Malpractice Environment and Physician Practice Location Choice

Medical malpractice costs lurk beneath the surface of discussions about health spending, with an unresolved debate about whether these suits are a major cause of over-utilization through defensive medicine.  Malpractice concerns may also influence where a physician decides to practice, a topic explored in a National Bureau of Economic Research paper.   (NBER Paper)   The authors looked at where residents exiting their programs in New York State chose to practice (anywhere but New York presumably) and compared those decisions to the malpractice environment in states, as reflected by the presence of caps on noneconomic and/or punitive damages.  Since the adequacy of physician supply in certain areas is a factor in access to care, the presence or absence of a favorable malpractice environment might exacerbate or ameliorate supply issues.  The impact of the malpractice environment might also vary by specialty, by the type of practice, for example, solo versus hospital, where physicians can be more insulated from the direct effect of a lawsuit, and even by the quality of the physician.  The researchers attempt to look at all these factors.

The authors used data from 1998 to 2012, which included the zip codes of where every resident trained in New York ended up practicing.  They had other data including specialty, type of practice environment and the medical school where the resident received their original education, which was used as a proxy (likely a poor one) for quality.  The researchers find that indeed the presence of the damage caps, particularly noneconomic damage limits, appear to influence choice of practice and that the effect is strongest among specialties, like surgery, that have the highest risk of incurring malpractice suits and lower among less-sued specialties.  In addition, doctors who went to solo practices or small partnerships, which obviously directly pay malpractice premiums, seemed more affected by malpractice environment than did those who were employed in large group practices or by hospitals.  Finally, graduates of foreign medical schools, whether US citizens or not, seemed to preferentially locate in more favorable malpractice states, which the authors, somewhat dubiously in my view, suggest indicates that lower-quality doctors seek places where their poor care won’t result in big costs.  The findings are consistent with common sense.  From a public-policy perspective they would suggest that if we are concerned about supply of physicians in rural, low-income or other areas, one way to attract, or at least not repel, them is to lessen the likelihood and cost of malpractice claims.  Whether or not those actions might lead to poorer care is yet another question to explore.  What is fairly clear from prior research is that doctors do practice defensive medicine, so lower malpractice costs can help reduce health spending.