Medical Malpractice Liability and Physician Migration

By Perry, John J.; Clark, Christopher | Business Economics, July 2012 | Go to article overview

Medical Malpractice Liability and Physician Migration


Perry, John J., Clark, Christopher, Business Economics


This paper uses national data on individual physicians and two control groups to provide evidence on the extent to which each of five medical malpractice reforms impacts the decision to move one's medical practice to another state. We find robust evidence that states that have implemented noneconomic damage caps experience less out-migration of physicians than states that do not have these reforms. In addition, we find some evidence that joint and several liability reforms and patient compensation funds also impact the migration decisions of physicians.

Keywords: medical malpractice, migration, noneconomic damages, physician

Economists are acutely concerned about and analyze the effect of government policies such as taxes and regulatory climates on the location and performance of economic activity. In this paper, we investigate a hotly debated policy issue that has potentially profound economic effects: the impact of medical malpractice climates on the physician workforce. In particular, we measure whether physicians respond to medical malpractice climates and "vote with their feet" by migrating toward states with malpractice climates they deem more favorable.

Policymakers, industry, academics, and particularly the medical and legal professions have engaged in fierce debates over the impact of medical malpractice laws on the provision of health care services. An important point of contention is over the severity of penalties given to medical professionals who are found to have engaged in medical malpractice. Some suggest that a "severe" medical liability climate is needed to hold medical practitioners accountable. (1) Others suggest that severe medical liability climates have the unintended consequence of increasing medical costs and reducing the supply of physicians, which could lead to a lower level of access to medical services for patients. (2)

Given the size of the medical industry and the central role physicians have in directing the industry, the effect of medical liability climates on physicians is important. While there has been research examining the effect of medical malpractice climates, little work has examined the individual-level response of physicians, and no paper has looked at individual-level physician migration. Using national data on a sample of individual physicians, we provide evidence through an econometric model on the extent to which each of five medical malpractice reforms impacts the decisions of physicians to move their practice to another state.

Our analysis of individual physician migration decisions shows that physicians do "vote with their feet." In our preferred specification, we find that states that have implemented noneconomic damage caps, (3) joint and several liability reforms, (4) and patient compensation funds see their physicians move away less frequently than states that do not have these reforms.

We estimate that the marginal effect of a state implementing noneconomic damage caps is a reduction in the probability of a physician moving out of state of about 0.8 percentage points--which translates to a 35 percent decrease in the probability that a physician moves to another state. The marginal effect of implementing a joint and several liability reform is estimated to reduce the probability of a move by roughly 55 percent in our preferred model specification. Having a patient compensation fund leads to about a 30 percent reduction in the probability that a physician moves. However, in our other empirical specification, only caps on noneconomic damages and patient compensation funds have a statistically significant impact on the moves of physicians, the magnitude of each being about the same as out preferred specification. We interpret these results as providing robust evidence that caps on noneconomic damages impact the location decisions of physicians but providing more limited evidence for joint and several liability and patient compensation funds. …

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