Quantifying the Economics of Medical Malpractice - A View from a Civil Law Perspective

Life is full of uncertainties. Legal rules should have a clear intention, motivation and purpose in order to diminish daily uncertainties. However, practice shows that their consequences are complex and hard to predict. For instance, tort law has the general objectives of deterring future negligent behavior and compensating the victims of someone else's negligence. Achieving these goals are particularly difficult in medical malpractice cases. To start with, when patients search for medical care they are typically sick in the first place. In case harm materializes during the treatment, it might be very hard to assess if it was due to substandard medical care or to the patient's poor health conditions. Moreover, the practice of medicine has a positive externality on the society, meaning that the design of legal rules is crucial: for instance, it should not result in physicians avoiding practicing their activity just because they are afraid of being sued even when they acted according to the standard level of care. The empirical literature on medical malpractice has been developing substantially in the past two decades, with the American case being the most studied one. Evidence from civil law tradition countries is more difficult to find. The aim of this thesis is to contribute to the empirical literature on medical malpractice, using two civil law countries as a case-study: Spain and Italy. The goal of this thesis is to investigate, in the first place, some of the consequences of having two separate sub-systems (administrative and civil) coexisting within the same legal system, which is common in civil law tradition countries with a public national health system (such as Spain, France and Portugal). When this holds, different procedures might apply depending on the type of hospital where the injury took place (essentially whether it is a public hospital or a private hospital). Therefore, a patient injured in a public hospital should file a claim in administrative courts while a patient suffering an identical medical accident should file a claim in civil courts. A natural question that the reader might pose is why should both administrative and civil courts decide medical malpractice cases? Moreover, can this specialization of courts influence how judges decide medical malpractice cases? In the past few years, there was a general concern with patient safety, which is currently on the agenda of several national governments. Some initiatives have been taken at the international level, with the aim of preventing harm to patients during treatment and care. A negligently injured patient might present a claim against the health care provider with the aim of being compensated for the economic loss and for pain and suffering. In several European countries, health care is mainly provided by a public national health system, which means that if a patient harmed in a public hospital succeeds in a claim against the hospital, public expenditures increase because the State takes part in the litigation process. This poses a problem in a context of increasing national health expenditures and public debt. In Italy, with the aim of increasing patient safety, some regions implemented a monitoring system on medical malpractice claims. However, if properly implemented, this reform shall also allow for a reduction in medical malpractice insurance costs. This thesis is organized as follows. Chapter 1 provides a review of the empirical literature on medical malpractice, where studies on outcomes and merit of claims, costs and defensive medicine are presented. Chapter 2 presents an empirical analysis of medical malpractice claims arriving to the Spanish Supreme Court. The focus is on reversal rates for civil and administrative decisions. Administrative decisions appealed by the plaintiff have the highest reversal rates. The results show a bias in lower administrative courts, which tend to focus on the State side. We provide a detailed explanation for these results, which can rely on the organization of administrative judges career. Chapter 3 assesses predictors of compensation in medical malpractice cases appealed to the Spanish Supreme Court and investigates the amount of damages attributed to patients. The results show horizontal equity between administrative and civil decisions (controlling for observable case characteristics) and vertical inequity (patients suffering more severe injuries tend to receive higher payouts). In order to execute these analyses, a database of medical malpractice decisions appealed to the Administrative and Civil Chambers of the Spanish Supreme Court from 2006 until 2009 (designated by the Spanish Supreme Court Medical Malpractice Dataset (SSCMMD)) has been created. A description of how the SSCMMD was built and of the Spanish legal system is presented as well. Chapter 4 includes an empirical investigation of the effect of a monitoring system for medical malpractice claims on insurance premiums. In Italy, some regions adopted this policy in different years, while others did not. The study uses data on insurance premiums from Italian public hospitals for the years 2001-2008. This is a significant difference as most of the studies use the insurance company as unit of analysis. Although insurance premiums have risen from 2001 to 2008, the increase was lower for regions adopting a monitoring system for medical claims. Possible implications of this system are also provided. Finally, Chapter 5 discusses the main findings, describes possible future research and concludes.

