Money-making L.A. hospitals quit delivering babies. Inside the fight to keep one labor

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Detranay Blankenship was 16 weeks pregnant when she found out she was expecting. The days passed quickly, and soon she was 7 centimeters dilated at Martin Luther King Jr. Community Hospital.

The 26-year-old first-time mom wasn’t sure what to expect during labor, but the team at MLK’s maternity ward soon felt like family. Every hour midwife Angela Sojobi bustled in to check on her progress and offer cheerful words of encouragement. When it was time to push, a nurse lowered the lights and flipped on the soothing sound of rain.

After 14 hours of labor, baby Myla made her appearance in the world. “That’s my grandbaby!” Latrina Jackson, Blankenship’s mother, shouted. The family’s cheers rang down the hall.

Blankenship lives just blocks away from MLK, where her labor was cozy and personalized. It was the kind of birth that many parents-to-be hope for, but a decade of widespread cutbacks to maternity care in California has made it almost a luxury. It’s available only because MLK’s leaders are fighting to keep maternity services despite steep financial losses.

Over the last decade, nearly 50 maternity wards have closed across California, with more than half shutting down in just the last four years. Seventeen of them were in Los Angeles County, where maternity ward closures have far outpaced the region’s declining birth rate.

Driving the trend in L.A. are for-profit hospitals owned by multi-state corporations. For-profit companies owned 13 of the 17 hospitals that stopped delivering babies. State data shows more than half closed at a time when the hospital was making millions of dollars for investors. Those who lost the most access were the state’s poorest patients. One hospital that serves predominantly low-income patients was earning 13 times more than the median hospital operating margin in California when it shuttered its labor and delivery ward.

In contrast, government-run and nonprofit hospitals tend to maintain labor and delivery units even if they are losing money overall, according to state data on hospital finances. State law requires nonprofit hospitals such as MLK to address community needs as part of maintaining their tax-exempt status.

Hospitals raking in profits often do so despite losing money on maternity care — the service has long been deemed a money-loser. That’s in part because Medi-Cal, California’s public insurance program which covers half of all births statewide, has had the fifth lowest reimbursement rate for obstetrics in the country, according to the Kaiser Family Foundation. Private insurance pays roughly five times more for an uncomplicated vaginal delivery. Simply put, when for-profit hospitals look at the bottom line and choose to make cuts, one of the first services to disappear is usually maternity care. No law prevents them from doing so.

In the L.A. area, these decisions disproportionately affect low-income Black and Latino communities, a CalMatters analysis found. The closures in L.A. overwhelmingly took place in hospitals where up to 80% of patients had Medi-Cal. These populations have some of the worst pregnancy-related complications and mortality outcomes in the state.

“Marginalized patients, women particularly … have really observed the decline in their care even in a place like California,” said Dr. Laila Al-Marayati, division chief for obstetrics and gynecology at Keck Medicine of USC and Los Angeles General Medical Center. 

This is because the state has failed to prioritize women’s health for decades, increasing Medi-Cal obstetrics rates only recently, Al-Marayati said. Hospitals with high numbers of Medi-Cal patients frequently can’t break even on labor and delivery. As a result, maternity care takes a backseat to more lucrative hospital services, leading to the wave of recent closures.

Residents in southern L.A. have been among the hardest hit. In the last few years they’ve lost two maternity wards: Centinela Hospital Medical Center and Memorial Hospital of Gardena Medical Center. Both hospitals are owned by for-profit corporations and happen to serve the highest proportion of Black Californians in the state.

Their closures mean that MLK now operates one of the last maternity wards in the area. The hospital gives patients access to a midwife-led program celebrated statewide for its healthy outcomes for both mom and baby.

It, too, is at risk.

Last year the hospital ran a $42 million deficit. A recent $20 million grant from Los Angeles County will keep it open until next summer, MLK’s chief executive Dr. Elaine Batchlor said, but it won’t fix the hospital’s primary funding problem: Medi-Cal doesn’t pay hospitals and doctors enough to keep up, she said.

Medi-Cal reimburses MLK about 71% of the cost of delivery, hospital spokesperson Gwendolyn Driscoll said. The hospital loses more than $2 million annually on its maternity ward. Despite the losses, Batchlor said the maternity ward is integral to the hospital’s mission.

“We serve a vulnerable community that has few other options,” Batchlor said. “The financial distress of our hospital threatens that mission, but we will continue to provide the care that we can as long as we’re able.”

California maternity wards closures outpace U.S. trend

Across the country, communities are scrambling to save maternity care. About 3% of U.S. hospitals, mostly in rural areas, have stopped delivering babies since 2011, according to a report by health consulting firm Chartis. California has lost an even greater share: More than 14% of the state’s 337 hospitals ended maternity services during the same period.

Some state lawmakers are trying to slow the loss of services. They’ve characterized what is happening in L.A. as “modern-day redlining” in recent legislative hearings.

