The Cost of Waiting

How Postponing the Decision to Outsource NICU Leaves Money on the Table

Posted by ProgenyHealth on July 15, 2021 at 9:29 AM

ProgenyHealth | Executive Decisions

If you work in the corporate world, you understand how bureaucracy hinders decision-making and cripples innovation. Fear of mistakes, the need for control, and aversion to risk all result in lost opportunities for cost-savings, productivity gains, and growth.

For this reason, the Cost of Delay (CoD) has become a critical business metric. According to a McKinsey Global Survey, only 20 percent of respondents said their organization excels at decision making. Most said it was ineffective.[i]

Measuring the Cost of Delay

To calculate CoD, you estimate the value an initiative will deliver times the length of the delay. Suppose outsourcing NICU Care Management provides 12 percent savings on NICU costs of $10 million per year, and an organization takes two years to decide. In that case, the CoD is 12% of $10 million x 2 – or $2.4 million left on the table.

CoD is an actual cost – but it lurks in the background. Because CoD does not appear on any ledger, it is often ignored by avoiding important decisions that involve taking action.

The Cost of Delay with NICU Care Management

Because NICU claims represent such a small percentage of claim volume, delaying implementation of a NICU care management program is common – especially compared to other clinical areas with higher utilization. The flip side is that even though NICU is low volume, these cases can represent the top 1% of costs with a high Cost of Delay.

When Sun Life studied the top ten conditions for million-dollar stop-loss claims, NICU-related costs appeared at positions three and six, but they were not identified as such.[ii] They were described as:

#3 – Congenital anomalies (conditions present at birth) – $171M (Average cost: $209.6K)

#6 – Liveborn (with secondary complications) – $ 143.9M (Average cost: $320.5K)

Creating a case for outsourcing requires getting a grasp of the NICU costs – especially if the costs are buried. Wendy Milligan, VP Strategic Sales and Operations at ProgenyHealth, explains the challenge:

"There will always be costs associated with birth, but health plans need to review a high-cost claimant report to uncover the costs related to NICU. Do you see a NICU trend in your top ten claims? Can you identify specific cases that could recoup 10% to 14% of that cost if managed differently? These savings require analyzing NICU events to understand where routine approvals are costing big money.”

Reasons Payers Delay NICU Management Decisions

Like any large organization, health plans must navigate a complex decision process when outsourcing NICU Care Management. A NICU program also brings its own set of barriers to making that decision. These barriers include:

  1. We’re already covered – Most health plans already provide Utilization Management (UM) and Case Management (CM) for NICU or believe they can readily build an in-house solution.
  2. Competing Priorities – NICU Care Management is often overshadowed by other priorities and initiatives within a health plan.
  3. Unaware of NICU cost – Plans are usually unaware that their NICU claims are in the top six stop-loss spending categories. Even though NICU events are infrequent, when they hit, they hit hard.
  4. Provider Conflict – Plans don’t want to upset their provider network. Because an outsourced care management team will interact with their providers, they want to avoid changing the status quo.
  5. Not one of the Big Conditions – Year over year, business process outsourcing by health plans has grown 22 percent.[iii] As part of this trend, plans regularly outsource specialized care management for imaging, cancer, cardiac, musculoskeletal, implants, and more. Despite this trend, plans don’t think to outsource NICU care management. Even if NICU generates costs and complexity, it’s not on their radar.

Download our latest report: "The Cost of Waiting"

Streamlining the Decision-Making Process to Outsource NICU

Payers deciding which programs are best handled by dedicated specialists must weigh the costs, time, talent, management, and oversight to build an in-house solution. Because of the time lost, payers must also consider the Cost of Delay.

Ann Kent, Chief Growth Officer for ProgenyHealth, explains that one of the first places for plans to look for the Cost of Delay is Length of Stay:

“When we see thirty percent and more of NICU infants with stays of only 1, 2, or 3 days, we know that NICU referrals are not being closely managed. Plans don’t realize it, but our eighteen years of NICU experience tell us that many of those babies should never have been admitted in the first place. They were likely admitted for a minor issue that warranted clinical oversight – but not a NICU admission. These sorts of admissions drive up NICU costs unnecessarily.”

ProgenyHealth | NICU Baby and Parent

Let’s make better decisions together.

ProgenyHealth meets with health plans every day to help them understand how NICU – a top-ten driver of cost and stop-loss claims – is affecting their bottom line.

Our team of data scientists, business analysts, and health economics specialists will analyze a health plan’s NICU claims to reveal opportunities to reduce costs while achieving better outcomes. We look at diagnosis at the time of admission, opportunities for NICU avoidance, and level of care related to length of stay. We also uncover broader patterns and trends that can help health organizations make informed decisions.

Even when health plans are actively focused on NICU Care Management, we find overlooked opportunities to decrease medical spend. The cost of doing something – outsourcing to ProgenyHealth – always turns out to be a better decision than the cost of waiting.


[1]  https://www.mckinsey.com/business-functions/organization/our-insights/decision-making-in-the-age-of-urgency

[2] 2021 Sun Life Stop-Loss & Health Research Report

[3] Black Book’s survey 5,400 health plan BPO users collected from Q3 2014 to Q1 2015

Topics: Blog, Cost of healthcare, health insurance, NICU team, outsourcing, The Business of Health Care, value of expertise

How Postponing the Decision to Outsource NICU Leaves Money on the Table

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