Rae Woods (00:17):
From Advisory Board, we are bringing you a Radio Advisory, your weekly download on how to untangle healthcare's most pressing challenges. My name is Rachel Woods. You can call me Rae. In an industry as vast as healthcare, changes that appear small at first can actually have significant ripple effects across the entire ecosystem. And here's one that you may have missed. The American Medical Association in collaboration with the American College of Obstetrics and Gynecology, decided to unbundle maternity care from billing codes, which fundamentally changes the way that providers charge for care. Providers are encouraged to start experimenting with this coding as soon as this September, with the new codes formally going into effect in January of 2027.

(01:02):
So, you might be wondering, why are we devoting an entire Radio Advisory episode to a single billing change in a single service line? Well, let me be clear, the impact of this change is significant. It will touch everything from health plan negotiations to clinical care models, to patient cost burdens. The unbundling is just the tip of the iceberg. It's also a signal of some of the other changes and experiments we should be bracing for next. So, today, I've invited Dr. Neel Shah, Chief Medical Officer from Maven Clinic, to break down what unbundling maternity care payments will mean for the broader industry. Neel, welcome back to Radio Advisory.

Dr. Neel Shah (01:42):
Thanks for having me, Rae.

Rae Woods (01:44):
How does it feel to have worn your journalism hat a little bit for this?

Dr. Neel Shah (01:50):
I didn't expect to do that. I honestly was so surprised that there wasn't more reporting on this, because it felt like such a big deal to me right away. And I understand why maybe it was a sleeper for a second, because it started with an email from ACOG, telling its members and constituents that this was a change coming and how we were going to pay for obstetrical care. But then it seemed like a really wonky technical change. But fundamentally, what we're doing is changing the way we pay for the most commonly used health service in America for the first time in a generation. That feels like a big deal, and so I had to report it.

Rae Woods (02:29):
You're right that it was kind of this sleepy change that happened. I mean, I think that I do a pretty good job at keeping up with healthcare news. But before I saw your piece and before I saw, frankly, my own professional network talking about your piece, I had no idea that this billing change had happened.

Dr. Neel Shah (02:48):
It really did take gumshoe journalism to excavate what is happening and why and what it might mean. And there are a lot more questions and answers. What I will tell you is a combination of where I think I have conviction, but also conversations with members of the AMA CPT committee, conversations with leaders inside of health plans, conversations with doctors on the ground. Conversations with people who are trying to support patients who are struggling to access care.

Rae Woods (03:14):
Again, not something that a chief medical officer normally does. And you fully put on your journalism hat and said, "We are going to understand this story and its impact?"

Dr. Neel Shah (03:22):
Well, it feels like gumshoe journalism, truly, because it is what a chief medical officer should do. We should have conversations to figure out what's happening in our industry and we do do that informally all the time. But what started to crystallize was this really big story that felt like we were breaking news. So, that was the new muscle, was to figure out how to report the story, not just try and understand myself.

Rae Woods (03:42):
What actually happened? What's changing with maternity billing and coding?

Dr. Neel Shah (03:48):
Since the 1980s, the way we've paid for pregnancy, delivering a baby and postpartum care has been like a prefixed menu. You get one bundled payment for the whole thing. It's one of the earliest examples of bundled payments.

Rae Woods (04:01):
It is.

Dr. Neel Shah (04:02):
Bundled payments are a construct that became more popular after the Affordable Care Act, as part of value-based care. And the idea is that rather than paying for everything a la carte, you get one payment for a single episode of care. And what we're doing is going back to the a la carte system. There have been many attempts to do that in the last couple of decades. Notably, the last big push was around the early Obama administration, where there was very little appetite from the administration.

Rae Woods (04:30):
So, beginning on January 1st of 2027, every individual component of a maternity visit is going to be associated with its own charge?

Dr. Neel Shah (04:39):
Yes.

