How to Buy a Better Birth

care is superior, but that's not the case. The United States healthcare system has alarming rates of poor outcomes for mothers and their newborns. Welcome to Prognosis, Bloomberg's podcast about the future of health care. I'm your host Michelle fay cortes. Americans pay higher prices than people in other countries for similar medical services, and the most expensive services is are

not necessarily the best. Bloomberg News health reporter John Tazzi looked at one health plan that's trying to use the millions of dollars it spends each year on births to lower costs and improve outcomes from others. Sarah Rothstein pays for a lot of babies. Well, she doesn't pay herself, but the health plan she runs does. My name is Sarah Rothstein, from the director of the thirty two Health Fund. That's a big union health plan based in New York.

It's affiliated with the Service Employees International Union. So our union members are office cleaners, their security guards. They're building doormen and women building maintenance people. The union negotiates contracts with employers on behalf of its members. As part of those contracts, employers contribute money to the health fund to

pay for workers medical care. If you live in a big Manhattan apartment building or your company rents office space in the city, you're probably paying for some of the union's medical expenses. The thirty two b J Health Fund spends more than a billion dollars each year on medical care. It covers about two hundred thousand people, both union members and their families, and every year some of those people have babies, And in our plan we pay for about births a year, nearly a thousand of which are in

downstate New York and in New Jersey. Having a baby is the top reason for planned hospital admissions among members of the thirty two b J plan, and the fund spends more than twenty million dollars a year on those births. The fund hires an outside company that administers its plan, but the fund pays the expense of medical care itself, so Sarah wants to keep costs in check while getting the best care for plan members in Sarah and her team started analyzing the funds data on childbirth, and they

found two big surprises. Sarah told me about it recently in her office on Eighteenth Street in Manhattan. The first big surprise was that prices for childbirth were all over the map. We could be paying ten thousand dollars or we could be paying thirty thousand dollars, depending on the hospital that someone had their baby at, same procedure, same procedure, same region, same health plan. The difference in costs rang from about ten thousand dollars to about thirty thousand dollars

just for a vaginal delivery. Sarah says Union members were also surprised. They said, you know, we assume that some hospitals would cost a little bit more. Maybe they're in a nice location, maybe the facilities look a little bit nicer. But when you have some hospitals charging so much more than others. That makes us feel like we're being ripped off. The second thing Sarah discovered was that the plan had a really big problem with the quality of maternity care.

Women giving birth experience serious, unexpected problems such as blood transfusions, kidney failure, or heart failure twice as often as the national average. She also found that women on the plan experienced a high rate of episiotomys. That's an incision to widen the vaginal opening. Experts say it should happen in only about five of births, but a quarter of the births that thirty two b J paid for involved epsiotomys, and of the deliveries were cesarean sections where the baby

is surgically removed through the mother's abdomen. C sections are riskier and more expensive than vaginal births. Sarah was stunned the hospitals where her members were giving birth build themselves as world class medical institutions. We have several academic medical

centers in New York. We have a lot of high quality care in New Jersey, and hospitals that advertise themselves as providing only the highest quality care and only care that's my really necessary, but the hospitals didn't seem to measure up to those promises, and so it was really shocking to us to see that the hospitals that are members were using, which advertise themselves as some of the best quality hospitals in the country, aren't necessarily the safest

for our members. Sarah found costs that varied widely among hospitals, and he found big quality problems, and the most expensive care wasn't necessarily better. What we've been finding after reviewing a number of episodes is that there is not a correlation between cost and quality. So higher cost doesn't mean higher quality, lower cost doesn't mean lower quality. This isn't just a problem when it comes to maternity care, and it's not just a problem for the thirty two b

