NSG/567 Week 5: Business Case, sample paper

Fewer First Cesareans, Less Revenue per Birth: An Honest Business Case for a Collaborative Midwife and Laborist Model

[Student Name]

University of Phoenix

NSG/567: Financial Resources Management in Health Care

Week 5 Assignment

[Instructor Name]

[Date]

The hospital, its service line and all figures are a composite written for a model paper.

The variance analysis in Week 4 found that the maternity service line's cesarean rate rose from 30% to 34% in one quarter, concentrated among first-time mothers at term with a single baby in head-first position, the group quality programs watch most closely. The obstetric quality committee asked whether a different care model could help. This paper builds a business case for a collaborative model of certified nurse-midwives and laborists.

The Problem

First cesareans matter because most women who have one will have cesareans in later births, with rising risks of placental complications, hemorrhage and hysterectomy. Our hospital's primary cesarean rate for low-risk first-time mothers was 29% last year, above the state's target. Many low-risk labors are managed by private obstetricians who also run busy offices and may favor interventions that shorten labor. The case for change is first a quality case; the business case must show whether the hospital can afford to act on it.

The Proposed Model

Four certified nurse-midwives, working in rotation, would provide continuous in-house labor care for low-risk patients whose private obstetricians opt in, with laborists available around the clock for consultation and operative births. Midwives would support labor with continuous presence, intermittent monitoring where appropriate, movement and position changes and patience in latent labor, while laborists, already in house, would manage complications.

The Evidence

A study of a hospital that expanded access to a collaborative midwifery and laborist model found that among privately insured women whose care model changed, the primary cesarean rate fell from 31.7% to 25.0% after the change, and the vaginal birth after cesarean rate rose from 13.3% to 22.4% (Rosenstein et al., 2015). The study was in one academic center, so results may differ, but it shows the effect is possible.

Costs

Four midwife positions, with salaries of $132,000 and benefits of 29%, cost $681,000 a year. Laborist coverage already exists, so no additional physician cost is assumed, though laborist workload may rise. Start-up costs for recruitment, credentialing and training total $60,000. Total first-year cost: $741,000.

Offsetting Revenue: Professional Billing

Midwives bill for the births they attend. With about 520 births a year in the eligible group and midwives attending an estimated 60% of those whose obstetricians opt in, about 310 births, professional billing would generate about $520,000 a year in net collections at current payer mix.

The Revenue Effect of Fewer Cesareans

If the model reduced the primary cesarean rate in the eligible group from 29% to 23%, about 31 fewer cesareans a year would occur. At current contracts, the hospital's facility payment for a cesarean birth episode is on average about $4,100 higher than for a vaginal birth, after accounting for payer mix. Fewer cesareans would therefore reduce facility revenue by about $127,000 a year. At the same time, direct costs would fall: a cesarean uses more operating room time, supplies, nursing hours and postpartum days, about $2,600 more in direct cost than a vaginal birth, saving about $81,000. Net effect on contribution margin from fewer cesareans: a loss of about $46,000 a year.

The Financial Summary

Year 1: cost $741,000; professional billing $520,000; net effect of fewer cesareans minus $46,000. Net financial effect: about minus $267,000. From year 2, without start-up costs: about minus $207,000 a year. Under current fee-for-service payment, the model does not pay for itself.

Beyond Fee-for-Service

Three factors change the picture. First, the hospital's largest commercial insurer is negotiating a maternity quality contract with a bonus tied to reducing the primary cesarean rate; the proposed bonus, if met, would be worth about $150,000 a year. Second, repeat cesareans in future pregnancies are costly and risky; each primary cesarean avoided also avoids future surgical risks, costs the hospital bears in part. Third, patient experience and reputation: families increasingly seek hospitals with midwifery care, and the service line competes with a hospital 25 miles away that offers it.

Strategic and Mission Fit

The hospital's strategic plan makes safety in childbirth its first maternity priority. Reducing unnecessary first cesareans advances that goal, and the service line's positive contribution margin, shown in Week 1, gives it room to invest. Finkler et al. (2013) describe business cases that combine financial and nonfinancial benefits as appropriate when an initiative serves the organization's mission and strategy.

Community Access

The model also supports access. Rural hospitals that lose obstetric services leave communities with longer travel and more births outside hospitals (Kozhimannil et al., 2018). Offering care that families seek, such as midwifery, helps the service line maintain the volume that keeps it viable, which protects local access for the whole community.

Sensitivity Analysis

The business case is sensitive to three assumptions. If physician opt-in is 40% instead of 60%, midwife billing falls by about $170,000 and the net cost rises accordingly. If the cesarean reduction is half as large as assumed, the revenue loss and the savings both shrink, changing the net effect little. And if the quality contract is signed, the net cost falls to about $60,000 a year. Showing these ranges tells leadership which assumptions matter most.

Risks

Physician opt-in may be lower than assumed, reducing both benefits and billing. Recruiting midwives may take time. Laborist workload may increase. And the quality contract may not be finalized.

Stakeholder Views

Obstetricians' views vary. Several welcome in-house labor support, which lets them keep office hours without leaving laboring patients; others worry about losing control or income. The proposal lets each obstetrician opt in and keeps the physician as the patient's attending, with the midwife managing labor under agreed guidelines. Nurses, who spend the most time with laboring patients, strongly support the model, and the family advisory council asked for it.

Recommendation

Proceed with a phased start: two midwives in year 1, expanding to four if physician opt-in and outcomes meet targets. Measure the primary cesarean rate in the eligible group, patient experience, midwife-attended births, laborist workload and the model's net cost quarterly. Present results at 12 months for a decision on expansion.

What Success Would Look Like

At twelve months, success would mean a primary cesarean rate in the eligible group moving toward the state target, high patient experience scores, obstetricians opting in at or above the assumed rate and a net cost at or below the estimate. Any of these missing would prompt a redesign or a decision not to expand, made openly with the obstetric department.

Conclusion

A collaborative midwife and laborist model has evidence behind it for reducing first cesareans, but under current payment it costs the hospital about $200,000 a year after professional billing and the revenue effect of fewer cesareans. Quality contracts, avoided future risks, competitive position and the hospital's safety commitment make the case worth testing. An honest business case shows leadership the loss as clearly as the benefits and proposes a phased start that limits risk while the model proves itself.

References

Finkler, S. A., Jones, C. B., & Kovner, C. T. (2013). Financial management for nurse managers and executives (4th ed.). Elsevier Saunders.

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

Rosenstein, M. G., Nijagal, M., Nakagawa, S., Gregorich, S. E., & Kuppermann, M. (2015). The association of expanded access to a collaborative midwifery and laborist model with cesarean delivery rates. Obstetrics & Gynecology, 126(4), 716-723. https://doi.org/10.1097/AOG.0000000000001032