The BABIES Act creates two parallel federal efforts to expand access to freestanding birth centers and test new payment approaches. First, it authorizes a HRSA grant program to help accredited (or accrediting) birth centers cover start‑up, expansion, equipment, and accreditation costs, with awards sized between $300,000 and $500,000 to up to 15 centers per fiscal year.
The grant program is targeted to facilities serving areas with maternity care shortages or poor maternity outcomes and carries an authorization of $5 million for FY2026–2030.
Second, the bill adds a Medicaid demonstration under section 1903 to let selected States test prospective payment systems (PPS) for freestanding birth center services for women with low‑risk pregnancies who are Medicaid‑eligible. The Secretary must publish participation criteria and PPS guidance within one year, award planning grants to up to six States, and run four‑year state demonstrations that include Federal matching for payments under the tested PPS; the bill provides discrete appropriations for planning and demonstration phases.
At a Glance
What It Does
Establishes (1) a HRSA grant program to support start‑up or expansion of freestanding birth centers, and (2) a Medicaid demonstration program that funds States to test prospective payment systems for birth center services provided to Medicaid‑eligible, low‑risk pregnant women.
Who It Affects
Freestanding birth centers seeking accreditation or expansion, State Medicaid agencies, Medicaid‑eligible pregnant people (low‑risk), accredited midwives and obstetric providers, and hospitals that receive transfers from birth centers.
Why It Matters
The bill ties capital and operating incentives to accreditation, data collection, and defined care coordination requirements, while creating a structured test of bundled/facility PPS payments for birth center episodes—potentially reshaping how maternity care for Medicaid populations is delivered and paid for in maternity‑underserved areas.
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What This Bill Actually Does
The BABIES Act approaches maternity access from two angles: supply and payment. On the supply side, HRSA may award grants to freestanding birth centers that are accredited or aiming for national accreditation.
Grant funds may pay for facility renovation or construction, equipment, and costs related to accreditation and state licensure. The statutory language sets per‑award minimums and maximums ($300,000–$500,000) and contemplates up to 15 awards per fiscal year for 2026–2030, while separately authorizing $5 million across those years.
On the payment side, the bill creates a new subsection in section 1903 directing the Secretary of HHS to run a Medicaid demonstration to develop and test prospective payment systems for freestanding birth center services. The Secretary must publish participation criteria for centers and guidance on prospective payments within one year; criteria include accreditation status (or initial accreditation phase), state licensure/approval, explicit care coordination arrangements, transfer agreements with hospitals, staff and equipment readiness, and data collection capabilities.
The guidance must address partial facility payments for transfers, payments for short observation stays, separate facility payments for mother and newborn, coverage of pain‑relief supplies (e.g., nitrous oxide, hydrotherapy), and bundled professional services across prenatal through postpartum episodes.The demonstration is structured in stages: the Secretary issues an RFP for States to apply; up to six States may receive planning grants to design proposals and recruit participating birth centers; selected States run four‑year demonstrations that waive certain Medicaid rules (including Statewideness) as needed. During the demonstration, States pay participating birth centers under the tested PPS, and the Federal government matches those expenditures at the regular FMAP for each quarter.
The Secretary must collect data from States and centers and produce annual reports assessing clinical outcomes (transfers, cesarean rates, preterm births, NICU admissions) and fiscal impacts compared to usual care. The statute also provides planning and demonstration appropriations in specific fiscal years and defines ‘‘low‑risk pregnancy’’ for the program scope.
The Five Things You Need to Know
HRSA grant program: the Secretary may award grants of $300,000–$500,000 to up to 15 freestanding birth centers per fiscal year for FY2026–2030 to cover renovation, equipment, and accreditation costs.
Authorized HRSA funding: the statute authorizes $5,000,000 to carry out the HRSA grant program for the FY2026–2030 period.