J Fund. Across the health care system, the price of care doesn't reflect how good the care is. Let's step back for a minute to consider how health care prices are set in the United States. Some prices are set by the government and programs like Medicare and Medicaid. These public programs are giant purchasers of health care. They spend hundreds of billions of dollars a year. They have a lot of buying power, so the government can decide how

much to pay. On the other hand, if you're one of the twenty eight million Americans with no health insurance, you have zero buying power. The supplier of medical care, a hospital or doctor, can set their prices as high as they like. Unless you qualify for a charitable discount. That's the price, and you're stuck with it. Private health plans, like the thirty two b J Health Fund exists in between these two extremes. Employers and unions higher health insurance

companies to negotiate with medical providers. The prices they pay are higher than what the government pays because these groups don't have as much buying power, but private health plans usually pay less than what a hospital would charge someone with no insurance at all. Each of these negotiations between health plans and medical providers is separate and hidden. The Trump administration is trying to force hospitals and insurers to

make their privately negotiated prices public. The industry is fighting the plan. Hospitals and insurers want to keep these rates secret. They argue that their contracts are private and revealing the details could actually put costs up. Some experts say this lack of transparency contributes to a lot of the crazy

price differences that we see in healthcare. But if you look at how much c sections costs, both nationally and in any given city, there's a huge range, from as low as four or five thousand dollars in Knoxville, Tennessee, to as high as forty dollars in San Francisco. This is Nile Brennan. I'm the CEO of the Healthcare Cost Institute. Nile's research group analyzes data from health in turns companies to better understand costs. The data is anonymized, so you

can identify patients, inferers, or particular hospitals. But Nile can look at the prices that inferrors pay hospitals in the private market, the amount of money that actually changes hands. Then, if you look at San Francisco, just the San Francisco area, the price of a C section can range from fifteen thousand dollars to again forty dollars. Just like Sarah found in New York, prices are all over the place. In a functioning market, Nile says, buyers would gravitate to the

lower priced services. So imagine a world where uh computer or a Toyota camray you know, could range from fifty thousand dollars. There would be absolute outrage, right and everybody would you know, flock to the fifteen dollar problems. Even simple commodity services like basically ab tests that are performed

all the time don't have standard prices. We found that the prices of blood tests in our data varied from you know, as low as twenty or thirty dollars to as high as you know, nine dollars nine hud dollars plus. Healthcare providers point out that they lose money on a lot of the patients they see. Government programs like Medicare and Medicaid set prices, and hospitals say they often don't

pay enough to cover expenses. Hospitals also point out that they have to treat people in emergencies regard us of the ability to pay. The industry has to comply with complex regulations, and it often can't control the cost of its inputs like labor or medication. Hospitals say the higher prices they sometimes charge to commercial health plans are necessary

to keep the doors open. The American Hospital Association points out that the price of similar services varies among hospitals because of factors particular to each facility and episode of care. Some hospitals may treat patients with more complex needs or have additional expenses related to training medical residents. The average person who walks into a hospital or doctor's office won't know ahead of time what they'll be charged for a given test or procedure. You typically pay the same copay

to your health plan. If you have a deductible, you may have to pay the entire amount, but you might not find out that you owe nine dollars rather than twenty dollars for the same blood test until the bill comes weeks later. Health insurance companies could exclude high cost providers, and sometimes they do, but they can't do that in markets where a big hospital system dominates, and even in more competitive markets, they're often reluctant to cut powerful providers

out of their networks. Remember, Niles data knows the amounts that insurance companies actually pay, and it shows wild price spreads across all the services he's looked at. C sections, lab tests, mammograms, m ris um all exhibit in incredible and unwarranted variation that can really only be explained by the fact that people have realized that they can get away with it. Some prices are higher because people can

get away with it. At the thirty two b J Health Fund, Sarah Rothstein examined what her health plan was spending, and she came to a similar conclusion. Our theory, um you know, which we can't prove because we don't have access to the contracts between the hospitals and the insurers, is that some of the health systems are able to

use their market power to demand higher prices. Giving birth is a more complex procedure than allowed test, but Sarah said, the Health Fund sees variation in prices across procedures big and small, and the Fund doesn't know how it's insurance carrier negotiates those rates with hospitals. Unless we were to go to the hospitals directly and negotiate a price, we