Rae Woods (04:39):
There's going to be one for the exam, one for the ultrasound, one for lab work, as opposed to this single bundled payment. And you hit at exactly my big question when I first read this, is I actually think of bundled payments as something that we would only see more of in the future as we move towards more value-based payment. And part of that is because there is evidence that a single payment for an episode of care can reduce costs and can improve outcomes. So, how did we get to the point where the thinking shifted, instead of going towards more bundled payments, going back to fee-for-service?

Dr. Neel Shah (05:16):
Yeah. Well, I think the rationale for bundles is both of the things that you mentioned. It's to figure out how to pay for care more rationally, but it's also to deliver better care. And what happened was, in the '80s, the way that we cared for people in pregnancy was pretty different. I was born in 1982. And when my mom was pregnant with me, ultrasounds were pretty new. Actually, the first IVF baby in America is the same age as me.

Rae Woods (05:43):
Wow.

Dr. Neel Shah (05:44):
So, the whole way that we care for pregnancy and birth has actually changed a lot in some meaningful ways. And the way that we pay for care hasn't kept up with both the technology or the fact that today the doctor in the office doesn't really deliver your baby.

Rae Woods (06:01):
And the people have changed, too, by the way. The patients have gotten sicker at younger age. Their care is more complex, their needs are more complex in that period of time as well.

Dr. Neel Shah (06:10):
Yeah. I think that's probably fair, too. So, those are the three arguments. It's that demographically moms today have more complexity than they did in the '80s. Number two, we have more technology to help them. And number three, we care for them in teams, which is for a combination of reasons, but it used to be... My mom's OB also delivered me, but today it is rarely the case that the doctor you see in the office is the person who delivers your baby. And for all those reasons, that old bundled model was under stress.

Rae Woods (06:39):
And so, the American College of Obstetricians and Gynecologists decided, "Hey, we're actually going to go..." It kind of feels 180 degrees back to fee-for-service line item payments, as opposed to trying to make the bundle something that's better.

Dr. Neel Shah (06:55):
Right. So, this is a product of how payments are determined in America, but it turns out physicians are the only self-regulated profession. And that it's actually the American Medical Association, the AMA that controls what the billing codes are that determine all the payments and the relative value units, which is basically how much each code is worth.

Rae Woods (07:15):
And how much physicians get paid.

Dr. Neel Shah (07:18):
Right. And this is kind of wonky, but hang with me for a second. There's a CPT committee and this thing called the RUC committee. The CPT committee is the codes. The RUC committee is the value of those codes. And designing things by committee in a constituency-based organization is just really complicated. That's kind of the point. So, ACOG didn't make this decision, but they lobbied for this decision to happen. And there was a working group that very thoughtfully and very diligently tried to figure out what to do with the fact that the old bundle wasn't working. I've got real empathy for that and I can only imagine the cat herding that that required. In fact, I talked to people that were part of that process.

(07:53):
And ultimately, where they landed is the old bundle had to go. And there's pretty much consensus that the old bundle wasn't working. But then what happened was the easiest way out was just to end it and replace it with the thing that everybody knows, which is fee-for-service a la carte.

Rae Woods (08:09):
And I want to dig into the ripple effects of what switching back to a la carte could actually look like. And I actually want to lean on a different example of where this has happened, so go with me on this one here. 2026 was the first year that we saw a similar change in radiation oncology billing. By the way, they're actually moving towards a bundle rather than away from one. But what we've learned in the last few months is that seemingly simple change in a billing code is not easy for the providers who are then going to have to live in that world or the payers who are going to have to cover those costs. So, what we saw is that providers reported that payers lowered their base payments for the new codes.

(08:52):
They're denying higher complexity billing claims and the providers are losing money. There are some clinics that have reported a 30 to 40% loss in revenue in Q1 of this year alone because of the complexity of adapting to a new billing change. How concerned should people be, coming from your conversations, about the revenue impact for maternity care providers because of this?

Dr. Neel Shah (09:15):
Well, let me start with the fact that the reason everybody should care tremendously about this is that we're all born. Maternity services are the most utilized service in America.

Rae Woods (09:24):
Yes.

Dr. Neel Shah (09:24):
25% of all hospitalizations are a mom or a baby after a birth. And that cumulatively is 0.8% of our GDP.

