Texas Medicaid Would Restrict Some Elective Deliveries to Lower NICU Costs

March 22, 2011— -- 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.

According to state figures for the 2009 fiscal year, the average Medicaid cost of a NICU stay was $45,000, compared with the $2,500 expense of delivering a healthy baby, Goodman said.

"Even though we don't expect this initiative would reduce the number of those stays very much, it would still generate savings, just because of the difference in cost," she said.

In 2009, the Texas Medicaid program paid for 4,370 elective inductions of babies before they reached the 39-week stage of development, Goodman said. While most of those procedures led to births of healthy babies, she said, "we just know there is a slightly elevated risk of complications…We don't think that's a risk worth taking."

The projected two-year, $36.5 million savings achieved by limiting early deliveries and controlling NICU costs represents only a fraction of the state's $6 billion Medicaid deficit, Goodman said. She predicted that the proposal, reviewed by a Senate committee looking for Medicaid savings, would be likely to win legislative support and go into effect with the 2012 fiscal year that begins Sept. 1, 2011.

The growth in ICUs is inarguable. For example, in response to an open records request filed by the Texas Tribune newspaper, HHSC provided figures showing that the number of NICU beds at Memorial Hermann Hospital, near Houston, rose from 18 in 1998 to 80 in 2009. That's a 344 percent increase. Texas Health Harris Methodist in Bedford, a Fort Worth suburb, increased its NICU capacity from four beds to 16 in that same period, a 300 percent increase.

Some Hospitals Say Their Increased NICU Activity Isn't Reliant Upon Late-Term Deliveries

However, some hospitals that have expanded intensive care for premature and sick newborns don't expect that tighter Medicaid oversight of NICU admissions will necessarily yield significant savings.

At Texas Health Presbyterian Hospital in Dallas, spokesman Steve O'Brien said its increase in NICU beds, from 38 to 84 in 1998-2009, has not been driven by increased births among late-term babies delivered at 37 to 39 weeks.

Instead, he said, "most of the babies admitted to our NICU are very low birth-weight and extremely premature, many just 25 to 33 weeks of gestation. We have numerous cases of babies barely over 1 pound surviving and going on to lead normal, active childhoods. The kinds of elective inductions discussed in this report have nothing at all to do with these babies."

He attributed the jump in NICU volume to two factors. "We've instituted a high risk maternal transfer program as well as a robust high risk obstetrics program that is used by women in this area and throughout a three-state region."

The other factor he cited was "a jump overall in high-risk pregnancies and premature births because of older women having babies, an increase in multiples, and more women with existing medical conditions giving birth."

He said some of them, who have chronic conditions, "would never have had the opportunity to be moms" without the life-saving technologies found in modern NICUs.