NEW YORK, Aug 19 (Reuters) - After working as a doula

for 10 years, Kortny Feutardo took her first Maryland Medicaid

patient in January, providing the new mom with care coordination

and counseling.

Feutardo is one of many providers benefiting from growing

investment in the maternal and neonatal health sector. After not

receiving timely payments from her patient's managed care

organization, she began working with Mae, a venture

capital-backed company that pairs pregnant women with doulas

through Medicaid partnerships and handles payment.

With a U.S. maternal mortality crisis underway, government

health plans for low-income Americans in the past few years have

increased coverage of services shown to improve the health of

mothers and babies.

And now, venture capital firms, including Khosla Ventures

and Rock Health, are bolstering investment into maternal health

companies and technology, as they anticipate sector growth and

bet payment rates from both Medicaid and commercial insurance

will accelerate.

Early maternal healthcare investments in businesses like Mae

and others ranging from clinics to specialists in fertility and

nutrition counseling totaled $306.5 million in 2023, a 700%

increase from $38.1 million in 2018, according to data that

research firm Pitchbook prepared for Reuters.

SAVING LIVES

Midwife and doula-led births often provide perinatal care

coordination, post-partum and pre-natal counseling, lactation

counseling, behavioral health screenings and support for moms

quitting smoking. Midwives are clinical providers certified to

provide obstetric and gynecological care. While doulas don't

provide clinical services, they assist patients through

educational and emotional support.

Increasing insurance coverage and integration of doulas and

midwives by healthcare plans, along with promising financial

exits are encouraging more investment. Alice Zheng, a partner at

VC firm RH Capital, pointed to Amazon's recent acquisition of

membership-based clinic One Medical as a sign of potential for

maternal health clinics.

"There have been some great exits in clinical care

recently," said Zheng, whose firm invested in maternity-clinic

Millie.

Millie Clinic, based in Berkeley, California closed its very

first round of funding in 2022 with $4 million, led by BBG

Ventures, which invests in female and diverse-led companies, and

TMV.

At Khosla Ventures, investors target maternal health

technologies, a strategy they say has advantages over clinical

care companies. The firm, with assets of $17 billion, has

invested in Mirvie, which uses RNA testing to predict pregnancy

complications and preterm infant incubator Vitara.

"Saving the lives of mothers and babies is in everyone's

interest, so for breakthrough innovations like Mirvie and

Vitara, there is a lot of space to obtain reimbursement," said

Alex Morgan, a partner at Khosla Ventures.

U.S. maternal mortality rates are far worse than any other

high-income nation and for Black women, those rates are more

than twice as high, according to a 2024 Commonwealth Fund

report.

Midwife-led care has been shown to help improve health outcomes

for Black women and their babies. A U.S. government analysis of

birth center outcomes between 2013 to 2017 found that Black

women who gave birth in midwife-led birthing centers had lower

rates of pre-term and low-weight births.

In 2020, healthcare VC firm Rock Health Capital invested in

Oula, which operates two maternity centers in New York that

offer patients both midwifery-led care and obstetrics in two

locations. Oula closed its second round of funding in February

with $28 million and is opening a third Manhattan clinic by

September.

Bill Evans, founder of Rock Health Capital, said he was driven

to invest in Oula by its health outcomes. Oula, when compared

with the National Center for Health Statistics' New York City

natality data had a 61% lower preterm birth rate across 1,500

births since 2021, the company said.

Millie's cohort of 150 births experienced a 71.3% lower

preterm birth rate than the national rate calculated by the U.S.

Centers for Disease Control. And for Black mothers, who are more

likely to deliver their babies prematurely, the preterm birth

rate was 60.2% lower, the company said.

REIMBURSEMENT ISSUES

Medicaid coverage for doula services is not currently a

federal requirement, but states can choose to cover doulas

within their Medicaid plans, said Amy Chen at the National

Health Law Program. Medicaid plans covered 41% of U.S. births in

2022, according to the Centers for Disease Control and

Prevention.

A Centers for Medicare and Medicaid Services spokesperson said

that the agency encourages states to provide coverage.

Fifteen states and Washington D.C. are reimbursing doulas,

including three that added it to Medicaid just this year,

according to the National Health Law Program.

Commercial insurance mandates are further behind with only

Rhode Island requiring it.

The three largest U.S. managed care companies Cigna ( CI ),

CVS's Aetna and UnitedHealth ( UNH ) leave the decision

to cover doulas to health plan sponsors like employers or

Medicaid, according to their websites. CVS and UnitedHealth ( UNH )

confirmed their policies. Cigna ( CI ) did not respond to a request for

comment.

As doula and midwifery companies try to expand nationally,

some grapple with insufficient reimbursement.

"We have to solve for inadequate reimbursement rates, viable

health system partners, and availability of clinical talent in

those markets," said Anu Sharma, chief executive officer at

Millie.

The reimbursement landscape makes venture funding a

necessity as companies look to grow.

Venture funding can help sustain innovation as

Medicaid-focused businesses face reimbursement limitations, said

Maya Hardigan, founder and CEO of Mae.

Even in New York, which pays midwives the highest rate of

reimbursement in the country - 95% of an obstetrician's fee -

and up to $1,440, payment is not enough, companies said.

Doula Feutardo has been glad to help a more diverse group in

Medicaid, but said that reimbursement has been an issue.

Feutardo who travels across Washington, Maryland, and Virginia

for clients, says government-sponsored reimbursement could be

raised to cover travel, food and housing costs. She has now

lowered private fees to match her Maryland Medicaid rate of

$1,300 per delivery.

"I give equal love to moms," she said.