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Torts, Expertise, and Authority: Liability of Physicians and Managed Care Organizations

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  • Jennifer Arlen
  • W.Bentley Macleod

Abstract

We examine optimal individual and entity-level liability for negligence when expected accident costs depend on both the agent's level of expertise and the principal's level of authority. We consider these issues in the context of physician and managed care organization (MCO) liability for medical malpractice. Under current law, physicians generally are considered independent contractors and hence MCOs are not liable for negligent acts by physicians. We find that the practice of reviewing the medical decisions of physicians affects their incentives to take care, which in turn implies that it is efficient for MCOs to be held liable for the torts committed by their physicians.

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Bibliographic Info

Paper provided by New York University, Leonard N. Stern School of Business, Department of Economics in its series Working Papers with number 04-26.

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Date of creation: 2004
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Handle: RePEc:ste:nystbu:04-26

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Postal: New York University, Leonard N. Stern School of Business, Department of Economics, 44 West 4th Street, New York, NY 10012-1126
Phone: (212) 998-0860
Fax: (212) 995-4218
Web page: http://w4.stern.nyu.edu/economics/
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Cited by:
  1. Janet Currie & W. Bentley MacLeod, 2008. "First Do No Harm? Tort Reform and Birth Outcomes," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 795-830, 05.
  2. Lakdawalla, Darius N. & Seabury, Seth A., 2012. "The welfare effects of medical malpractice liability," International Review of Law and Economics, Elsevier, vol. 32(4), pages 356-369.
  3. Randall D. Cebul & James B. Rebitzer & Lowell J. Taylor & Mark E. Votruba, 2008. "Organizational Fragmentation and Care Quality in the U.S. Healthcare System," Journal of Economic Perspectives, American Economic Association, vol. 22(4), pages 93-113, Fall.
  4. Daniel Carvell & Janet Currie & W. Bentley MacLeod, 2009. "Accidental Death and the Rule of Joint and Several Liability," NBER Working Papers 15412, National Bureau of Economic Research, Inc.
  5. Darius N. Lakdawalla & Seth A. Seabury, 2009. "The Welfare Effects of Medical Malpractice Liability," NBER Working Papers 15383, National Bureau of Economic Research, Inc.
  6. James B. Rebitzer & Mark E. Votruba, 2011. "Organizational Economics and Physician Practices," NBER Working Papers 17535, National Bureau of Economic Research, Inc.
  7. Bisso, Juan Carlos & Choi, Albert H., 2008. "Optimal agency contracts: The effect of vicarious liability and judicial error," International Review of Law and Economics, Elsevier, vol. 28(3), pages 166-174, September.
  8. Wright, Donald J., 2011. "Medical Malpractice and Physician Liability Under a Negligence Rule," Working Papers 2011-04, University of Sydney, School of Economics.

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