It's in the Air: Managed Care and Spillover Effects

The concept of spillover effects, or externalities, is more familiar to economists than to clinicians. An example of a spillover effect would be my decision to light my fireplace. It has some direct effects on my well-being, but it also has external effects that have no or very minimal impact on me. For example, the air in the community will be somewhat more polluted. My neighbor downwind may suffer from the smoke, or the burning wood may kindle pleasant childhood memories that cannot be recreated with her gas-fired, ecologically sound fireplace. In this context, the key aspect of an externality is that it involves an effect (either positive or negative) on some party who is not a direct participant in the initial interaction. My neighbor played no part in my having a fire, yet she suffers or gains from my decision. Heidenreich et al. (1) examine this notion of spillover effects in this issue of the Journal. They ask whether the pattern of treatments provided to fee-for-service Medicare beneficiaries who have myocardial infarction is related to the proportion of people in a metropolitan area with managed care coverage. Their findings suggest better adherence to recommended patterns of care for betablocker and aspirin usage both during hospitalization and at discharge in areas with 30% or more managed care market share than in areas with less than 10% managed care market share. There was also lower use of angiography among fee-for-service patients in high managed care (or health maintenance organization [HMO]) areas. Thirty-day mortality rates were also lower in these areas, but this effect disappeared when broad geographic factors were included in the model. It is natural to ask whether this empirical association is simply because of a methodological problem, or might be otherwise explained. For example, if HMOs attract enrollees who have lower clinical risk, then fee-for-service patients in areas with substantial HMO enrollment will differ from the fee-for-service patients in areas where that selection effect cannot occur. Suppose that even with all the clinical risk factors included, the model used by Heidenreich et al. missed some subtle factors. This risk selection would lead one to expect a greater need for care and higher expected mortality among fee-for-service patients in high HMO areas, suggesting that the observed results underestimate the true effect. Indeed, some people favor intervention, while others may prefer a minimalist approach to their medical treatment. Health maintenance organizations are more likely to attract the latter group than fee-for-service practices, so areas with a high HMO market share will tend to have a larger proportion of “pro-intervention” patients in the fee-for-service pool than will areas with a low HMO share. The above examples of subtle selection effects may occur in such situations, but they would not explain the observed differences; in fact, they are contrary to the findings. Externalities, or spillover effects, may take several forms. A plausible scenario follows from the fact that, with the exception of highly integrated HMOs such as Kaiser Permanente, the same physicians treat both managed care and fee-for-service patients and, in clinical practice, do not differentiate between the two groups. Thus, if HMOs were to develop educational programs to encourage adherence to appropriate guidelines, such as for aspirin and beta-blocker usage, then these practice patterns would probably be carried over to the fee-forservice patients of these physicians. The apparent spillover effect of managed care on angiography use is more interesting. The 30-day mortality rates suggest that there are no adverse consequences (at least in the short term) associated with the lower rates of angiography for fee-for-service patients in high managed care areas. From an economic perspective, one would have expected the opposite spillover effect. Since angiography is a relatively highly reimbursed procedure, its use might be expected to increase among fee-for-service patients if higher managed care market share led physicians to seek to maintain their income by performing more procedures on their fee-for-service patients. One need not assume purely mercenary behavior—a reduced patient load due to managed care will allow clinicians to be more thorough in their assessments of fee-for-service patients (2). Health maintenance organization market share, however, is associated with somewhat lower availability of certain specialized services (3). This may be because HMOs encourage practice styles that require fewer such facilities, or because in their efforts to lower costs to be competitive, hospitals are less inclined to incur the costs for such facilities unless they will be utilized fully. It would be surprising, however, if the somewhat fewer facilities in a high managed care area had a substantial effect on access. It is more likely that HMOs also affect the patAm J Med. 2002;112:240 –241. From the University of California, San Francisco, San Francisco, California. Requests for reprints should be addressed to Harold S. Luft, PhD, Institute for Health Policy Studies, University of California, San Francisco, Box 0936, San Francisco, California, 94143-0936. Manuscript submitted November 8, 2001.