Medicaid demo timing: the Secretary must publish participation criteria and PPS guidance within one year of enactment, award planning grants within 18 months, and require States selected for the demonstration to begin within 2 years and run each demonstration for 4 years.
State planning and pilot funding: the bill directs up to 6 State planning grants (uses include stakeholder input and accreditation support) and appropriates $3,000,000 for FY2027 for planning and $6,000,000 per year for FY2028–2031 to run the demonstrations.
Participation criteria and PPS requirements: centers must be accredited or in initial accreditation, state‑licensed/approved, have care coordination and transfer plans, at least two qualified staff on‑site per birth, data systems for maternal/newborn transfers, and the PPS guidance must address partial payments for transfers, separate mother/newborn components, and coverage of specific services and supplies.
Section-by-Section Breakdown
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HRSA ‘Strong Start Birth Center’ grants for start‑up and expansion
This section adds a grant program administered through HRSA for freestanding birth centers that are accredited or seeking accreditation. Grants may pay for construction/renovation, equipment purchases or upgrades, and accreditation and state licensure activities. The statute sets award sizes ($300,000–$500,000) and a not‑to‑exceed cap of 15 grantees per fiscal year for 2026–2030, and it instructs the Secretary to give special consideration to centers serving HRSA‑designated maternity shortage areas or areas with maternity outcomes below a Secretary‑set threshold. The provision also includes a $5 million authorization for FY2026–2030.
Medicaid demonstration authority to test payment models for birth centers
This addition directs HHS to run a demonstration exploring prospective payment systems for freestanding birth center services to Medicaid‑eligible, low‑risk pregnant women. It creates a multi‑step process: publish participation criteria and PPS guidance, issue an RFP for States, award planning grants, select States to run four‑year demonstrations, and require data reporting and annual HHS reports to Congress. It also authorizes Federal matching for State expenditures made under the tested PPS during each quarter of the demo.
Certification standards and required capabilities for participating birth centers
The Secretary must publish criteria for State certification of birth centers participating in the demo. Criteria include national accreditation (or completion of initial accreditation phase), state licensure or approval to provide the full scope of prenatal, labor/delivery, postpartum, and newborn ambulatory care, formal care coordination and transfer arrangements (including relationships with FQHCs, clinics, and hospitals), the ability to meet evidence‑based peripartum care for low‑risk pregnancies, and concrete operational capabilities (two qualified staff present for births, emergency readiness, transfer plans, physician consultation, and data systems for transfer and admission tracking). These specifics shape which centers can join and create operational expectations tied to participation.
Prospective payment guidance and State application requirements
The Secretary’s guidance must outline PPS elements such as partial facility payments for labor transfers, payments for observation/therapeutic rest, separate facility payment components for mother and newborn, coverage for specific supplies (nitrous oxide, hydrotherapy), and payment of professional services across prenatal, delivery, and postpartum episodes. The RFP for States will require a minimum number of existing or developing centers, licensing recognition mechanisms, evidence of maternity care deserts in the State, and a demonstration that the proposed PPS could expand access without increasing net Federal spending (Secretary’s determination). State applications must list participating centers, verify compliance with participation criteria, describe services to be paid under the PPS, commit to payment rates, and agree to data submissions.
Planning grants, 4‑year demos, waiver authority, reporting, and appropriations
HHS must award planning grants to up to six States within 18 months to design their demo proposals and help centers meet participation criteria (including accreditation). Selected States begin demos no later than 2 years after enactment and run each demo for four years; the Secretary will provide Federal matching (FMAP) for amounts the State expends under the State’s PPS. The statute waives certain Medicaid statutory requirements (e.g., Statewideness) as needed. The Secretary must produce annual reports starting two years after the first State selection assessing clinical outcomes (transfer rates, cesareans, preterm birth, NICU admissions) and fiscal effects compared to non‑demo care, and submit recommendations about continuation or modification six months before a demo ends. Specific appropriations are allocated: $3,000,000 for FY2027 (planning) and $6,000,000 annually for FY2028–2031 (demonstrations); funds remain available until expended.
