Blog Post

Should you invest in a freestanding birth center? Weigh these 4 market factors first.

April 2, 2018

    Freestanding birth centers experienced a 72% volume increase between 2004 and 2014, leading many health system planners to wonder if these facilities are a worthwhile investment to grow their women's service line. With only 313 freestanding birthing centers (FSBCs) in the United States—20 of which are hospital-affiliated—FSBCs have yet to enter every market. This doesn't mean that every market is ripe for opportunity, though: There are four key factors to consider when deciding if these centers are right for a particular region.

    1. Low-risk pregnancy volumes

    FSBCs can offer only low-intervention care to women with low-risk, uncomplicated pregnancies, so planners should consider if their market has sufficient volumes of qualified deliveries to sustain a FSBC. Only a subset of patients will qualify to deliver in one of these centers, and an even smaller subset will actually elect to deliver in a freestanding birth center. Based on anecdotal evidence, at a maximum, just 3% of total births in a market will be attributed to FSBC services, although this value varies depending on the capacity of other local birthing facilities and hospitals.

    Use the Advisory Board's Women's Program Estimator tool to forecast volumes for vaginal births without complications in your market.

    Use the Women's Program Estimator

    2. Female demographics

    FSBCs offer a more natural and comfortable birthing experience than a traditional hospital delivery, which tends to appeal to a specific demographic of women. In a national birth center study of women who delivered in FSBCs, 85% were between the ages of 18 and 34, 80% were married, and 72% had a college degree or higher. Thus, a key success factor for FSBCs is placement in markets with a large cohort of consumers who match this demographic profile.

    To gauge potential market interest in a FSBC, use the Advisory Board's Demographic Profiler to stratify your market by age, family structure, and education. Then, see which zip codes within your market have the highest makeup of this target consumer.

    Use the Demographic Profiler

    3. Payer mix

    Commercially insured women choose to deliver at freestanding birth centers more often than publically-insured women, which makes the investment financially appealing for planners looking to attract privately insured patients. In fact, 62% of the participants in a study published in the New England Journal of Medicine who delivered at a FSBC were privately insured. However, irrespective of payer type, it's important to consider that reimbursement for delivery at an FSBC setting is overall lower than for delivery at a hospital setting. In 2011, the average Medicaid reimbursement was $1,907 in the FSBC setting versus $3,998 in the hospital setting. (Researchers used 2011 Medicare rates as a proxy for Medicaid rates because there is limited Medicaid data publicly available and 2011 national Medicare rates were found to be comparable to Medicaid rates.) This reimbursement discrepancy further emphasizes the importance of evaluating the market of privately insured patients in your region.

    To understand payer mix in your market, use the U.S. Census Bureau's American FactFinder's advanced search function to see insurance breakdown within your state or county. Work with private payers in your market to negotiate reimbursement rates for birth center births, and analyze your state's publically available Medicaid Fee Schedules to understand current reimbursement rates for public payers.  

    4. State-specific regulations

    Eighty-two percent of states regulate birth centers by indicating which procedures are eligible for reimbursement and establishing requirements for staffing, birthing room accommodations, and facility fire and building codes.

    Evaluate your state's FSBC regulations for any restrictions on Medicaid reimbursement and Certificate of Need laws that could potentially limit FSBC investment.

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