Rae Woods (09:31):
Wow.

Dr. Neel Shah (09:33):
So, if you were to take our whole GDP, spread it across the table, you could see the cost of hospitalizing moms and babies with your naked eye. This is a big part of not only our healthcare industry, but it's a big part of our overall economy. And it's a big part of what we're even doing as a society, is caring for people who are trying to start and grow their families. And we have made a generational change in how we pay for it, which means we've created a generational change in how those services are going to be delivered. That is a big deal. Now, you would think that for something that's that big of a deal, it would benefit from a lot of careful planning and thoughtfulness.

(10:07):
But because of the systems that we have to make changes like this, we made a very radical change that everybody is now catching up to. And so, to answer your question directly, most likely there's going to be winners and losers from this. There might be some independent practices in rural parts of the country that may make less money through the unbundling. There may be others that make much more money. And what we don't know right now is are those "winners and losers" going to be the right ones.

Rae Woods (10:38):
Yeah. The winners and the losers is something that I'll say is particularly concerning to me, especially when I think about the timing of this rollout. So, there's going to be some opportunity to test the new codes in the fall of 2026, but the change won't take full effect until January of 2027. There's another big change in healthcare that is going to take effect in January of 2027. And that's that the Medicaid cuts and Medicaid work requirements and redeterminations that were passed in the One Big Beautiful Bill Act will finally start impacting providers. We've shared on Radio Advisory that the cuts here are significant. This is a trillion dollars being taken out of healthcare across the next 10 years.

(11:20):
And when we see providers struggling to meet their margin, one of the first difficult trade-offs that they start making is pulling back on L&D. That's at the front of my mind when I think about providers that might see revenue losses because of managing this billing change on top of managing Medicaid cuts. How do you think about the timing of this and what it could mean for providers' impact?

Dr. Neel Shah (11:47):
It turns out, in America right now, 50% of counties don't have a qualified person to deliver your baby. It also turns out the farthest you have to drive to get to a hospital that's qualified to deliver your baby in Kenya is three hours, but in the United States of America, you sometimes have to drive farther. That's the current state. And it turns out most Americans are born in hospitals that do less than 800 deliveries a year, probably closer to 500 deliveries a year. And hospitals that do that many deliveries lose money. I train in hospitals that do 10,000 deliveries a year. They make money. But you run deeply in the red if your volume is that low, because you're paying expensive people to wait for the delivery that might happen that day or tomorrow.

(12:31):
And on top of it, if it's with Medicaid reimbursement, you're dependent on other services in the hospital to subsidize labor and delivery. And ultimately, when that doesn't work, you shutter. And so, that's a trend year over year for decades that we've been watching that is unquestionably going to get worse, not a direct result of the bundled payments, but because of what you said, the trillion dollars coming out of Medicaid.

Rae Woods (12:51):
It's a compounding effect. If you take the margin pressures that providers are facing already, then you add to it the new pressures that are going to start as a result of these Medicaid cuts. You add it to the fact that rural providers, as you said, are struggling more so than their suburban and urban counterparts. Now we start to see the ripple effects of closures starting to really impact people. Since the end of 2020, 133 rural hospitals stopped delivering babies or announced that they would stop before the end of 2026. That's a real problem when it comes to patient care. What impact are you concerned about when it comes to the people that are actually delivering?

Dr. Neel Shah (13:30):
I'm concerned about many things. One is basic access and loss of infrastructure. You can't deliver a baby through a screen.

Rae Woods (13:38):
Yes.

Dr. Neel Shah (13:38):
I say that as a chief medical officer of Maven Clinic, right?

Rae Woods (13:41):
I'm smiling because I think I actually said that to you the last time that you came on this podcast, when we were talking about the benefits of all of the tech advancement that Maven has done. And I said, "Well, you still can't deliver a baby through a phone."

Dr. Neel Shah (13:52):
No, there are limits. You need infrastructure. And it's because I think that we share a lot of perspectives, Rae, on the world. But I think that we need infrastructure and that's really concerning. But then we also need that infrastructure, whether it's provided digitally or whether it's provided in person to be affordable. And there's going to be a lot of near term pain with the unbundling.

