Reimbursement schemes for hospitals, malpractice liability, and intrinsic motivation

Malpractice liability, technology choice and negative defensive medicine

“…This view is reinforced in a theoretical and empirical paper by Kessler and McClellan [26] who show that reimbursement schemes based on prospective (fixed) payments and low liability risks can be seen as substitutes since both reduce incentives for exerting inefficiently high care. Feess and Ossig [15] analyze second best optimal liability rules depending on the interaction of liability rules, reimbursement schemes, and intrinsic motivation and confirm that liability rules should be tightened when moving to a prospective payment system. 15 To the best of our knowledge, our paper is the first one that analyzes the trade-off between ex ante efficiency (technology choice) and ex post efficiency (care level) when liability risks set incentives for negative defensive medicine.…”

“…National Practitioner Data Bank (NPDB) [34], and U.S. Department of Health and Human Services [42]. 15 For an earlier comprehensive overview on the theoretical and empirical literature see Danzon [9], and for an assessment of the situation from a legal point of view see Hyman and Silver [20]. 16 We are grateful to an anonymous referee who has pointed to this artifact of the discrete modeling that we used in a former working paper version of this article.…”

The optimal negligence standard in health care under supply-side cost sharing

“…In the context of the model presented in this paper traditional standards exceed the first-best level of care by far and preserving them, as suggested by legal experts, decrease welfare unless otherwise a pooled equilibrium with negligent medicine exists. Feess and Ossig (2004) also examine the relationship between liability and reimbursement incentives. In contrast to the present paper they adopt the insurers' point of view and determine the optimal supply-side cost share at a given degree of liability risk.…”

“…In contrast to the present paper they adopt the insurers' point of view and determine the optimal supply-side cost share at a given degree of liability risk. Furthermore, Feess and Ossig (2004) base the analysis on a strict liability rule and assume that care costs are unobservable. The latter is implemented by H (y, e) > 0 and H y > 0.…”

Effects of Ownership on Hospital Efficiency in Germany.

“…In contrast, private non-profit and public hospitals allow more room for objectives other than efficiency and are therefore able to provide a higher quality of care than private for-profit hospitals. Another group of theorists argues that particularly physicians represent a group that is typically acting driven by high intrinsic motivation (Arrow 1963;Zismer 1999;Feess and Ossig 2007). Thus, physicians are intrinsically motivated to deliver high quality of care.…”