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Liability, insurance and defensive medicine: new evidence

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Author Info
Paul Fenn (Nottingham University Business School)
Alastair Gray (Health Economics Research Centre, University of Oxford)
Neil Rickman (University of Surrey & CEPR)

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Abstract

For the first time, we test for effects of liability on hospital care using measures of current perceptions of litigation risk at hospital level; in particular, the risk-sharing arrangements agreed between hospitals and their insurers. GMM and ML estimators are used to allow for possible endogeneity of risksharing arrangements. Our findings are consistent with the exercise of liabilityinduced discretion by hospitals, especially regarding use of costly diagnostic imaging. Hospitals facing higher expected litigation costs also use these tests more frequently, after controlling for activity levels, casemix and treatment outcome; the latter indicating that defensive medicine may be present. We also find evidence of fewer new claims against these hospitals, given adverse events, which may indicate the increased use of claims management processes by hospital managers concerned at the expected cost of litigation.

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File URL: http://www.econ.surrey.ac.uk/discussion_papers/2004/DP03-04.pdf
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Publisher Info
Paper provided by Department of Economics, University of Surrey in its series Department of Economics Discussion Papers with number 0304.

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Length: 40 pages
Date of creation: Jul 2004
Date of revision:
Handle: RePEc:sur:surrec:0304

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Related research
Keywords: Medical malpractice; defensive care; insurance; litigation;

Find related papers by JEL classification:
I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Danzon, Patricia M, 1991. "Liability for Medical Malpractice," Journal of Economic Perspectives, American Economic Association, vol. 5(3), pages 51-69, Summer. [Downloadable!] (restricted)
    Other versions:
  2. Daniel P. Kessler & Mark McClellan, 1996. "Do Doctors Practice Defensive Medicine?," NBER Working Papers 5466, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9694, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Kessler, Daniel & McClellan, Mark, 1996. "Do Doctors Practice Defensive Medicine?," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 353-90, May. [Downloadable!] (restricted)
  5. Sloan, Frank A. & Entman, Stephen S. & Reilly, Bridget A. & Glass, Cheryl A. & Hickson, Gerald B. & Zhang, Harold H., 1997. "Tort liability and obstetricians' care levels," International Review of Law and Economics, Elsevier, vol. 17(2), pages 245-260, June. [Downloadable!] (restricted)
    Other versions:
  6. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November. [Downloadable!] (restricted)
  7. Smith, Richard J & Blundell, Richard W, 1986. "An Exogeneity Test for a Simultaneous Equation Tobit Model with an Application to Labor Supply," Econometrica, Econometric Society, vol. 54(3), pages 679-85, May. [Downloadable!] (restricted)
  8. Dubay, Lisa & Kaestner, Robert & Waidmann, Timothy, 1999. "The impact of malpractice fears on cesarean section rates," Journal of Health Economics, Elsevier, vol. 18(4), pages 491-522, August. [Downloadable!] (restricted)
  9. Dubay, Lisa & Kaestner, Robert & Waidmann, Timothy, 2001. "Medical malpractice liability and its effect on prenatal care utilization and infant health," Journal of Health Economics, Elsevier, vol. 20(4), pages 591-611, July. [Downloadable!] (restricted)
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