Using Sovereign Immunity to Examine the Effects of Tort Liability on Defensive Medicine and Health

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Project Summary Research suggests that the U.S. wastes billions each year on defensive medicine – unnecessary procedures and treatment that add no clinical value—with recent estimates suggesting that defensive medicine might account for 8-20% of Medicare spending and over 1/3 of overall hospital spending. Much of the “waste” occurs in hospital settings (e.g. low-value imaging and testing, unnecessary hospitalizations) where 85% of inpatient stays and 53% of emergency department (ED) visits are among adults age 45 and older. Although the fear of medical malpractice lawsuits may help prevent medical errors and improve patient safety, it may also result in over-utilization and higher healthcare costs. In an effort to curb the number of non-meritorious lawsuits and reduce defensive medicine costs, a number of states have enacted tort reforms. Noneconomic damage caps (limits to the amount awarded for “pain and suffering”), have shown the most promising effects, but evidence is mixed on whether these caps have changed the probability of being sued or the supply of physicians. For patients, there appears to be little evidence that caps resulted in changes in quality and mostly evidence of no effects on utilization and costs, except for certain healthcare settings or patients. We know little about the effects of a more substantial reform except from a recent study on the military health system. The authors found a significant effect of liability immunity, but it is unclear the extent to which this effect might hold for the broader US population, and in particular for older adults who are more likely than younger patients to be medically complex, have multiple chronic conditions, and need inpatient care, a setting where 85% of U.S. defensive medicine costs occur. The overall objective of this R03 is to use a natural experimental design to determine the causal effect of liability immunity on inpatient care and expenditures in the civilian health industry. In 2011, the Florida legislature extended the state's sovereign immunity to cover non-profit university teaching hospitals, eliminating personal liability for physicians practicing in six large hospitals accounting for roughly 10% of the state's hospital caseload. Sovereign immunity, in contrast to damage caps or other reforms that modify payment amounts, serves as a legal bar to lawsuits. Using individual-level hospital inpatient discharge and emergency department data covering all patients in Florida over a 10-year period, we will use a regression-adjusted difference-in-differences strategy to compare changes in defensive practice, quality, and charges in hospitals granted immunity to other large hospitals in Florida following the law change. We can also test for mediating factors, including the type of service (e.g. emergency department) and patient characteristics (e.g. age, diagnosis). Based on preliminary findings in the military health system, we hypothesize that liability immunity will reduce the incidence of defensive medicine and quality of care. Our findings have significant potential to inform malpractice reform efforts to address defensive practice to ensure efficiency in healthcare.