Behavioral Economics and Physician Behavior

This study seeks to answer whether the availability heuristic leads physicians to utilize more medical care than is economically efficient. Do rare, salient events alter physicians' perceptions about the probability of patient harm? Do these events lead physicians to overutilize certain medical procedures? This study uses Pennsylvania inpatient hospital admissions data from 2009 aggregated at the physician level to investigate these questions. The data come from the 2009 Pennsylvania Health Care Cost Containment Council (PHC4). The study is divided into two parts. In Part I, we examine whether bad outcomes during childbirth (defined as maternal mortality, an obstetric fistula or a uterine rupture) lead physicians to utilize more cesarean sections on future patients. In Part II, we examine whether bad outcomes associated with appendicitis (defined as patient death, a perforated or ruptured appendix or sepsis) lead physicians to perform more negative appendectomies (appendectomies performed when the patient did not have appendicitis) on future patients. Overall the study does not find evidence to support the claim that the availability heuristic leads physicians to overutilize medical care on future patients. However, the study does find evidence that variations in health care utilization are strongly correlated with individual physician practice patterns. The results of the study also imply that physicians' financial incentives may be a source of variation in health care utilization.

The determinants of improvements in health outcomes and of cost reduction in hospital inpatient care

This study aims to address two research questions. First, ‘Can we identify factors that are determinants both of improved health outcomes and of reduced costs for hospitalized patients with one of six common diagnoses?’ Second, ‘Can we identify other factors that are determinants of improved health outcomes for such hospitalized patients but which are not associated with costs?’ The Healthcare Cost and Utilization Project (HCUP) Nationwide Inpatient Sample (NIS) database from 2003 to 2006 was employed in this study. The total study sample consisted of hospitals which had at least 30 patients each year for the given diagnosis: 954 hospitals for acute myocardial infarction (AMI), 1552 hospitals for congestive heart failure (CHF), 1120 hospitals for stroke (STR), 1283 hospitals for gastrointestinal hemorrhage (GIH), 979 hospitals for hip fracture (HIP), and 1716 hospitals for pneumonia (PNE). This study used simultaneous equations models to investigate the determinants of improvement in health outcomes and of cost reduction in hospital inpatient care for these six common diagnoses. In addition, the study used instrumental variables and two-stage least squares random effect model for unbalanced panel data estimation. The study concluded that a few factors were determinants of high quality and low cost. Specifically, high specialty was the determinant of high quality and low costs for CHF patients; small hospital size was the determinant of high quality and low costs for AMI patients. Furthermore, CHF patients who were treated in Midwest, South, and West region hospitals had better health outcomes and lower hospital costs than patients who were treated in Northeast region hospitals. Gastrointestinal hemorrhage and pneumonia patients who were treated in South region hospitals also had better health outcomes and lower hospital costs than patients who were treated in Northeast region hospitals. This study found that six non-cost factors were related to health outcomes for a few diagnoses: hospital volume, percentage emergency room admissions for a given diagnosis, hospital competition, specialty, bed size, and hospital region.^

The relationship between hospital financial performance and information technology integration strategy selection