don't know how the prices are set. So, for example, if our member has a baby at the hospital, we don't know if there is a different price for a vaginal delivery or a C section. We don't know if the doctors are getting paid more if they're performing in a psiotomy than if they aren't. The Health Fund is paying the bills, but it doesn't know how prices are set or whether doctors have an incentive to provide certain

types of care that could be riskier for women. And last year, the thirty two b J Health Fund decided to try to change that. Sarah wants to use the health Plans buying power, the billion plus dollars it spends on medical care every year to reward hospitals that are providing high quality care at lower prices, and in particular, he wants to use the plans clout in the market to improve maternity care. The first thing the Health Fund did was give its members an incentive to avoid the

highest cost facilities in the New York area. That began in April. We now have preferred hospitals and non preferred hospitals, and having a baby at a preferred hospital as a hundred dollars, having a baby at a non prefer at hospital is a thousand dollars, So that's a big price difference.

That wasn't just for maternity care. The health Plan told its members that they would face thousand dollars co pays for planned in patient services at several big hospitals such as New York Presbyterian because it found the prices at those facilities to be significantly higher than other hospitals. At other facilities, such as Mount Sinai, the normal hundred dollar copay applies. The Plan was careful to explain to members why co pays at certain hospitals went up by so much.

One mailing showed how the plans costs compared at different hospitals. The average cost for having a baby at a non preferred hospital was seven thousand dollars more than at preferred hospitals. The Plan reminded union members that their employers pay up to twenty thousand dollars a year for healthcare, and rising

costs left less money for wages. Then last summer, Sarah announced that the thirty two b J Plan would launch a program to encourage its members to give birth at the best performing hospitals, the ones that would deliver high quality at reasonable prices. The plan calls it the Better Birth Maternity Program. Sarah invited hospitals to apply to join it, and to get into the program, they have to reveal

detailed information about their practices. You really wanted to get under the hood of the data and understand what was behind the good numbers. At the hospitals that were performing better and how they were holding their providers accountable. UM, so really kicking the tires to make sure they were doing all of the hard work that leads to better data and better outcomes. Um to make sure that it wasn't just by luck or by hoppenstance. Sarah shared a

copy of the request that she sent to hospitals. It's nineteen pages and includes uSens of detailed questions. It asks about whether the hospitals limit women's health services like sterilization or contraception. It asks if factation consultants and duels are on staff. It asks for detailed data on the kind of serious harm to mothers that the plan is trying

to reduce. They had to meet certain quality criteria off the bat, and then they also had to provide us with an enormous amount of data as well as providing attestation that they're adhering to the best practices as set forth by national and state organizations who have done a lot of work to figure out what leads to higher quality maternity care. She even asked about some things that

the hospitals hadn't looked at themselves. The funded nudged hospitals to provide data on maternal harm in terms of race and ethnicity. Women of color experience higher rates of maternal harm, a fact that's drawn increasing attention in the medical world. One of the areas for concern for US was racial and ethnic disparities amongst maternal outcomes. Their significant data that shows that black women are particularly at risk and other women of color are a much higher risk for adverse

outcomes when they're having a baby. But when the Fund asked hospitals how often women of color suffered adverse events related to childbirth, some of them couldn't answer, and a number of hospitals said, we want to work to do this, will commit to getting this data to you in the future, but we don't have the data broken out that way as of today. And that was interesting for us to hear, because if you're not measuring something, you can't figure out if you have a problem or if you have to

fix it. In the fall, Sarah met in person with hospital leaders to explain why the third QBJ Health Fund wanted all this information and to learn more about how the facilities tried to ensure good outcomes in their maternity care. And so they've been good conversations. UM, we've learned a lot about how hospitals are holding prov witers accountable, how they're changing clinical models in their hospital, and they've learned a lot about a purchaser who is really concerned about

the well being of its plan participants. When I spoke to Sarah in January, the plan hadn't yet announced which providers would be included, but thirty T b J will soon start telling its members which hospitals, doctors and midwives have met the standards to join the Better Birth Program, and it will offer some perks for mothers to go to these providers. The plan will reba the hundred dollar

