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Liability, insurance and defensive medicine: new evidence

Author

Listed:
  • Paul Fenn

    (Nottingham University Business School)

  • Alastair Gray

    (Health Economics Research Centre, University of Oxford)

  • Neil Rickman

    (University of Surrey & CEPR)

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.

Suggested Citation

  • Paul Fenn & Alastair Gray & Neil Rickman, 2004. "Liability, insurance and defensive medicine: new evidence," School of Economics Discussion Papers 0304, School of Economics, University of Surrey.
  • Handle: RePEc:sur:surrec:0304
    as

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    File URL: https://repec.som.surrey.ac.uk/2004/DP03-04.pdf
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    References listed on IDEAS

    as
    1. Daniel P. Kessler & Mark McClellan, 1996. "Do Doctors Practice Defensive Medicine?," NBER Working Papers 5466, National Bureau of Economic Research, Inc.
    2. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9694, National Bureau of Economic Research, Inc.
    3. 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.
    4. Danzon, Patricia M., 2000. "Liability for medical malpractice," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 26, pages 1339-1404 Elsevier.
    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.
    6. 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.
    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 679-685, May.
    8. Daniel Kessler & Mark McClellan, 1996. "Do Doctors Practice Defensive Medicine?," The Quarterly Journal of Economics, Oxford University Press, vol. 111(2), pages 353-390.
    9. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Medical malpractice; defensive care; insurance; litigation;

    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; Forensic Economics

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