Rae Woods (14:12):
Yes.

Dr. Neel Shah (14:13):
And then there's questions about where we're going to land in a steady state. But in terms of the near term pain, nobody that I've talked to is on top of it. Almost everybody to the chief medical officers of national health plans, to individual practices to large health systems, everybody's on their back foot. So, first there's the change of management of it all, there's the recontracting, there's the updating of software systems, and then there's just the volatility around utilization, around the winners and losers. And so, ultimately, that's going to fall on patients because all the things. They're going to see money come out every single time they have a visit. Rather than having one global payment at the end, they're going to have to pay their cost share.

(14:52):
And so, they're going to say, "Do I really need that mental health screening because I'm paying for it right now." The administrative complexity means that their premiums are probably going to go up. They're already going up, by the way, to the point where affordability around healthcare is already at a boiling point heading into the midterms. It's probably the tip of the spear of the entire national conversation I predict.

Rae Woods (15:12):
That's right.

Dr. Neel Shah (15:13):
And then there's the deeper thing that you and I are talking about right now, about are hospitals or clinics even going to have the doors open. So, very concerning.

Rae Woods (15:22):
I don't envy the position that a provider is in to make sure that they can keep their doors open under the extraordinary financial pressure that many organizations are under. But if I start thinking about the compounding ripple effects, if I'm starting to make a decision of whether or not I see a commercial patient that's healthier versus one that is more complex. I mean, you point out in your piece that one of the reasons why we've been able to keep costs down relatively so in maternity is because we're able to do all these screenings.

Dr. Neel Shah (15:50):
Yeah. Here's the thing. I've actually talked to a lot of people who think unbundling is a good idea from this standpoint too. And there's an intellectually honest perspective there also, but the main thing is that actually more complicated patients will make more money. So, you can imagine that there's a Medicaid system, and I've talked to people inside those systems, where they're getting paid the same amount today for taking care of a healthy person as a very complex person. So, maybe paying more for the complex person will lead to better care for them, because there's more incentives to do things for them. But the actual clinical concern I have, Rae, is that risk in pregnancy is dynamic. What that means is people don't show up on their first visit high risk.

(16:34):
It's not until like the second to third trimester that preeclampsia creeps up or diabetes gets diagnosed. And so, you can't select patients at the beginning and know if they're high risk or not. And actually, the disincentive right now is to take good care of low risk people, which in theory should be most of us. So, that's part of the nuance and complexity here.

Rae Woods (18:07):
I want to channel a different perspective in this conversation, which is the perspective of the health plan. We mentioned that pregnancies in the US are trending towards more complexity, in part because of the demographic changes that we mentioned. And the health plans are also going to be dealing with the change of going from a bundled payment to these line items. Line items that have corresponding complex and expensive codes, which could add to the perception that providers are, and I'm putting this in quotes here, "up coding." In your reporting, did any fears come up among providers, that that would just lead to then more denials, more friction with payers, more operational burden?

Dr. Neel Shah (18:54):
Where I heard that concern was from Warris Bokhari, who's the CEO of a company called Claimable, that rightfully is on the Time 100 and has won a lot of plotteds for creating a service for helping patients with appeals to denials. And he tells me that every year in America, there's a billion denials, which is extraordinary because we only have 350 million people. And that only 1% of them are ever appealed. And so, he spends all of his days thinking about and working directly with people who are trying to cover the surface area of denials. And one, he said, "Unbundling is the original sin." And I was like, "What do you mean, Warris?" And he was like, "When they unbundled your cable, what happened? Was that better for you to have to pay separately for Netflix and Hulu and whatever?"

(19:39):
And he was like, "Remember Airfare, when it was all quaint and it covered your meal and your baggage? Did unbundling make that better for you? What do you think is going to happen?" And then he was like, "I do expect there to be much more denials because there's just much more surface area. There's more codes." But I will also tell you, I mean, I think we've observed in this fee-for-service construct there will be an effort to optimize billing. And part of that will be that gray area of upcoding and that will lead to increased costs as well. There's the utilization piece, there's an administrative complexity, and there's the upcoding. And all of that is going to lead to increased costs.

