Homebirth will never be cost effective

Earlier this year I criticized a paper that claimed that the Birthplace study showed that homebirth is cost effective.

… the study CAN’T tell us about cost effectiveness since it does not take into account the largest costs, the costs of caring for a child injured during birth and the massive costs associated with legal settlements for babies who were injured or died.

There is another issue that I did not address in that post: even leaving aside long term costs of injuries and brain damage, homebirth can never be cost effective. To understand why, it helps to consider a simple example, such as making a pair of pants.

Which pair of pants costs more:

1. The pair of pants fabricated by Joe, using machinery costing tens of thousands of dollars?

2. The pair of pants sewn by Jane using her $800 sewing machine?

At first glance, it seems that the pair of pants created with the inexpensive machine surely costs less to produce, and that would be the case if Joe used his machinery to produce only a single pair of pants. However, Joe uses his machinery to produce 1,000 pairs of pants a day, 5 days a week, 50 weeks a year. Not only that, Joe obtains his fabric on industrial sized bolts at wholesale prices, while Jane has to pay retail price for a small quantity at her local fabric store. Similarly, Joe buys other supplies, like thread, needles and zippers in bulk, leading to lower prices per unit of each item than what Jane must pay.

When the cost of the expensive initial investment is spread over the hundreds of thousands of pairs of pants that Joe produces each year, the actual cost of a pair produced by Joe is far, far less than the cost of a pair produced by Jane. This principle is known as “economies of scale.” As Wikipedia explains:

… There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. “Economies of scale” is a long run concept and refers to reductions in unit cost as the size of a facility and the usage levels of other inputs increase.

… The common sources of economies of scale are purchasing (bulk buying of materials through long-term contracts), managerial (increasing the specialization of managers), financial (obtaining lower-interest charges when borrowing from banks and having access to a greater range of financial instruments), marketing (spreading the cost of advertising over a greater range of output in media markets), and technological (taking advantage of returns to scale in the production function). Each of these factors reduces the long run average costs (LRAC) of production …

The same economic rules apply to providing obstetric care. At first glance, it appears to cost less for Jane to have a homebirth, than for Joanna to give birth in the hospital. However, when governments are considering the cost of obstetric care, they aren’t looking at individual cases; they’re looking at providing obstetric care for an entire population. It is far more cost effective to provide obstetric care at a centralized facility where a variety of providers can care for many patients at the same time than it is to provide care in a private home where each midwife can care for only one patient at a time.

Many countries, like the UK, have moved to centralize care in regional hospital facilities instead of multiple community hospitals. In a regional facility, 10 midwives can care for 60 patients or more at the same time, since they are in different stages of labor and will not all deliver at the same time. In contrast, 10 homebirth midwives can care for 10 patients in the same amount of time. So while the cost of an individual homebirth attended by a midwife might appear smaller, long run average costs are much, much higher.

Homebirth advocates are looking at the wrong metric, the cost of an individual birth, when declaring that homebirth costs less than hospital birth. The correct metric is the cost of providing obstetric care to the entire population in a given time period. By that measure homebirth is woefully cost ineffective. In countries like the UK, where there is a shortage of midwives, homebirth is probably the least cost effective option of all.

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