Investigating the Spillover Mechanisms of Payment Incentives on the Outcomes for Non-Targeted Patients

Payment reforms in healthcare can have spillover effects on the care experienced by non-targeted patients treated by the same provider. Few empirical studies have quantitatively investigated the mechanisms behind these effects. We formulate theory-driven hypotheses to investigate the spillover mechanisms of a regional payment reform in the English National Health Service, using linked patient-physician data and difference-in-differences methods. We show that regional payment changes were associated with an increase in mortality of 0.321 percentage points (S.E. 0.114) for non-targeted emergency patients who were treated by physicians with no exposure to the incentives, compared to control regions. In contrast, the mortality rate for non-targeted patients reduced by 0.008 percentage points (S.E. 0.002) for every additional targeted patient treated per quarter by their physician. These findings were consistent across a range of sensitivity analyses. The findings suggest that providers diverted resources away from non-targeted patients but that patients benefitted from physicians learning from the incentives. We demonstrate how the formulation of theory-driven hypotheses about spillover mechanisms can improve the understanding of how and where spillover effects may occur, contributing to research design and policymaking.