NEW YORK — General Electric Co and other large companies are trying to chip away at rising childbirth costs for U.S. employees, working directly with hospitals to reduce cesarean sections and related complications.
The efforts are in very early stages, with few details on their impact outside of cost savings of a few million dollars so far. But they illustrate yet another path companies are taking to bring down U.S. medical costs by working with doctors and hospitals to set health goals.
GE’s maternity strategy is designed to steer its employees to hospitals that are believed to provide better care and less likely to recommend unnecessary and costly interventions, company officials told Reuters.
U.S. employer spending on maternity care rose 50 percent in the last decade, fueled by a jump in C-section rates despite years of efforts to curb the practice, according to research firm Truven Health Analytics.
“Maternity is one of the main drivers of high cost claims,” for employers, said Ellen Kelsay, chief strategy officer at the National Business Group on Health. Avoiding unnecessary C-sections and minimizing complications “decreases turnover in the workforce following the birth of a child,” she said.
General Motors Co said it has included maternity goals, including reducing C-sections, in a new contract with a Detroit-area hospital. Dow Chemical demanded explanations from hospitals that care for its employees when its C-section rate hit 44 percent several years ago. Now part of the merged company DowDuPont Inc, it is working on new payment agreements with doctors and administrators.
“We went to them and said how do you explain this?” said Steve Morgenstern, Dow Chemical’s North American Health and Insurance Plan Leader, who called the rate “unacceptable.”
GE launched its Maternity Care Select Program in Cincinnati, Ohio, home to its aviation business, where nearly 300 babies are born to employee families every year.
Local hospital system TriHealth agreed to a single “bundled” payment rate to care for low and moderate-risk mothers from the start of pregnancy until 90 days after the baby is born, rather than charge for each visit and delivery separately. That typically removes the financial upside for C-sections, which cost nearly 60 percent more, on average, than a regular delivery.
Adam Malinoski, GE’s manager of health services, said none of the company’s health insurers offered bundled payments on maternity care when it designed its program, so it decided to work directly with providers.
GE pays the out-of-pocket costs for women who enroll, saving them up to several thousand dollars. TriHealth and GE would not disclose the bundled payment rates or how they compare with other hospital rates.
New deliveries under GE’s program began in 2016, when only 78 pregnant women enrolled. In 2017, 136 women enrolled, TriHealth told Reuters. C-section rates for first-time, low-risk deliveries, which represent a small group within the program, dropped to about 6 percent in 2017 from 24 percent in 2016. That comes in well below the U.S. rate of 26 percent for low-risk births.
TriHealth would not disclose the C-section rate for the total group.
GE expanded the program to hospitals in Wisconsin, South Carolina and Massachusetts in 2017 and announced a fifth location in New York in August, but says it is too early to provide data for other locations.
GE executives said the program so far has saved the company nearly $2 million because of lower negotiated fees for maternity care. It represents a fraction of its spending on the 113,000 employees and family members enrolled in the GE health insurance plan, but a step in the right direction, they added.
The rise of C-sections has been fueled in part by fears about malpractice litigation, as well as expecting mothers with health issues or who are older, which raise the risk of complications.
Hospitals say that makes them reluctant to set maternity goals. The Stanford Health Care medical system works directly with employers on health targets, such as diabetes care, but has so far refused to set specific goals on C-sections.
In such higher risk cases, “it’s entirely appropriate and (there’s) no way to determine upfront” who will need a cesarean, said John Jackson, who handles corporate health partnerships at Stanford Health Care.
Suzanne Delbanco, executive director of the nonprofit Catalyst for Payment Reform, has worked with large employers seeking to reduce C-section rates. But some companies “are still leery about wading in too much,” she said. “They don’t want to alienate people, they don’t want to be accused of being Big Brother.”
GM is taking its own shot at lowering costs and improving care with a new health program, announced in August, that was created directly with Henry Ford Health System in Michigan . Three of the program’s 19 health metrics involve maternity care such as lowering C-section rates, the company told Reuters.
The automaker’s total C-section rates vary widely, from about 40 percent in the Dallas/Fort Worth area to 30 percent or lower in Detroit.
“We were shocked,” said Sheila Savageau, U.S. health care leader for GM. “We have to change the system.” — Reuters

GROCERY GROUP Ahold Delhaize will roll out small, automated warehouses to speed order picking and cut delivery times, Reuters has learned, as it revamps its ecommerce business in response to rising competition in a fast-growing sector.
At an investor event on Nov. 13, the world’s eighth biggest food retailer is set to showcase a partnership that will allow it to automate order collection at mini “robot supermarkets” attached to the stores of its U.S. chains like Stop & Shop.
That marks a departure from its previous strategy of relying more on manual labor at bigger warehouses, or on a mixture of man and machine, to meet online food orders.
Now Netherlands-based Ahold Delhaize is teaming up with Takeoff, a start-up which builds small warehouses that stack groceries to the ceiling to save space and use robot arms to assemble shoppers’ orders for items such as beer, milk, bread and fruit.
The warehouses serve as condensed supermarkets that can supply several stores with click-and-collect orders. They cost about $3 million to build, which Takeoff says is less than the cost of a typical store revamp.
“Ahold is preparing for a major push,” Curt Avallone, Takeoff’s chief development officer who led digital innovation at Stop & Shop until 2003, told Reuters.
“If it goes well, both from their side and our side, the hope is we would rapidly be able to build quite a few.”
