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.