Nursing Model Saves Millions of Dollars

2014: Volume 4, Number 3

A publication of the Centers for Medicare & Medicaid Services, Office of Information Products & Data Analytics


Potential Medicaid Cost Savings from Maternity Care Based at a Freestanding Birth Center

Embry Howell, Ashley Palmer, Sarah Benatar, and Bowen Garrett
The Urban Institute—Health Policy Center

Objectives: Medicaid pays for about half the births in the United States, at very high cost. Compared to usual obstetrical care, care by midwives at a birth center could reduce costs to the Medicaid program. This study draws on information from a previous study of the outcomes of birth center care to determine whether such care reduces Medicaid costs for low income women.

Methods: The study uses results from a study of maternal and infant outcomes at the Family Health and Birth Center in Washington, D.C. Costs to Medicaid are derived from birth center data and from other national sources of the cost of obstetrical care.

Results: We estimate that birth center care could save an average of $1,163 per birth (2008 constant dollars), or $11.6 million per 10,000 births per year.

Conclusions: Medicaid is the leading payer for maternity services. As Medicaid faces continuing cost increases and budget constraints, policy makers should consider a larger role for midwives and birth centers in maternity care for low-risk Medicaid pregnant women.

Keywords: Cost effectiveness analysis, cost, utility, benefit cost, maternal and perinatal care and outcomes, birth centers, obstetrical costs, midwifery, Medicaid

ISSN: 2159-0354




The Medicaid program is a crucial payer for prenatal care, delivery, and newborn services. In 2008, Medicaid paid for 40 percent of births nationwide, rising to 48 percent by 2010 (Markus, Andres, West, Garro, & Pellegrini, 2013). Yet states face an environment of rapidly increasing use of technology and escalating costs for obstetrical care. In particular, recent increases in Cesarean section and pre-term birth rates have contributed to higher costs for Medicaid and other payers (Martin et al., 2010; Bettegowda et al., 2008).

One option may be to provide midwifery care in freestanding birth centers for more Medicaid deliveries. Freestanding birth centers provide prenatal care and, when appropriate, delivery care at the birth center or at a hospital. There were 217 free-standing birth centers in 2011 in the U.S.A recent study showed that 30 of 44 states responding to a survey covered deliveries at birth centers under Medicaid (Ranji, Salganicoff, Stewart, Cox, & Doamekpor, 2009). In addition to potentially improving care for low-income women, birth center care may reduce costs compared to usual care (Schroeder et al., 2012). To date, the costs of birth center care for low-income women have not been rigorously evaluated in the United States.

Cost studies and comparative effectiveness research are becoming increasingly used for evaluating health services in the U.S. and abroad (Rawlins, 2013; Garber & Sox, 2010; Russell, Gold, Siegel, Daniels, & Weinstein, 1996; Chalkidou & Anderson, 2009). Through such analyses, the outcomes and costs of alternative health services are compared in order to make a judgment about which is a better investment. However, both costs and effects are difficult to calculate accurately for a variety of reasons (Tan-Torres Edejer et al., 2003).

The first and more difficult challenge is measuring the impact of birth center care relative to usual care on factors that drive costs, in a manner that controls for differences in social risk, medical risk, and other differences in the women who receive care in the two settings. Women served in birth centers are generally at lower medical risk, and it would be inappropriate to compare costs without controlling for differences in risk. The second challenge is measuring the relevant components of costs, particularly the individual components that vary according to the type of maternity care received.

This paper provides new evidence of the cost of birth center care relative to usual care for low income women enrolled in Medicaid. It does this by estimating relevant cost components from a variety of data sources and applying the cost estimates to women receiving birth center care and women not receiving birth center care, but who have been reweighted to have nearly identical demographic characteristics and observed risk factors. The information in this paper is timely, because the Centers for Medicare & Medicaid Services (CMS) recently launched a new national demonstration initiative, called Strong Start, to reduce the rate of early elective deliveries and to test the effectiveness of specific enhanced prenatal care approaches.

Personal communication with K. Bauer, American Association of Birth Centers, 2011.