Health & Human Services

South Carolina’s Birth Initiative Stirring Up Payment Reform

South Carolina is the first state to stop reimbursing Medicaid and privately insured patients for medically unnecessary birth deliveries – a move that’s saving the state millions and improving health outcomes.
November 18, 2013
Born prematurely in 2011, Melinda Star Guido spent her early months in the neonatal intensive care unit (NICU). Early birth deliveries often lead to worse health outcomes for mothers, send more babies into the NICU and incur higher medical costs.
Born prematurely in 2011, Melinda Star Guido spent her early months in the neonatal intensive care unit (NICU). Early birth deliveries often lead to worse health outcomes for mothers, send more babies into the NICU and incur higher medical costs. AP/Jae C. Hong

Payment reform is one of the building blocks of the federal health-care reform law, and moving from a fee-based to an outcome-based model is seen by many as the key to cutting costs. Evidence supporting that comes from South Carolina, which saved millions of dollars by reducing the number of unnecessary early birth deliveries.

Early elective deliveries are performed solely for scheduling convenience -- grandma’s in town or the doctor is heading on vacation. But such deliveries lead to worse health outcomes for mothers, send more babies into the neonatal intensive care unit (NICU) and incur higher medical costs. So the state’s Medicaid agency and its largest private insurer, Blue Cross and Blue Shield, which combine to pay for 85 percent of all births in the state, agreed not to reimburse Medicaid or privately insured patients for early deliveries that are not medically necessary.

According to an analysis by the independent, nonprofit group Catalyst for Payment Reform, South Carolina’s two-year Birth Outcomes Initiative (BOI) reduced such deliveries by 50 percent, lowered neonatal intensive care unit (NICU) admissions and saved the South Carolina Department of Health and Human Services more than $6 million in the first quarter of 2013.

South Carolina is the only state to stop these payments for both the public and private sector; however, many states have implemented official or voluntary changes to Medicaid payment policies to discourage early elective deliveries. And now, “At least 12 other states have called us to ask how we did it,” says BZ Giese, the state’s director of health initiatives.

Almost every organization involved in birthing babies was brought into the project from the beginning, including the South Carolina Hospital Association, the March of Dimes, physicians, smaller insurers and even other state agencies involved in health care. The team of stakeholders met monthly, beginning in July 2011, to set new policies and procedures that would let everyone know that, beginning January 2013, payments for early elective deliveries would stop. Collaboration was a key to the program’s success, says Giese.

“You need to work with all the people so when you move forward with changes in payment, it is a seamless process. So many government agencies have complicated payment systems,” she says. “Also, don’t do it alone as a Medicaid-only initiative. Reach out to the biggest private payer and make it a partnership so it affects more people in the state -- not just Medicaid moms.”

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Dr. Amy Picklesimer, the initiative’s clinical lead and an obstetrician with the Greenville Health System, says policies that ask providers to voluntarily reduce inductions and C-sections tend not to stick, but putting a hard stop in place throughout the state works because patients don’t want to be responsible for the bill.

“Physicians want to make their patients happy, and by the end of a pregnancy, the woman is often ready to be done, so it’s easy to schedule a few days early. There is a lot of science behind the risks for babies born too soon, including feeding and breathing problems. There is clear guidance from ACOG [the American Congress of Obstetricians and Gynecologists] against early delivery. But there is no enforcement, so the guidelines were not followed before non-payment.”

The state even incentivized birthing hospitals by creating a $1 million pool to be split among the first five hospitals to achieve national “Baby Friendly” certification, which includes reducing unnecessary interventions. “We went from zero to four certified hospitals in less than 12 months,” Giese reports. “There’s still $200,000 left.”

According to Picklesimer, there’s been very little resistance to the policy change from physicians. “The state came to us first to generate the indications [for and against early induction], and Medicaid really listened to us and let us do our jobs. That got buy-in from the physician community up front, and having our own crack at it made a real difference.”

Though implementation wasn’t flawless – some claims were rejected and payments were delayed because the claims processing software wasn’t ready – it was smoother than expected, according to Giese. Another issue they didn’t see coming is that there was initially a slight increase in the C-section rate after 39 weeks, meaning doctors and patients were waiting only as long as they had to.

“It’s great they waited, but we are asking the hospitals to look at cases that could have still progressed to a vaginal birth. We want to put it in the hands of the decision makers, and see if they can make a difference.”

Overall, though, everyone involved says that the outcomes were better than anticipated. “That shows us it is working,” Picklesimer says. “It’s wonderful to get our patients off to a good start in life.”

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