Ahold Chief Executive Frans Muller confirmed the deal on Wednesday and said it should help expand online faster and at a lower cost than with standalone warehouses.
“With the robotized solution we can optimize those picking costs and be closer with micro fulfillment to our catchment areas. We also reduce the cost of the last mile,” he said.
Ahold’s shares jumped 5 percent on Wednesday as it reported third-quarter results that beat analysts’ forecasts, lifted by strong online sales and growth in its key markets.
ONLINE GROCERY WAR
Ahold’s move is the latest salvo in a war for the online grocery market that has escalated since Amazon’s takeover of Whole Foods last year. Whole Foods since launched same-day grocery delivery with Amazon’s Prime Now in more than 60 cities. Other retailers are also racing to respond: Walmart will test Alert Innovation’s Alphabot automated grocery picking at a store in New Hampshire, and Kroger has teamed up with British online grocery expert Ocado.
Kroger said it will disclose the location for the first three U.S. sites out of a planned 20 high-tech Ocado warehouses in the next couple of weeks. They will take about two years to build and each cost Ocado about $39 million.
Ahold Delhaize, the operator of U.S. chains such as Giant Food, Food Lion and Hannaford, acquired Chicago-based online grocer Peapod in 2000 which is still the market leader.
However, growth has slowed at Peapod since Amazon bought Whole Foods and as supermarkets — including Ahold’s own chains like Stop & Shop — team up with start-ups like Instacart to offer curbside pick-up, or one- to two-hour delivery.
Ahold reported U.S. online sales growth picked up in the third quarter, but Muller said he was still not happy with that.
HAND TO MOUTH
Until now, Ahold’s strategy has been largely manual. At its warehouses, known as “dark stores,” pickers grab items from shelves and put them into crates for packaging and delivery. Ahold has decades of experience in delivering groceries to homes, starting in the Netherlands in 1986 when its Albert Heijn chain took orders by phone or fax.
At one Albert Heijn warehouse outside the Dutch city of Eindhoven, pickers each grab an average of one product every 10 seconds, walking about 4.5 km a day. Algorithms work out the shortest path through the aisles, and try to minimize trolley congestion.
Pawel Kamienczuk, a 28-year-old order picker from Poland, sweats as he races down an aisle, trying to meet a target of 380 items an hour.
“At the beginning, it took time to get used to it, but now I don’t feel tired,” he said.
Kamienczuk wears a device like a smartphone on his wrist which tells him where to go and which items to grab next.
He scans each product with a device mounted on his forefinger and puts it into one of 18 blue crates stacked on a large trolley.
Albert Heijn warehouses can pick and pack 135-140 units per labor hour, lower than Kamienczuk’s rate because it takes into account work done by others to unload supplies, stack shelves, assemble orders and pack delivery vans.
The figure is also less than the 163 units Ocado reported for the first half of 2018, but analysts say it is impressive given than Albert Heijn’s capital outlay for its centers is a fraction of the cost of Ocado’s automated warehouses.
Efficiency is key at a time when labor costs are rising in the United States and Europe.
The Dutch jobless rate is at an 18-year low and U.S. unemployment is around the lowest in five decades, wage pressures are rising and companies are increasingly complaining about a scarcity of workers.
Last month, Amazon said it would raise the minimum wage for U.S. workers to $15 an hour, in part to attract staff.
China hopes to escape bumpy landing as trade ties improve
At Ahold’s Peapod warehouse in Jersey City, pickers who start on about $12 per hour with benefits can make up to $3.50 an hour extra if they beat speed targets, but they are also closely monitored for quality: a dented tin could mean a refund.
“When we shop, we have many people that check after us,” said Amal, an expert “shopper” who specializes in selecting bananas, Peapod’s top selling product.
The Peapod warehouse in New Jersey is the firm’s biggest and most sophisticated to date in terms of automation.
There, crates move along conveyer belts to teams of pickers who focus on different food categories, while robots add non-food items like shampoo. Peapod does not share pick times.
Despite the automation, Peapod employs 825 people here, working two shifts from 5 a.m. until 2 p.m. and from 5 p.m. until 2 a.m. in a warehouse with seven temperature zones.
NEXT DAY VERSUS SAME DAY
Peapod has only offered next-day delivery so far. The partnership with Takeoff will enable the group to offer same-day delivery, or click-and-collect, initially to customers living near a pilot warehouse at a Shop & Stop in Connecticut.
Avallone declined to comment on the financials of the Ahold deal, but said Takeoff should be able to roll out the concept quickly as it takes 16-20 weeks to set up its 10,000 square foot warehouses, which can handle up to $50 million in annual sales.
That contrasts with Ocado’s newest facility in Britain, which is a 563,000 square foot site, with a potential annual turnover of 1.2 billion pounds ($1.55 billion).
The U.S. grocery ecommerce market is still in its infancy at just 1.6 percent of sales, but it is expected to more than double by 2023, according to industry research group IGD.
Ahold, which makes almost two thirds of its sales in the United States, wants to boost ecommerce sales to 5 billion euros ($5.8 billion) by 2020, or about 8 percent of total turnover, from 2.8 billion in 2017. It will update that target next week.
Its U.S. online sales should near $1 billion by the end of the year as it creates a shared ecommerce infrastructure for all of its store-based brands, along with its online grocery site Peapod, Muller said in August. — Reuters