Rae Woods (20:14):
But I have to also say this was meant to be a positive change. There is a reason why unbundling happened. And it was intended to help OB/GYNs, who were saying, "My patients are more complex. It's no longer one caregiver that is seeing a patient through their 10-month journey through to delivery." And that was part of the entire movement that really pushed this forward. So, how could unbundling improve maternity care?

Dr. Neel Shah (20:42):
And I think it still could. And I really appreciate that question, because I feel like I'm tossing a lot of doom and gloom out there and this is a complicated issue. And unbundling is something that sits on top of the trillion dollars coming out of Medicaid that's unquestionably going to hurt a lot of people. And other things that are just really tough and have been tough for a long time, predating the current policies. But the upside of this is that if you have a team-based care model, if you have a integrated practice with midwives and OBs and everybody's working together to deliver the best care for the patient, attribution is a lot easier. Before, it was really hard for a person like me to have a granular understanding of which health services were being rendered, because it was one global payment. And now I have really precise data going forward and I can use that to make sure that the right care is being given.

(21:30):
I think that people are more likely to introduce innovative technologies. And Rae, what a time to be alive. We are living in a moment where there is a blood test that might be able to predict preeclampsia months in advance in a person with no apparent risk factors. And now there's incentives to think through how we deploy some of these emerging frontier technologies. I also think there's a world in which people may be incentivized to experiment more because there are going to be winners and losers. But if you think you're a winner, you might go to a payer and say, "Pay me to be a winner." And maybe you will see more people willing to go at risk, which is directionally what we want to see.

(22:08):
The only thing that gives me pause here is that for all of those good things to happen, there needs to be an accountability mechanism. And that generally is not our forte in healthcare and I don't see who owns that. I'm looking around, I've talked to dozens of people, and I'm not clear on who owns that accountability mechanism.

Rae Woods (22:25):
So, then what would you want to see for both there to be the data to actually track what does this change mean, in terms of costs, in terms of outcomes, in terms of impact to the provider, the patient, the payer? And what would the right accountability mechanism need to look like to understand is this change actually working?

Dr. Neel Shah (22:43):
Well, in order to do this, ACOG and AMA had to convince CMS that this would be budget neutral. So, there had to be a theoretical case. And then there'll be a multi-year process of studying it to see if it is the case or how it's not the case and to make adjustments. There's also things that we don't know. The RUC committee hasn't come back with what the relative value of the new codes are going to be. There's still a lot of unknowns. But if I could Monday morning quarterback, I talked to Kavita Patel, who was in the Obama White House during one of the biggest pushes towards bundling in our health system. And she described a process at CMS and CMMI, where they would've run the experiment first and then done something this radical.

(23:22):
But now what we're doing is doing something very radical. And the experiment is going to happen to the entire American population over a period of many years before we have an opportunity to do some of the fine-tuning fields two-week adjustments, let's say, like big probable adjustments that are going to happen. So, as a Monday morning quarterback, that's what I wish would've happened. Going forward, I think to use an obstetrics metaphor, we threw the baby out with the bathwater here. I don't think that the problem was bundles. The problem was the implementation of that bundle, which is like, of course, we shouldn't pay the same thing for a really complicated pregnancy and a really low... That's dumb. Nobody thinks that we should do that.

(24:02):
Also, just don't do that. We have other ways of not doing that. There's modifiers for not just clinical complexity, but social complexity. If you have an issue with the team-based care model, we should have a bundle for prenatal care and a different bundle for delivery. We can do that.

Rae Woods (24:17):
There could be a way that we could do a better bundle, as opposed to going this 180 degree almost reversal.

Dr. Neel Shah (24:23):
My bias would've been, I think bundles are conceptually a good thing. As many of us believe, this was a bad bundle. We should've created a better bundle.

