Malpractice Allegations and Physician Productivity: Evidence from the Emergency Department

While a substantial literature has studied the influence of malpractice pressure on physician behavior, existing research has not found that malpractice concerns influence physicians to any great extent. However, these studies generally focus on variation in state laws governing malpractice exposure. What is perhaps more important is the actual experience of being sued. In this project, we test how physicians respond to malpractice lawsuits – both those that are successful and those that are not. Despite the fact that the vast majority of physicians will face a malpractice claim during their career, there is little evidence on how experience with the liability system informs physicians’ assessments of malpractice pressure. We study the impact of malpractice allegations on the labor supply and treatment intensity decisions of Emergency Department (ED) physicians, combining physician-level data on malpractice claims with the universe of ED discharges in Florida. To address potential differences between physicians with different allegation histories, we exploit variation in the timing of unexpected malpractice allegations.

We find that physician labor supply decreases sharply after malpractice allegations and that this reduction is persistent over time. We estimate a 10% reduction in physicians’ patient loads overall and find that our results are driven by intensive margin responses, specifically that physicians reduce the number of patients they treat but maintain practice in the state. We further find that physicians stop practicing at the hospital where the alleged negligence occurred, and that part of the decline in total patient volume is driven by physicians leaving high volume hospitals to practice at smaller facilities. Next, we find that physicians increase care intensity among their remaining patients, increasing total charges per patient by about 5% after an allegation. Lastly, we provide suggestive evidence that physicians do not respond optimally to malpractice allegations, showing that physicians respond equally to legitimate claims of negligence as to allegations that are ultimately dismissed. We additionally show that physicians adjust practice patterns equally for all patient types after a malpractice allegation, rather than using information from the allegation to adjust care for clinically relevant patients.