In light of the new healthcare regulations, hospitals are increasingly reevaluating their IT integration strategies to meet expanded healthcare information exchange requirements. Nevertheless, hospital executives do not have all the information they need to differentiate between the available strategies and recognize what may better fit their organizational needs. ^ In the interest of providing the desired information, this study explored the relationships between hospital financial performance, integration strategy selection, and strategy change. The integration strategies examined – applied as binary logistic regression dependent variables and in the order from most to least integrated – were Single-Vendor (SV), Best-of-Suite (BoS), and Best-of-Breed (BoB). In addition, the financial measurements adopted as independent variables for the models were two administrative labor efficiency and six industry standard financial ratios designed to provide a broad proxy of hospital financial performance. Furthermore, descriptive statistical analyses were carried out to evaluate recent trends in hospital integration strategy change. Overall six research questions were proposed for this study. ^ The first research question sought to answer if financial performance was related to the selection of integration strategies. The next questions, however, explored whether hospitals were more likely to change strategies or remain the same when there was no external stimulus to change, and if they did change, they would prefer strategies closer to the existing ones. These were followed by a question that inquired if financial performance was also related to strategy change. Nevertheless, rounding up the questions, the last two probed if the new Health Information Technology for Economic and Clinical Health (HITECH) Act had any impact on the frequency and direction of strategy change. ^ The results confirmed that financial performance is related to both IT integration strategy selection and strategy change, while concurred with prior studies that suggested hospital and environmental characteristics are associated factors as well. Specifically this study noted that the most integrated SV strategy is related to increased administrative labor efficiency and the hybrid BoS strategy is associated with improved financial health (based on operating margin and equity financing ratios). On the other hand, no financial indicators were found to be related to the least integrated BoB strategy, except for short-term liquidity (current ratio) when involving strategy change. ^ Ultimately, this study concluded that when making IT integration strategy decisions hospitals closely follow the resource dependence view of minimizing uncertainty. As each integration strategy may favor certain organizational characteristics, hospitals traditionally preferred not to make strategy changes and when they did, they selected strategies that were more closely related to the existing ones. However, as new regulations further heighten revenue uncertainty while require increased information integration, moving forward, as evidence already suggests a growing trend of organizations shifting towards more integrated strategies, hospitals may be more limited in their strategy selection choices.^

Hospital district viability and Medicaid /market changes

Hospital districts (HD) that serve the uninsured and the needy face new challenges with the implementation of Medicaid managed. The potential loss of Medicaid patients and revenues may affect the ability to cost-shift and subsequently decrease the ability of the HD to meet its legal obligation of providing care for the uninsured. ^ To investigate HD viability in the current market, the aims of this study were to: (1) describe HD's environment, (2) document the HDs strategic response, (3) document changes in the HD's performance (patient volume) and financial status, and (4) determine whether relationships or trends exist between HD strategy, performance and financial status. ^ To achieve these aims, three Texas HDs (Fort Worth, Lubbock, and San Antonio) were selected to be evaluated. For each HD four types of strategic responses were documented and evaluated for change. In addition, the ability of each HD to sustain operations was evaluated by documenting performance and financial status changes (patient volume and financial ratios). A pre-post case study design method was used in which the Medicaid managed care “rollout'” date, at each site, was the central date. First, a descriptive analysis was performed which documented the environment, strategy, financial status, and patient volume of each hospital district. Second, to compare hospital districts, each hospital district was: (i) classified by a risk index, (ii) classified by its strategic response profile, and (iii) given a performance score based upon pre-post changes in patient volume and financial indicators. ^ Results indicated that all three HDs operate in a high risk environment compared to the rest of the nation. Two HDs chose the “Status Quo” response whereas one HD chose the “Competitive Proactive” response. Medicaid patient volume decreased in two of three HDs whereas indigent patient volume increased in two of the three (an indication of increasing financial risk). Total patient revenues for all HDs increased over the study period; however, the rate of increase slowed for all three after the Medicaid rollout date. All HDs experienced a decline in financial status between pre-post periods with the greatest decline observed in the HD that saw the greatest increase in indigent patient volume. ^ The pre-post case study format used and the lack of control study sites do not allow for assignment of causality. However, the results suggest possible adverse effects of Medicaid managed care and the need for a larger study, based on a stronger evaluation research design. ^

Estimates of hospital and physician costs of epilepsy in the United States for 1995 comparing the provider -based survey method and a patient -based medical charts and billing method

