The "Keeping Obstetrics Local Act" seeks to enhance financial support for hospitals providing maternity, labor, and delivery services, particularly in rural and safety net settings, while expanding maternal health coverage and workforce capacity. It mandates states to conduct studies on the costs of these services every five years, with the Department of Health and Human Services (HHS) compiling national reports. This data will inform future payment rate adjustments and help identify challenges faced by hospitals.

A core provision requires states to ensure Medicaid payment rates for maternity, labor, and delivery services at eligible hospitals are not less than 150% of Medicare rates for fiscal year 2027, with future rates adjusted to accurately reflect costs. Eligible hospitals include those in rural areas, critical access hospitals, Indian Health Service facilities, and those with a high proportion of Medicaid/CHIP births. The bill also significantly increases federal financial participation for these services, providing 100% federal matching for the amount exceeding a base payment rate and an enhanced match for the base rate.

To further support low-volume obstetric hospitals (those with fewer than 300 births annually), the bill establishes an "anchor payment" system. States must provide annual payments to these hospitals to ensure their Medicaid and CHIP revenue for labor and delivery services meets a defined floor, which includes per-delivery and standby capacity amounts. Hospitals receiving these payments must commit to maintaining services and utilizing funds specifically for labor and delivery care.

Beyond financial support, the legislation expands maternal health care coverage by requiring 12-month continuous, full-benefit coverage for pregnant and postpartum individuals under both Medicaid and CHIP. This replaces previous limited coverage periods, ensuring comprehensive care throughout pregnancy and the critical postpartum year. States also gain the option to establish "maternity health homes" under Medicaid, offering coordinated care for pregnant and postpartum individuals, including behavioral health and social support services, with enhanced federal matching funds for the initial years.

The bill addresses workforce needs by expanding the Public Health Service Commissioned Corps' ability to respond to "urgent maternal health care needs" arising from hospital closures or staff shortages. It authorizes funding for Commissioned Corps operations, including training for maternal health care. Additionally, it streamlines the enrollment process for out-of-state maternity, labor, and delivery providers in Medicaid and CHIP, facilitating access to care across state lines.

Finally, the legislation enhances transparency and data collection regarding obstetric services. Hospitals will be required to provide timely public notification (180 days in advance) of impending obstetric unit closures, including an impact analysis and plans to address service gaps. States must make these reports publicly available. Hospitals will also need to include detailed data on labor and delivery services, such as birth volumes, transfers, staffing, expenses, and revenue sources, in their cost reports.