New data on medical malpractice claims against a single hospital where a
direct measure of the quality of medical care is available are used to
address 1) the specific question of the role of the negligence rule in the
dispite settlement process in medical malpractice, and 2) the general
question of how the process of negotiation and dispute resolution in medical
malpractice operates with regard to both the behavior of the parties and the
outcome of the process. We find that the quality of medical care is an
extremely important determinant of deferdants' medical malpractice liability.
More generally, we find that the data are consistent with a model where 1)
the plaintiff is not well informed ex ante about the likelinood of negligence
and 2) the ex ante expected value to the plaintiff of a suit is high relative
to the cests of filing a suit and getting more information. Thus, suits are
filed even where there is no concrete reason to believe there has been
negligence, and virtually all suits are either dropped or settled based on
the information gained after filing. We conclude that the filing of suits
that appear, ex post, to be nuisance suits can be rational eguilibrium
behavior, ex ante, where there is incomplete information about care quality.
*Published:
Rand Journal of Economics, Vol. 22, Summer 1991, pp. 199-217.
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