“If you start looking at where these are being eliminated, I do think the local counties who are familiar with the communities are going to question why the decisions seem to be made around hospitals that are overrepresented of…people of color,” Sen. Dave Cortese, a Democrat from Campbell, told CalMatters. 

Hospitals administrators say the state could make a difference by significantly increasing how much Medi-Cal pays for births to incentivize hospitals to keep these services open. 

Last year lawmakers approved a rate increase that went into effect in January, bringing up pay for some obstetric services, but the state’s multibillion-dollar deficit makes further raises unlikely. Gov. Gavin Newsom has proposed canceling additional increases to address the budget gap, something that lawmakers have rejected in a counter proposal.

“I’m not sure how many more conversations we need to have about some of the crises that we have within our health care space,” Assemblymember Akilah Weber, a Democrat and an obstetrician from La Mesa said during a recent budget hearing on Medi-Cal rates. Weber said Medi-Cal rates are “embarrassingly low in the state of California.”

The California Department of Public Health in an emailed statement said it is aware of hospitals that have chosen to reduce or eliminate labor and delivery beds, but that in the last three years the total number of beds across the state has slightly increased.  “CDPH is exploring any potential avenues within its authority to promote retention or further increases of these beds, in the interest of making sure maternal care across California remains protected.”

Some experts say it will take federal intervention to slow closures. On top of increasing reimbursement rates, they’ve also suggested putting policies in place that would make it harder for hospitals to close maternity services in already underserved communities.

For now, Cortese is carrying a bill to improve transparency and public notification when a hospital decides to close a maternity ward. Private hospitals aren’t currently required to disclose the reasons for eliminating services, he said. Another bill by Weber would require hospitals to notify the state a year in advance if a maternity ward is at risk of closure due to staffing or financial limitations.

Cortese and Weber say their measures would give the state and local governments information needed to intervene if there are potentially unnecessary closures. 

They won’t, however, bring back services that have already been lost in communities like Blankenship’s. 

Next to her delivery room, a young couple also covered by Medi-Cal rests while their newborn son sleeps in a bassinet. The mother didn’t think she would be able to deliver vaginally after a previous cesarean section, but MLK gave her the chance that other hospitals wouldn’t. At the end of the hall, a homeless woman living in a nearby shelter labors with a midwife by her side.

“If this community lost the services, I don’t know where these women would go,” midwife Sojobi said minutes after catching Blankenship’s daughter.

The insurance divide

More than 90% of the patients who go to MLK are covered by public insurance programs like Medi-Cal or Medicare. In contrast, most hospitals that still operate maternity wards rely heavily on private insurance. Patients with private insurance represent only 3% of MLK’s patient population. 

Thirteen of the 17 maternity ward closures in L.A. County happened at hospitals that serve what the state calls a disproportionate share of low-income patients. Six of those closures happened in areas where shortages of medical providers make it difficult to get any type of health care, a CalMatters analysis of state and federal data shows.

Batchlor and other hospital administrators who serve mainly low-income patients say this creates a problem because public insurance reimburses far below the cost of care. The added expense of 24-hour staffing in a maternity ward makes it a loss leader for most hospitals.

Although more than 40 hospitals still deliver babies in the county, doctors say the swath of recent closures has caused care delays. The remaining maternity wards have to absorb new patients, sometimes overwhelming them, said Dr. Lisa Moore, a family medicine doctor with Venice Family Clinic, a community health center with clinics throughout the region. Since 2020, the number of babies born at L.A.’s three county-run hospitals has increased by several hundred each year, state data shows.

Medi-Cal patients often bear the brunt of delays. Appointments for pregnant Medi-Cal patients who need scheduled inductions have been increasingly postponed, and some hospitals have stopped taking all but the highest-risk Medi-Cal patients, multiple doctors interviewed for this story said. 

“People are angry, and they’re scared often because we’re telling them ‘We need to induce you. It’s not safe for you to continue being pregnant.’ But then they’re also hearing ‘Not yet. There’s no appointment,’” Moore said.

Delays worsen existing maternal and infant health disparities and increase the likelihood of a pregnant patient needing a cesarean section, Moore said.

The role of for-profit hospitals

The high costs of keeping specialized staff available 24/7 combined with relatively low payment and high malpractice risk make labor and delivery particularly difficult for hospitals to maintain, but experts say hospitals can usually recoup losses on other services. 

Two hospitals neighboring MLK that recently eliminated labor and delivery were high-earning for-profit facilities.

Centinela Medical Center, which is owned by national chain Prime Healthcare, averaged a 10% five-year operating margin when it stopped delivering babies in 2023. In contrast, the median five-year average operating margin for all California hospitals was 2%, according to a CalMatters analysis of hospital financial records. Prime Healthcare and its foundation have closed five maternity wards statewide since 2013, the most of any health system in California.

