Rural Obstetric Service Resumption Payment Modeling

Problem

A Medicaid agency wanted to use payment policy to encourage rural hospitals to restore obstetric and maternity services they had stopped offering. To determine whether higher reimbursement could provide a meaningful incentive, the agency needed provider-specific estimates of what each hospital could receive if services resumed. Recent baseline claims, however, did not contain a full year of obstetric volume for every facility.

Approach

Built a seven-program SAS simulation pipeline that reconstructed one year of pre-closure obstetric utilization for each hospital, combined it with two years of baseline inpatient claims where available, and identified obstetric, neonatal, and normal-newborn volume through APR DRG service lines.

Repriced the claims under two scenarios using the agency’s newly implemented rate model: continued operation without obstetric services and resumed operation with historical obstetric volume restored. Applied the corresponding rural hospital base rates, DRG relative weights, age and service adjusters, transfer rules, cost-to-charge ratios, and outlier policies, then summarized the differences by provider and DRG so decision-makers could see both total reimbursement effects and the service volume underlying them.

Outcome

The model estimated approximately $3.1 million in combined potential annual reimbursement increases if four rural hospitals resumed obstetric services, with provider-level estimates ranging from roughly $247,000 to $1.5 million. This gave the agency facility-specific payment incentives it could use in discussions with hospitals about restoring maternity care, replacing a general appeal to reopen services with a quantified financial case for each facility.

The reusable pipeline also made the analysis refreshable as claims volume, hospital participation, or payment rates change, rather than requiring each service-restoration scenario to be rebuilt from scratch.