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We test for effects of tort liability on the use of certain diagnostic procedures, where the health care providers' expected cost of litigation is proxied by the risk-sharing arrangements agreed with their insurers. 2SLS and GMM estimators are adopted to test for possible endogeneity of these risk-sharing arrangements. Our findings are consistent with the exercise of liability-induced discretion by hospitals, especially regarding use of costly diagnostic imaging procedures. Hospitals facing higher expected costs per claim as a consequence of higher deductibles used these tests more frequently, after controlling for activity levels and casemix. These results are consistent with hospitals reacting to the incentives provided by a clinical negligence compensation system.

Original publication

DOI

10.1016/j.jhealeco.2007.01.004

Type

Journal article

Journal

J Health Econ

Publication Date

01/09/2007

Volume

26

Pages

1057 - 1070

Keywords

Diagnostic Tests, Routine, Economics, Hospital, Insurance, Liability, Malpractice, Risk Sharing, Financial, State Medicine, United Kingdom