The Impact of Malpractice Liability Claims on Obstetrical Practice Patterns

Since the late 1960s, a dramatic rise in malpractice insurance premiums has sparked both debate and concern among physicians and health policy makers that access to care may be limited by physicians who no longer practice certain types of procedures (Studdert, Mello, and Brennan 2004). In March 2005, the American Medical Association identified 20 states in full-blown medical liability crisis due to rising medical malpractice premiums. In response, many state legislatures have attempted to pass malpractice reform bills to limit noneconomic damages awarded in lawsuits or attempted to regulate premiums. Obstetrics provides a useful context for analysis because many claims are associated with birthing deliveries and the volume of deliveries is not subject to physician-induced demand (American College of Obstetricians and Gynecologists 2004). A central question of interest to policy makers is to what extent do malpractice claims have an adverse impact on obstetrical delivery volume, practice patterns (C-section rates), and access to care. Previous studies on the impact of malpractice pressure on C-section rates yielded mixed results. Tussing and Wojtowycz (1992) reported that higher malpractice premiums decreased the probability of a cesarean delivery. Sloan et al. (1997) found no significant effect of perceived risk on the likelihood of having a cesarean delivery; however, Localio et al. (1993) found that higher malpractice risk increased the probability of a cesarean delivery. A limitation of these early analyses was the use of a single year of data. Using a more rigorous framework with multiple years of data, Dubay, Kaestner, and Waidmann (1999) analyzed the impact of average malpractice premiums on cesarean rates. Using birth certificate data from 1990 through 1992 to conduct a county fixed-effects analysis, they found a small, positive relationship between malpractice pressure and higher risk-adjusted C-section rates. Using panel data, Grant and McInnes (2004) also found that physicians with malpractice claims increased their risk-adjusted C-section rate by a small amount.1 Recent studies on the impact of malpractice pressure on physician supply have found small or no effects. Baicker and Chandra (2005) did not find any significant association between overall physician supply and higher malpractice premiums or total claim payments at the state level. Using tort reform as an exogenous source of variation in their studies of physician supply, Kessler, Sage, and Becker (2005) found that direct reforms (e.g., damage caps) were associated with 3 percent higher growth in physician supply after 3 years, but this growth was primarily due to retirements and entries rather than interstate relocations. Dranove and Gron (2005) used Florida hospital discharge data to compare the period from 1997 to 2000 with 2000 to 2003 to see whether travel times for high-risk deliveries changed. They concluded that women undergoing high-risk deliveries did not see increases in travel times. Therefore, access to obstetrical care was not compromised from 1997 to 2000 compared with 2000 to 2003. This analysis of individual-level claims in Florida extends these prior studies by providing evidence on whether a change in practice patterns and delivery volume is affected by the timing of a claim and award size. This study examines whether malpractice claims have any impact on obstetrical practice patterns, after accounting for the award size of claims. A panel dataset and a fixed-effects model framework allow for the control of unobservable, time-invariant physician characteristics. Also, this study explores whether the timing of a malpractice claim matters, by using multiple fields for the incident occurrence date, filing date, and closing date of each claim. Do physicians react immediately after an incident, before a claim is filed? Or is a response more likely to occur after a malpractice claim is closed and revealed to the public? Evidence that affirms the first question may point toward a physician-led, supply-side response. However, evidence in support of the latter question may indicate either a supply-side response in which physicians avoid certain high-risk patients to reduce the likelihood of future claims or a possible demand-side response where the loss of a physician's reputation influences patient choice. Finally, by including the award value of claims in the study's findings, it will be possible to draw policy implications regarding the likely effect of award caps, a central feature in tort reform legislation.