The Impact of Medical Liability Standards on Regional Variations in Physician Behavior: Evidence from the Adoption of National-Standard Rules

Abstract

I explore the association between regional variations in physician behavior and the geographical scope of malpractice standards of care. I estimate a 30–50 percent reduction in the gap between state and national utilization rates of various treatments and diagnostic procedures following the adoption of a rule requiring physicians to follow national, as opposed to local, standards. These findings suggest that standardization in malpractice law may lead to greater standardization in practices and, more generally, that physicians may indeed adhere to specific liability standards. In connection with the estimated convergence in practices, I observe no associated changes in patient health. (JEL I11, I18, J44, K13)

Do Physicians Respond to Liability Standards?

“…In this paper, we attempt to fill some of these gaps left by Frakes (2013). Using data on overall rates of surgical intervention (inpatient and outpatient) derived from the Area Resource File (ARF), we likewise find that local surgery rates converge (both upwards and downwards, as appropriate) in the direction of the national mean upon the abandonment of locality rules and contemporaneous adoption of national standard rules.…”

“…1 These distinctions in liability rules are of particular relevance in light of the rampant geographical variations that exist in clinical practice patterns, a phenomenon that has been the subject of a massive literature in medicine and health economics (Skinner 2011). In other words, in light of such substantial regional variations in practices, this move from a locality rule to a nationalstandard rule constitutes a meaningful and substantial change in the clinical 1 Frakes (2013) reviewed both case and statutory law and documented the evolution of each state's malpractice standard-of-care laws from the mid-1970's to the present. (Wennberg and Gittelsohn 1973).…”

“…Regardless of the precise cause, medical liability "locality rules" may operate to cement these regionally distinct practice styles, either by discouraging physicians from deviating from those local customs that have developed or by providing comfort to physicians wishing to maintain such customs. Frakes (2013) showed that the abandonment of such locality rules and the adoption of national-standard rules may have broken those isolating forces and led to substantial regional convergence in various obstetric, cardiac, and diagnostic procedures-i.e., local practices did indeed begin to conform more strongly with national practices upon the relevant change in the law. Frakes (2013) analyzed the effects of national-standard adoptions using rich inpatient discharge data, which, among other things, facilitated the inclusion of control variables for various comorbidities.…”

“…Frakes (2013) showed that the abandonment of such locality rules and the adoption of national-standard rules may have broken those isolating forces and led to substantial regional convergence in various obstetric, cardiac, and diagnostic procedures-i.e., local practices did indeed begin to conform more strongly with national practices upon the relevant change in the law. Frakes (2013) analyzed the effects of national-standard adoptions using rich inpatient discharge data, which, among other things, facilitated the inclusion of control variables for various comorbidities. Limited to inpatient records, however, Frakes (2013) was forced to focus on those types of clinical scenarios-i.e., obstetrics and intensive cardiac intervention-in which care is almost exclusively inpatient in nature.…”

“…As such, it is unclear whether his findings generalize to a broader range of clinical settings. Another limitation with Frakes (2013) is that the geographical scope of the analysis is at the state level (given data limitations). The analysis may have validly captured the effects of national-standard adoptions on across-state variations in practices; however, given that locality rules operated along sub-state dimensions, Frakes (2013) sacrificed the ability to estimate more geographically nuanced (and geographically accurate) specifications.…”