WMBA 6602 Week 5 Rural Obstetrics Trade-Off Example

Pricing the Trade-Off in a Rural Obstetrics Closure: About $1.9 Million a Year Saved, Thirty More Miles to Deliver and a Measurable Rise in Risk, With the Money Named on Both Sides

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Walden University

WMBA 6602: Contemporary Topics in the U.S. Healthcare Delivery System

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Month Day, Year

Pricing the Trade-Off in a Rural Obstetrics Closure: About $1.9 Million a Year Saved, Thirty More Miles to Deliver and a Measurable Rise in Risk, With the Money Named on Both Sides

The Decision

Laurel Valley Health, a composite nonprofit system in east Tennessee, runs a 25-bed rural hospital in a county about fifty minutes from its main campus. The rural hospital's labor and delivery unit handles about 180 births a year. Keeping it open requires around-the-clock obstetric nursing, an obstetrician or family physician with obstetric privileges on call and anesthesia coverage for cesarean deliveries, and the unit loses about $1.9 million a year. The board is considering closing it and directing women to the main campus. This paper prices the trade-off: what closure buys on cost, what it costs on access and quality, and where the money falls on each side.

What Closure Buys

Closure saves about $1.9 million a year in operating losses. Most of the saving comes from staff costs that do not shrink with volume: nurses scheduled whether one woman or three are in labor, and anesthesia coverage for a few cesareans a month. The saving would allow the rural hospital to keep its emergency department and inpatient beds, which serve far more patients and are also under financial pressure. Hung et al. (2016) examined rural hospitals across nine states and reported that closures were more common in smaller units and in communities with limited obstetric workforces, which describes this unit.

What Closure Costs in Access

Women in the county would travel to the main campus, about thirty miles farther, to deliver. That figure is close to the average of 29 additional miles Hung et al. (2016) found for women in communities that lost rural obstetric units. Prenatal care would continue locally through the family physicians at the rural clinic, but labor would begin a long drive from the hospital where delivery would occur, and some women would arrive late or deliver on the way.

What Closure Costs in Quality

The best national evidence comes from Kozhimannil et al. (2018), who studied births in rural counties from 2004 to 2014. Where remote rural counties, those not bordering a metropolitan area, lost hospital obstetric care, births outside a hospital rose by about 0.7 percentage points, deliveries in hospitals lacking an obstetric unit by about 3.1 points and preterm births by about 0.7 points in the year after closure, compared with counties that kept services. The county in this case is not adjacent to an urban area.

The Money on Both Sides

Table 1

Estimated Annual Effects of Closure, Applied to 180 Births

Rates are from Kozhimannil et al. (2018) for non-adjacent rural counties; applying them to one hospital is an approximation.

The quality costs can be partly priced. A national study estimated the economic cost of preterm birth in the United States at more than $51,000 per preterm infant in 2005 dollars, counting medical care, early intervention, special education and lost productivity (Behrman & Butler, 2007). At roughly 1.2 additional preterm births a year, that is on the order of $60,000 to $80,000 a year in current dollars, borne mostly by payers, including TennCare, and by families. Births outside a hospital or in an emergency department without obstetric staff carry risks that are harder to price but real, and they fall on the families and on the rural hospital's emergency staff.

The exchange is therefore uneven. Laurel Valley would save about $1.9 million. Families and payers would bear perhaps $100,000 a year in measurable costs, plus travel and risks that do not translate cleanly into dollars. In pure dollars, closure looks favorable; the question is whether the system is willing to buy its saving with risk carried by others.

A Middle Option

A third option prices differently. The rural hospital could keep a smaller unit for low-risk births staffed by family physicians and nurses cross-trained in obstetrics, with cesarean deliveries and high-risk pregnancies transferred to the main campus by scheduled referral, and with telehealth consultation from main-campus obstetricians. Laurel Valley estimates this would cut the annual loss to about $900,000, saving $1 million while keeping most births local. The trade-off is that a unit without in-house anesthesia must transfer women who need an urgent cesarean, which requires a tested transfer protocol and an ambulance on standby.

What the Board Should Ask the Community

The decision touches people outside the hospital, and the board should hear from them before choosing. The county's emergency medical service can say how often it could support transfers in labor and what a standby ambulance would cost. The family physicians at the rural clinic can say whether they would maintain obstetric privileges under a low-risk model. Hung et al. (2016) found that workforce problems drive many closures, so the clinicians' answer may decide whether the middle option is feasible at all.

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Measures for the Trial Year

The trial should report four figures each quarter: births at the rural unit, transfers before and during labor, births outside a hospital or in the emergency department and the unit's operating loss. Each can be compared with the county's recent history and with the rates Kozhimannil et al. (2018) reported, so the board will know by the end of the year whether the middle option is performing better than closure would have.

Recommendation

The board should not close the unit outright. It should adopt the low-risk model with a strict transfer protocol for one year, measure transfers, travel and outcomes, and revisit the decision with local data rather than national averages. The middle option buys about half the saving at a much smaller cost in access and quality.

References

Behrman, R. E., & Butler, A. S. (Eds.). (2007). Preterm birth: Causes, consequences, and prevention. National Academies Press.

Hung, P., Kozhimannil, K. B., Casey, M. M., & Moscovice, I. S. (2016). Why are obstetric units in rural hospitals closing their doors? Health Services Research, 51(4), 1546-1560. https://doi.org/10.1111/1475-6773.12441

Kozhimannil, K. B., Hung, P., Henning-Smith, C., Casey, M. M., & Prasad, S. (2018). Association between loss of hospital-based obstetric services and birth outcomes in rural counties in the United States. JAMA, 319(12), 1239-1247. https://doi.org/10.1001/jama.2018.1830