copay that members would otherwise have to pay. They'll also be a basket of stuff for mom and baby, so mom will get a nice gown, she'll get some birds, bees, products, um, things that will maybe make her feel a little bit better after delivery. And then there'll be a choice of a big thing for baby, so could be a baby carrier, a car seat. Thirty T b J will also promote

the program to women on its plan. The Health Fund will send mailings and emails a few times a year directing people to a website with information about the hospitals in the program and why they've been selected. Sarah says that some members in focus groups said they want help accusing the best providers, and across the board they said they really trust us to recommend programs to them. They also really had a range of experience in maternity care.

Some people who had had a first or second childhood good experiences, some people had really bad experiences, and a number of people said, I really don't know how to get the information that I need um and would welcome the Health Fund providing me with this information and figuring out what are some of the good choices for me to make. Over the next few years, Sarah and her staff will track how many women accused to use providers in the new program, and they'll also measure rates of

c sections. Appease theotomies and incidents of harm to mothers. By steering members to the best, lowest cost providers, Sarah hopes to raise the bar across the entire market. There's a role for purchasers to really push healthcare providers on quality that they're not necessarily being pushed by other entities, and this helps us serve our members better as well as the rest of the public. What the thirty two b J Fund is doing is unusual, but it's worth

asking why it's so extraordinary. Lots of big, sophisticated companies spend plenty of money on healthcare, they have an incentive to spend it wisely, and they all hire insurance companies

to administer their plans. Those insurers could apply the same kind of pressure on hospitals that the thirty two b J Fund is, but Sarah said that really hasn't happened from Eternity Care, and even the hospitals that are interested in participating have told us they've never been asked by anyone for that level of quality data, which was shocking

to us. Um and a number of hospitals also said that, you know, until recently, they themselves weren't looking at the quality data from an Alternity Care, which was shocking to us as well. For much of the last twenty years, there's been a lot of talk about how Americans need to be smarter consumers of health care. Employers raised health insurance deductibles so people would have more skin in the

game and shop for care more carefully. They've effectively asked individuals to use their buying power to make the market work better, but people don't have good information on which providers are the best or how much they cost. A lot of the information that moms would need is hard to get from hospitals. It's not publicly available, and even a sophisticated consumer might have a hard time figuring out how to wade through hundreds of data points to figure

out what the right facility is for them. And the employers that pay for healthcare, for the most part, haven't been doing what Sarah is doing using their own collective buying power to try to improve the health care system. It's ultimately our goal to have equally high quality care and low prices everywhere so that members can go wherever

they want. But until that happens, we think it's to our advantage and to our plan participants advantage to steer plan participants to health care facilities that are lower cost and high quality. Higher costs don't mean better care. There are already some healthcare providers that deliver good care at lower prices. Their proof that the system doesn't have to be as expensive as it is and that it can

perform better than it often does. On this season of Prognosis, We've looked at a lot of the ways the American health care system is broken, how it costs too much, and how it often fails people. It's a complicated problem and there's no single solution, but one place to start is with the entities were ultimately paying for a system that doesn't work very well. A few big purchasers of healthcare look carefully at where their dollars are going. If more of them did, maybe we'd all feel better about

what we're paying for. And that's it for this season of Prognosis. Thanks so much for listening. We'll be back with the new season soon, but until then, you can see what our health team is up to by going to www dot Bloomberg dot com backslash Prognosis. Do you have a story about healthcare in the US or around the world, We want to hear from you. We're on Twitter at bay Cortes or at Jaytaws. If you're a fan of this episode, please take a moment to rate

and review us. It really helps new listeners find the show, and don't forget to subscribe. This episode was produced by Laura Carlson. Our story editor was Rick Shine. Special thanks to Drew Armstrong Health care team leader and Francesca Levy, whose head of podcasts at Bloomberg, thanks so much for listening.