Rae Woods (24:31):
Knowing that you just said that your bias is towards bundles, I'm going to ask you to take off your maternity care hat and think about the industry writ large. Does this signal any change for you as a health leader about the state of value-based payment and what the future of payment transformation could look like?

Dr. Neel Shah (24:50):
I am worried about that. Yeah. I think that bundles were a really big part of how CMMI had been conceived in the first place and thought about payment innovation. And this certainly could be precedent for re-looking at orthopedics and cardiac care and other places, where I think that we've made really important progress and positive steps. I will say, though, bundles aren't the only idea we have. We should have more ideas than that when it comes to payment innovation and there's a lot of opportunity. I actually do think that the CMI at the moment is doing some really important work, not only around digital health, but rural health transformation. The challenge is just the complexity of $50 billion for rural transformation, but a trillion dollars of Medicaid coming out and all that happening at once.

Rae Woods (25:35):
And to your point, test the ideas, get the data, figure out what's working and what doesn't work and then scale it.

Dr. Neel Shah (25:43):
I mean, call us old-fashioned, Rae, but I do prefer generally to have data run a test. And then this is not just sort of like scientific conservatism. We're talking about healthcare and we're talking about family formation, which is existential to people. So, it feels like something that we should do a little bit thoughtfully.

Rae Woods (26:01):
So, if that's the case, knowing that you are speaking to health leaders, what actions do you want them to take next knowing that this change is coming and knowing that this could be a signal for broader change? What do you want the providers, the employers, the health plans to do now to ease the burden of what's going to change in 2027?

Dr. Neel Shah (26:20):
Let's remember that policy usually starts with payment reform, but the purpose of payment reform is delivery reform. In an ideal world, we would start with the delivery reform. We would start with the care that people want to see and then pay for that. What we've done is we've taken a very fixed calcified way of doing things that was administratively simple. Yes, we've made it more complicated, but we've created way more degrees of freedom. And what we can do now, should we choose to do it, is decide what the care should look like. We can do that now. We have more incentives to do it. We can actually get paid for providing the right care. And then we have opportunities now to also think about how we direct payments towards those things.

(27:00):
The really tactical thing though, because I think your audience is like, "Wait, what? What's happening with the OB bundles?" Is that don't be on your back foot. It's happening on January 1st. I've been assured that it is definitely happening on January 1st, despite the fact that a lot needs to happen between now and then. That's actually very, very soon.

Rae Woods (27:17):
It is.

Dr. Neel Shah (27:18):
And by the way, some people are going to be pregnant in November and deliver their babies after January 1st. And so, what do you do for them? And every single person I've asked that question, people who really should have answers for that, don't have answers for that. So, the tactical thing is wrap your arms around it now, make sure you've got your systems ready. And then ideally, if you're one of the winners, if you're one of the people who provides good care and wants to provide better care, get on that part of it too.

Rae Woods (27:46):
Yeah. I love that. Well, Neel, thanks so much for coming on Radio Advisory and thanks for breaking this story for all of us.

Dr. Neel Shah (27:54):
Yeah, thank you. Anytime, Rae.

Rae Woods (28:00):
If you think this was a niche conversation, let me remind you of a data point that Neel shared. Maternity care represents 0.8% of our GDP. That's huge for an industry that covers 18% of our GDP as a whole. So, any policy change in this area has the potential to significantly impact the ecosystem as a whole. The clock starts now. These new changes go into effect on January 1st of 2027. If you're looking for help on this or any other change, remember, as always, we're here to help.

(28:54):
New episodes drop every Tuesday. If you like Radio Advisory, please share it with your networks, subscribe wherever you get your podcasts and leave a rating and a review. Radio Advisory is a production of Advisory Board. This episode was produced by me, Rae Woods, as well as Abby Burns, Chloe Bakst, and Atticus Raasch. The episode was edited by Katy Anderson with technical support provided by Dan Tayag, Chris Phelps, and Joe Shrum. Additional support was provided by Leanne Elston and Erin Collins. Special thanks to Gaby Marmolejos. We'll see you next week.