This investigation compares two different methodologies for calculating the national cost of epilepsy: provider-based survey method (PBSM) and the patient-based medical charts and billing method (PBMC&BM). The PBSM uses the National Hospital Discharge Survey (NHDS), the National Hospital Ambulatory Medical Care Survey (NHAMCS) and the National Ambulatory Medical Care Survey (NAMCS) as the sources of utilization. The PBMC&BM uses patient data, charts and billings, to determine utilization rates for specific components of hospital, physician and drug prescriptions. ^ The 1995 hospital and physician cost of epilepsy is estimated to be $722 million using the PBSM and $1,058 million using the PBMC&BM. The difference of $336 million results from $136 million difference in utilization and $200 million difference in unit cost. ^ Utilization. The utilization difference of $136 million is composed of an inpatient variation of $129 million, $100 million hospital and $29 million physician, and an ambulatory variation of $7 million. The $100 million hospital variance is attributed to inclusion of febrile seizures in the PBSM, $−79 million, and the exclusion of admissions attributed to epilepsy, $179 million. The former suggests that the diagnostic codes used in the NHDS may not properly match the current definition of epilepsy as used in the PBMC&BM. The latter suggests NHDS errors in the attribution of an admission to the principal diagnosis. ^ The $29 million variance in inpatient physician utilization is the result of different per-day-of-care physician visit rates, 1.3 for the PBMC&BM versus 1.0 for the PBSM. The absence of visit frequency measures in the NHDS affects the internal validity of the PBSM estimate and requires the investigator to make conservative assumptions. ^ The remaining ambulatory resource utilization variance is $7 million. Of this amount, $22 million is the result of an underestimate of ancillaries in the NHAMCS and NAMCS extrapolations using the patient visit weight. ^ Unit cost. The resource cost variation is $200 million, inpatient is $22 million and ambulatory is $178 million. The inpatient variation of $22 million is composed of $19 million in hospital per day rates, due to a higher cost per day in the PBMC&BM, and $3 million in physician visit rates, due to a higher cost per visit in the PBMC&BM. ^ The ambulatory cost variance is $178 million, composed of higher per-physician-visit costs of $97 million and higher per-ancillary costs of $81 million. Both are attributed to the PBMC&BM's precise identification of resource utilization that permits accurate valuation. ^ Conclusion. Both methods have specific limitations. The PBSM strengths are its sample designs that lead to nationally representative estimates and permit statistical point and confidence interval estimation for the nation for certain variables under investigation. However, the findings of this investigation suggest the internal validity of the estimates derived is questionable and important additional information required to precisely estimate the cost of an illness is absent. ^ The PBMC&BM is a superior method in identifying resources utilized in the physician encounter with the patient permitting more accurate valuation. However, the PBMC&BM does not have the statistical reliability of the PBSM; it relies on synthesized national prevalence estimates to extrapolate a national cost estimate. While precision is important, the ability to generalize to the nation may be limited due to the small number of patients that are followed. ^

Financing hospital care in the United States.

Vols. 2-3 published by Blakiston Division, McGraw-Hill.

