Dr Pettker is an Associate Professor of Maternal-Fetal Medicine in the Department of Obstetrics, Gynecology and Reproductive Sciences, Yale School of Medicine, New Haven, Connecticut. He is also a member of the Contemporary OB/GYN editorial board.
Last year the US Department of Agriculture estimated that it would cost a middle-income couple just over $245,000 to raise a child to the age of 18.1 Admittedly, these costs varied. For instance, costs for low-income rural families are about $145,000, while those for high-income families in Northeast urban areas are estimated at $455,000. These assessments don’t include the cost of college, but they include housing, food, childcare, education through high school, and other expenses. When I read this information I was as surprised by the number as I was by the fact that this has been estimated annually since 1960!
However, as an obstetrician I found it particularly interesting that these expense estimates did not include the cost of pregnancy and childbirth, which certainly is an important part of “raising a child.” The most obvious reason for this oversight is that the Department of Agriculture is trying to account for the costs of raising a child from birth, rather than from conception. However, looking deeper, it becomes clearer that the complexity of our healthcare finance system makes adding this estimate quite challenging. For instance, would the actuaries use the cost of the insurance to cover the pregnancy or the costs paid by those insurance companies for perinatal care? Furthermore, do we actually know the true costs of perinatal care in the United States?
I became familiar with the difficulty in determining these costs when a patient from overseas came to my practice this year requesting an itemization of the costs she would be asked to pay for her prenatal care and birth, assuming a routine, uncomplicated pregnancy. We went to our practice and hospital administrators to determine the actual costs for ultrasounds, prenatal visits, and hospitalization for someone who was not indigent. We arrived at an answer after a great deal of investigation, but it was a bit shocking that such sophisticated businesses could find it as challenging as it was. I would encourage you to ask the question at your own center. For me, it was a true-life demonstration of what I had read in the popular press regarding the enigmatic and highly variable process for determining charges versus actual cost estimates for common procedures such as hip replacements and colonoscopies.2
Around the same time, coincidentally, a similar, larger-scale question was being asked by a colleague of mine at Yale University. Xiao Xu, PhD, Assistant Professor of Obstetrics, Gynecology and Reproductive Sciences and a member of the Institute for Social Policy and Studies at Yale, is a health economist who is interested in how value, costs, and outcomes interact in women’s health. Her team’s questions were simple: How much do hospitals report it costs for an average, routine stay following childbirth for a low-risk mother? Also, if there is any variation in these costs, is the variation due to any characteristics of the patients or the hospitals, such as volume, teaching status, quality outcomes, or other care practices?
As reported in the July issue of Health Affairs, her team used the 2011 Nationwide Inpatient Sample database that included 463 hospitals across the country.3 (Editor’s note: this team included Dr. Pettker.) They limited their analysis to low-risk pregnancies. Furthermore, they used reported hospital “cost-to-charge” ratios to estimate costs, as the dataset included only hospital charges to payers, which are known to not precisely indicate actual expenditures. The cost estimates did not include prenatal care or the fees that obstetricians or anesthesiologists may add. Vaginal deliveries averaged $4,192, whereas the mean cesarean delivery estimate was $6,945. These are not unexpected numbers. What was surprising was the variation. While the overall average for low-risk births was $4,485, these estimated hospital costs ranged from a low of $1,189 to a high of $11,986. Taking out the wide outliers, there was still a 2.2-fold difference between the 10th and 90th percentiles.
Many hospital characteristics were associated with this variability, some of them quite counterintuitive. For example, public hospitals were more expensive than private ones, and nonprofit hospitals were more expensive than for-profit hospitals. Care was also more costly in rural locations, at facilities with lower volumes, and at centers with low numbers of Medicaid patients. Interestingly, there was no difference between geographic regions (eg, Northeast versus South or Midwest) and teaching hospitals did not seem to have higher costs. Obstetric facilities with higher cesarean delivery rates were indeed associated with higher costs. Finally, hospitals with longer lengths of stay and with higher rates of serious maternal morbidity outcomes also had higher facility costs.
The last issue is tricky. It is hard to know if the lengths-of-stay and morbidity differences reflect sicker populations (ie, a higher case mix) or a lower quality of care. However, the authors attempted to reduce the influence of case mix by selecting mothers between 16 and 34 years of age, and without major comorbidities such as preeclampsia, hypertension, diabetes, and obesity. The implication may be, then, that higher costs might actually be due to worse quality, demonstrating that our national goal of improving healthcare value by lowering costs and improving quality is not well adopted.
This report has important information for all of us. At the most basic level, it is hard not to be surprised that there could be a 10-fold difference in estimated average costs for a low-risk, uncomplicated birth. How the outliers account for their extraordinarily low or high costs would be an interesting, and I suspect provocative, investigation. Improving healthcare expenditures begins with looking at variability, to ascertain the secrets of best performers and to begin to control waste and inefficiencies in the worst performers. But from a policy standpoint the details that might explain the variability also provide insights into our next steps. First, systematic approaches to lowering the cesarean delivery rate could be very helpful in reducing obstetric care costs, especially considering that some of the centers in this study reported primary cesarean rates as high as 39% in their low-risk populations. Second, resourceful solutions to reducing lengths of stay (such as home nursing visits, which are more common outside of the United States) may help.
Healthcare economists may ask why it is important to study the costs of childbirth, a seemingly small piece of the healthcare puzzle. As pointed out in the introduction of the article, “In the United States, hospital care is the most expensive component of national health spending and childbirth is the leading cause of hospital admission. In 2011 childbirth accounted for 3.8 million hospitalizations and more than $15.1 billion in hospital facility costs. . . .” This represents approximately 6.5% of total health expenditures ($2.3 trillion) from that year and is not inconsequential.4 More than that, however, our response to improving costs and reducing variability in obstetrics may help inform methods of doing this in other medical specialties—such as geriatrics or cardiology—that might loom more prominently in the minds of healthcare policy experts. This may be an opportunity to use the example of a rather straightforward condition and hospitalization (labor and childbirth in healthy women) to suggest strategies for more complicated hospitalizations (such as for myocardial infarction or hip replacements).
What is most telling is that the variables studied (cesarean rate, length of stay, hospital characteristics, and maternal outcomes) accounted for only 13% of the variation in the mathematical model. Finding out what accounts for the rest of the variation is both a daunting task and huge opportunity to improve the value of maternity care.
1. United States Department of Agriculture. Parents projected to spend $245,340 to raise a child born in 2013, according to USDA report. http://www.usda.gov/wps/portal/usda/usdahome?contentidonly=true&contentid=2014/08/0179.xml. Accessed August 6, 2015.
2. The New York Times. The $2.7 trillion medical bill: colonoscopies explain why U.S. leads the world in health expenditures. http://www.nytimes.com/2013/06/02/health/colonoscopies-explain-why-us-leads-the-world-in-health-expenditures.html. Accessed August 6, 2015.
3. Health Affairs. Wide variation found in hospital facility costs for maternity stays involving low-risk childbirth. http://content.healthaffairs.org/content/34/7/1212.full.html. Accessed August 6, 2015.
4. National Center for Health Statistics. Health, United States, 2013: with special feature on prescription drugs. Hyattsville, MD. 2014; http://www.cdc.gov/nchs/data/hus/hus13.pdf. Accessed August 6, 2015.