In the era of managed care, the potential for high-risk patients of all ages to receive less than optimal care exists because the mechanism for reimbursement is designed to promote savings. The specific ways managed care payment mechanisms actually differ from indemnity insurance or fee-for-service are conceptually quite simple. Managed care in its many forms, including preferred provider organizations (PPOs) and closed-panel health maintenance organizations (HMOs), accept a per-member, per-month payment and seek to limit their payout by controlling or managing “unnecessary” utilization of services and controlling payments for services rendered. Mechanisms used to determine what is unnecessary include utilization review; setting length-of-stay benchmarks; and requiring preapproval for referrals to specialists, specific treatments, procedures, and hospital days.Negotiation of contracts with providers (physicians and hospitals) for lower payments or the use of capitation methods at the hospital and individual provider level to confer risk sharing at the provider level are approaches used to directly limit the payout for patients. Other mechanisms used to enhance cost savings are physician gag clauses and financial incentives; however, such mechanisms are increasingly being scrutinized by state legislatures.These mechanisms can unwittingly make hospitals and physicians complicit in the payers' cost savings strategies because if the providers—be they hospitals or physicians—need to pause and consider their financial situation relative to the care of specific patients, the potential for care freely determined outside the realm of the financial equation is altered permanently. Denying care as well as providing care become provider-level mechanisms.This is not to say there are no incentives in the historical method of payment. There are, but these were largely in the opposite direction. The more care provided, the more money flowed from insurance to hospitals and physicians. Thus, costs and technology use could spiral seemingly uncontrolled. This mechanism undoubtedly gave rise to the desire for an approach to control health care costs. Two mechanisms readers might recognize that are different but prominent approaches are: (1) Medicare's use of the all-inclusive, case-based payment using the Diagnosis-Related Groups (DRG) system (which began in the early 1980s) replacing charge-based per diem payment, and (2) state efforts to use rate setting for hospitals to prospectively determine hospital payments. Even as these were introduced in the 1980s, HMO-type payer mechanisms were proliferating.While any payment mechanism in its uncontrolled state can have risks, such as offering expensive technologies of doubtful effectiveness at high cost versus denying expensive technology that is useful, there is greater comfort in providing more care rather than less because we as a society intrinsically value life and health and have been willing to go to great lengths to save a life. It is in this context of the potential incentives to deny high-technology care that we need to begin to ask the question, does payer affect the care provided? Is there any evidence in the perinatal area that the payment mechanism affects outcome in any manner, independent of patient characteristics?The study presented here represents the continuation of an epidemiologic study aimed at exploring the impact of the introduction of a new technology on outcome, surfactant. The original work,20 published in the New England Journal of Medicine, showed that the surfactants had a significant impact on in-hospital mortality among newborns 500 to 1500 g. This new work focuses on exploring if three other groups benefited equally—larger infants (those between 1500 and 2000 g); whites and nonwhites; and payer subgroups, including Medicaid, private nonmanaged care, and HMO.The original mortality analysis in which a pre-post surfactant design corroborated the clinical trial evidence clearly demonstrated that surfactant therapy, either synthetic or animal compounds, resulted in significant reductions in mortality among very low birthweight newborns.9, 11, 12, 13, 17 The decline demonstrated in clinical trials ranges from 30% to 70% depending on the gestational age, birthweight, type of surfactant, timing, and dosage; however, the pre-post univariate analysis in our new study resulted in an unexpected finding: HMO newborn mortality did not decline in the postsurfactant period, whereas all other subgroups experienced the decline originally reported. This finding caused us to focus the analysis on the postperiod to assess whether there appeared to be differentials in mortality by payer when controlling for patient characteristics and hospital of birth—factors known to affect mortality.