazza, chief patient safety officer for the Austin-based Seton Family of Hospitals.

A half dozen Seton hospitals helped pioneer a highly successful program that drastically reduced NICU use by following American Congress of Obstetricians and Gynecologists guidance to stop performing elective deliveries before 39 weeks. The program had no effect on medically necessary early deliveries.

By strictly adhering to that cutoff, Seton hospitals reduced NICU costs associated with prematurity and traumatic delivery from $4.5 million a year to "somewhere in the neighborhood of $186,000 a year," Mazza said in an interview Monday. The hospitals have consistently posted NICU savings for the last 7 years, he added.

That test program, which also led to more healthy births, provided much of the impetus for the cost-saving proposal put forth last month by the Texas Health and Human Services Commission. That measure seeks to reduce early elective deliveries and more closely scrutinize which babies are admitted to NICUs.

"We just really want to put an extra check and balance in place, and have doctors or hospitals call in and verify why that baby needs NICU treatment before they put them in," said Stephanie Goodman, a spokeswoman for HHSC in Austin, which administers the Medicaid program in Texas.

"We feel like that extra step may just help make sure that the babies in NICUs really need that level of care, and that any other baby that could be better-served or as well-served in just the regular nursery, would."

Reduced NICU Use Cuts Deeply Into Hospital Revenues

While it's unclear how many cash-strapped states might follow suit and try to find similar savings in the delivery room and NICUs, any such actions could cut deeply into hospital revenues.

"NICUs are traditionally very good profit centers for hospitals," Mazza said. "Basically, our profitability in our NICUs went from being quite good to being a break-even proposition."

Mazza credited Seton's chief executive officer with taking the long view -- that having fewer very sick babies in NICUs saves the considerable costs of long-term care and institutionalization for the sickest.

However, he said that for those hospital executives whose institutions hold them responsible for strong financial performance, cutting into NICU operations, which have come to be a cash cow for many financially strained medical centers, "will be hard medicine for them to take."

In Texas, about 1 in 8 residents relies on Medicaid, a joint federal-state health safety net. The program, administered by HHSC, funds more than half of all births in the state.

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