The Impact of Malpractice Litigation on Physician Behavior: The Case of Childbirth∗

How do malpractice lawsuits affect physician behavior? Despite the central importance of this question in understanding the design of malpractice law, empirical evidence on this question remains limited. In this paper, I study the impact of malpractice claims against obstetricians, a specialty that is regarded as particularly subject to malpractice concerns, on their choice of whether to perform C-sections, a common procedure that is thought to be sensitive to physician incentives. I find that immediately after an adverse event (defined as an obstetrical procedure that ultimately leads to a malpractice claim), C-section rates jump discontinuously by 4%. The increase in C-section rates persists even 4.5 years after the adverse event. Several other findings provide support to the view that fear of litigation and damage to reputation explain the results, rather than a mere response to the negative outcome that brought about the malpractice claim. First, unsuccessful claims, which, at the time of the adverse event, are perceived as less harmful to physicians’ reputation, do not lead to an increase in C-section rates. Second, the impact on C-section rates is larger for patients insured by a commercial insurance provider, for which reputational concerns are likely to be stronger, since they are less constrained in their choice of physicians. In addition, the impact is smaller for experienced physicians, but not for those with a prior history of litigation claims. I also find evidence of peer effects: following an adverse event, a physician’s colleagues also have higher C-section rates. Overall, this study shows that following an adverse event physicians adopt more conservative and costly treatment strategies and that their response is likely to be related to fear of litigation and damage to reputation. I thank David Card, Raj Chetty, Emmanuel Saez and seminar participants at UC Berkeley for very helpful comments and discussions. E-mail: [email protected].