The effects of noneconomic damages cap on liability payments, hospital charges, and utilization of procedures

Abstract

As physicians are exposed to liability risk in their medical practice, variations in the liability risk of their practicing environments can induce changes in physicians' treatments of patients. This paper contributes to the current literature on the effect of changing liability risk on physicians' behavior by studying the impact of the repeal of a noneconomic damages cap in Georgia on malpractice payments, total hospital charges, and procedure use. This paper uses a differences-in-differences model on inpatient stays data from the Nationwide Inpatient Sample (NIS) from 2006 to 2011, and from New Jersey, Maryland, and Georgia State Inpatient Databases (SID) from 2012 to 2015Q3, Healthcare Cost and Utilization Project (HCUP), Agency for Healthcare Research and Quality and malpractice payments data from the National Practitioner Data Bank Public Use Data File, matched to the presence of a noneconomic damages cap for Georgia, Maryland, and New Jersey. This study finds that a noneconomic damages cap is associated with lower malpractice payments, while having no statistically significant impact on total hospital charges. In terms of the effect of a noneconomic damages cap on procedure use, the study finds weak evidence that such effects vary across different patients' age quartiles and across different medical specialties.