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Explore Healthcare in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Medicaid‑eligible pregnant people with low‑risk pregnancies in maternity‑underserved areas — gain increased local access to peripartum care and support services when birth centers are started or expanded and when States adopt PPS designed to cover comprehensive episodes.
- Freestanding birth centers that can obtain accreditation — receive capital and accreditation support and access to prospective payment revenue streams that cover bundled facility and professional services across prenatal, delivery, and postpartum care.
- Certified nurse‑midwives and licensed midwives — expand practice settings and potential reimbursement under a PPS that explicitly recognizes midwifery professional services as part of the bundle.
- Rural and maternity care deserts — targeted grant and demo selection criteria prioritize facilities that serve areas with maternity shortages, improving geographic access where hospital obstetric services are scarce.
- State Medicaid programs — gain an authorized, structured pathway (planning grants, RFP, waiver authority) to test payment reforms that could increase capacity and standardize birth‑center reimbursement.
Who Bears the Cost
- Federal Treasury — funds HRSA grants and the Medicaid demonstration (appropriations and Federal Medicaid matching) and assumes administrative costs for RFPs, guidance, reviews, and annual reporting.
- State Medicaid agencies — must design and run the PPS, carry administrative burdens for enrollment, monitoring, data submission, and potentially front‑fund payments or adjust budgets to accommodate bundled payments and provider recruitment.
- Participating birth centers — must meet accreditation, licensure, staffing, data collection, and transfer requirements; smaller centers may incur accreditation, IT, and compliance costs to qualify.
- Hospitals and obstetric units — may face more transfers from birth centers and potential revenue shifts if Medicaid enrollees receive more services in birth centers rather than hospital‑based settings.
- HRSA and HHS program offices — responsible for grant selection, monitoring grantees, implementing the RFP and demo, and producing the required annual outcome and cost reports, without dedicated operational staff or an explicitly separate appropriation.
Key Issues
The Core Tension
The bill seeks to expand low‑risk, community‑based maternity care and lower costs by encouraging birth‑center capacity and testing bundled PPS payments, but that approach risks undercutting safety or shifting uncompensated complexity to hospitals if payment rates, transfer policies, accreditation, and data systems aren’t rigorously specified and funded; the central dilemma is how to incentivize access and lower system costs while guaranteeing timely, well‑resourced escalation of care when complications arise.
Several implementation tensions and practical gaps stand out. First, the HRSA grant program’s per award amount and the cap on up to 15 grantees per year for FY2026–2030 are internally inconsistent with the single $5 million authorization for the entire period; the statute does not reconcile how multiyear award volumes will be funded.
That mismatch creates immediate uncertainty about how many centers will actually receive grants and whether awards will be reduced or subject to separate appropriations.
Second, designing a durable prospective payment system for birth centers is technically complex. The bill requires guidance covering partial payments for transfers, separate mother/newborn facility components, payment for specific supplies, and bundled professional services across an episode that may span prenatal through postpartum care.
Translating those elements into rates that fairly reflect complexity, avoid under‑incentivizing necessary transfers, and are administrable for State Medicaid claims systems will require significant actuarial work and robust data—data the bill requires but does not fully scope for standardization or interoperability. Small centers may struggle with the upfront cost of data systems, accreditation, and the staffing levels the statute demands.
Finally, the statute’s selection and evaluation criteria leave open operational judgments: the Secretary sets the thresholds for ‘‘maternity care outcomes below a threshold’’ and decides when a State demonstrates potential to ‘‘increase quality without increasing net Federal spending.’’ Those subjective determinations, combined with waivers of Medicaid rules like Statewideness, could produce uneven geographic rollouts and make cross‑State comparisons difficult, complicating the Secretary’s required annual assessments of clinical and fiscal impacts.
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