Three essays on hospital efficiency

This dissertation analyzes hospital efficiency using various econometric techniques. The first essay provides additional and recent evidence to the presence of contract management behavior in the U.S. hospital industry. Unlike previous studies, which focus on either an input-demand equation or the cost function of the firm, this paper estimates the two jointly using a system of nonlinear equations. Moreover, it addresses the longitudinal problem of institutions adopting contract management in different years, by creating a matched control group of non-adopters with the same longitudinal distribution as the group under study. The estimation procedure then finds that labor, and not capital, is the preferred input in U.S. hospitals regardless of managerial contract status. With institutions that adopt contract management benefiting from lower labor inefficiencies than the simulated non-contract adopters. These results suggest that while there is a propensity for expense preference behavior towards the labor input, contract managed firms are able to introduce efficiencies over conventional, owner controlled, firms. Using data for the years 1998 through 2007, the second essay investigates the production technology and cost efficiency faced by Florida hospitals. A stochastic frontier multiproduct cost function is estimated in order to test for economies of scale, economies of scope, and relative cost efficiencies. The results suggest that small-sized hospitals experience economies of scale, while large and medium sized institutions do not. The empirical findings show that Florida hospitals enjoy significant scope economies, regardless of size. Lastly, the evidence suggests that there is a link between hospital size and relative cost efficiency. The results of the study imply that state policy makers should be focused on increasing hospital scale for smaller institutions while facilitating the expansion of multiproduct production for larger hospitals. The third and final essay employs a two staged approach in analyzing the efficiency of hospitals in the state of Florida. In the first stage, the Banker, Charnes, and Cooper model of Data Envelopment Analysis is employed in order to derive overall technical efficiency scores for each non-specialty hospital in the state. Additionally, input slacks are calculated and reported in order to identify the factors of production that each hospital may be over utilizing. In the second stage, we employ a Tobit regression model in order to analyze the effects a number of structural, managerial, and environmental factors may have on a hospital’s efficiency. The results indicated that most non-specialty hospitals in the state are operating away from the efficient production frontier. The results also indicate that the structural make up, managerial choices, and level of competition Florida hospitals face have an impact on their overall technical efficiency.

O papel dos sistemas de informação do Hospital de Curry Cabral na gestão hospitalar : Estudo de caso num serviço de radiologia

Os sistemas de informação, enquanto ferramenta da gestão, podem contribuir para o desenvolvimento das organizações sendo atualmente visível esta preocupação nos órgãos de gestão dos serviços de saúde. No processo de implementação dos sistemas de informação a economia da informação assume um destaque pela sua componente de mais-valia. No presente trabalho, fizemos uma caracterização dos sistemas de informação utilizados no serviço de radiologia do hospital Curry Cabral e percebemos como os profissionais trabalhavam e atualizavam a informação nesses mesmos sistemas. Analisámos posteriormente a produtividade através de índices criados para o próprio serviço, antes e depois da implementação dos sistemas de informação, para entender até que ponto podemos falar da economia da informação. Através de uma abordagem quantitativa pretendeu-se a realização de um estudo descritivo com recurso à técnica de inquérito através de questionário aplicado a 55 profissionais do serviço, nomeadamente a 17 médicos de radiologia, a 6 administrativas e a 31 técnicos de radiologia. De uma forma geral, os dados obtidos nesta investigação permitem verificar que a atualização dos sistemas de informação por parte dos profissionais deste serviço ocorre de uma forma bem conduzida e cuidada, nomeadamente pelos técnicos de radiologia. Entendemos também que de uma forma geral todos os profissionais estão cientes que os sistemas de informação contribuem para o auxílio na gestão principalmente devido a uma melhor monitorização do trabalho efetuado. Relativamente aos índices de produtividade percebemos que são difíceis de quantificar, no entanto, e de um modo geral esta aumentou em valores pouco significativos, cerca de 2,3%. ABSTRACT: The information Technology as a management tool can contribute to the healthy development of the organization. This fact has become visible by the interest showed on IT by the management body of the Health Services. On the implementation process of the IT Services the economy of information assumes a major role as a powerful and altering force to the landscape. ln this thesis we studied the IT services used by the Radiology Service of the Hospital Curry Cabral, and tried to understand how the professionals work, by using and improving the information on those systems. We analyze the productivity using markers built for the specified service, before and after the implementation of the IT Services to understand how far into the "IT Economics" we have traveled. Thru a direct approach a study was conducted using a questionnaire, and a target audience of 55 local radiology professionals, namely 17 radiology doctors, 6 service secretaries and 31 radiology technicians. ln general, the data gathered by this investigation, allowed us to verify that the data collected and updated by the Radiology professionals, is carefully collected, especially by the Radiology Technicians. We have also found that generally all Hospital professionals see the IT Services as a major help for management mainly thru better monitoring of accomplished work. ln relation to the productivity indexes we have found that they are hard to quantify, because certain aspects are close to impossible to ascertain, but in gross it has grown but in less than expected, more or less 2,3%.