Elizabeth Nikels, a spokesperson for Prime Healthcare, denied that profitability or staffing shortages had anything to do with maternity ward closures at Centinela or its other four hospitals. She instead pointed to declining demand and low birth rates. 

Like Centinela, many hospitals cite decreasing birth rates as a reason for eliminating labor and delivery. California’s birth rate has reached record lows and L.A. County is not immune to the trend, but maternity wards are closing faster than birth rate declines.

In 2023, 7,700 fewer babies were born in L.A. County compared to 2020. Maternity wards closed at a faster pace than that decline, forcing remaining hospitals to absorb about 3,800 additional births over three years, according to a CalMatters analysis of hospital utilization records.

“Prime Healthcare’s priority is always community need and patient care. Service line decisions are based on greatest benefit to patients with financial sustainability not a determining factor,” Nikels said in an email.

Centinela consolidated services with St. Francis Medical Center, also a Prime hospital located 10 miles away that delivers almost four times as many babies. In 2022, 732 babies were born at Centinela, state records show, roughly two per day. Another 2,762 were born at St. Francis that same year. Centinela’s consolidation with St. Francis gives patients access to “high quality care with expansive services,” Nikels said.

The other hospital near MLK that stopped delivering babies is Memorial Hospital of Gardena. Owner Pipeline Health System, another national chain, closed Memorial’s maternity ward in 2020. The hospital posted an average annual profit margin of 16% over the five years preceding its closing of labor and delivery services, state records show.

Pipeline owns four hospitals in L.A. County. Only one offers labor and delivery services. Jane Brust, a spokesperson for Pipeline Health System, said it would be “cost prohibitive” for Pipeline to implement obstetrics at its other three hospitals.

Meanwhile, nonprofit hospitals can also be part of large, well-funded systems, such as Kaiser Permanente and Sutter Health, but by law are required to assess the needs of their community and invest in those needs in exchange for their tax-exempt status. The attorney general holds additional regulatory power over nonprofit hospital acquisitions. This is not the case for transactions between for-profit systems.

“These aren’t public entities. They make the decisions in their boardroom, and nobody really knows what the basis was,” said Sen. Cortese.

That means for-profit systems tend to have more leeway in prioritizing the bottom line.

“In order to make money, you have to increase your revenue or decrease your expenses,” said Ge Bai, professor of health policy and management at Johns Hopkins University. “To decrease expenses is to cut off those unprofitable services.”

What do L.A. parents-to-be want

Other experts say policymakers need to look beyond money.

“The bigger public policy question is, should hospital-based (obstetrics) be part of a set of services we feel everyone in California needs access to and should be a certain geographic distance from,” said Kristof Stremikis, director of markets and insights at the California Health Care Foundation. 

For communities in the neighborhoods surrounding MLK, Centinela and Gardena, that’s an easy answer, said Gabrielle Brown, maternal and infant health program coordinator with Black Women for Wellness. 

After Centinela ended its maternity program, Black Women for Wellness canvassed households within 10 miles of the hospital and held a community town hall to assess the impact. The verdict: Residents of Inglewood, a majority Black and Latino city, felt abandoned, Brown said. 

The community was also reeling from the death of April Valentine, a young Black woman who died during childbirth at Centinela nine months before the hospital stopped labor and delivery care. Last year, state regulators fined Centinela $75,000 for lapses in care that led to the death. The hospital has previously denied allegations of improper care and racial bias. 

“Instead of improving the services that they offer, they decided to remove them,” Brown said. 

Prime spokesperson Nikels said Valentine’s death was not a factor in Centinela’s maternity ward closure.

If MLK were to close, patients including Blankenship and her daughter Myla would have to travel farther for delivery and postpartum services—barriers that often affect whether a pregnant patient sees a provider at all. In urban areas, the next hospital could be a few miles down the highway, but L.A.’s notorious traffic easily makes travel time untenable. They’d also lose the rare access to a midwife. 

Patients and providers at MLK are acutely aware of how dangerous those barriers can be. A whiteboard in Blankenship’s room listedher birthing goals, the words “Safe Delivery” handwritten in bold. Frequently, laboring Black mothers arrive at the hospital terrified of what might happen having heard horror stories, midwife Sojobi said. Many never saw a doctor during their pregnancy.

“They look at me and go, ‘Please don’t let me die,’” Sojobi said.

Next year, MLK is adding another midwife to its maternity team. A quarter of its financial loss comes from midwife salaries because Medi-Cal will not reimburse a midwife and an obstetrician working simultaneously, which is how MLK’s team works. The hospital will absorb the additional loss because midwives improve outcomes for communities of color, MLK executive Batchlor said.

For her, the decision to keep labor and delivery open no matter the cost comes down to believing patients deserve it.

“I think it’s leadership, and I think it’s values. I do,” Batchlor said.

Supported by the California Health Care Foundation (CHCF), which works to ensure that people have access to the care they need, when they need it, at a price they can afford. Visit www.chcf.org to learn more.