Reimbursement schemes for hospitals, malpractice liability, and intrinsic motivation

We develop a simple multi-task principal-agent model to analyze the interplay between optimal reimbursement schemes for hospitals and liability rules (basic model). We then extend our model and assume that the hospital is intrinsically motivated to exert positive effort for quality and cost reduction. This effort, however, is biased towards quality. Moreover, the intrinsic motivation may be crowded out by monetary incentives. In such a setting, we find that a pure prospective payment system (PPS) that has become widespread in recent years can only be optimal in the unlikely case where malpractice liability holds hospitals fully responsible for expected harm. For other cases, we confirm the prejudice that PPS may lead to inefficiently low quality. Then, the traditional fee-for-service (FFS) system is superior if the intrinsic motivation is high and relatively little biased towards quality, whereas mixed systems should be chosen otherwise. Our model sheds light on why countries like the USA with a tough liability system haven been less reluctant to switch from FFS to PPS than Germany, for instance.     

Teamwork in health care and medical malpractice liability: an experimental investigation

European Journal of Law and Economics - The treatment of a patient often implies consultations with different health care professionals. This complex health care pathway raises the issue of the...     

Medical malpractice in the absence of a doctor-patient relationship: the potential liability of psychiatric examiners in New York State

In New York, psychiatrists (and all physicians) have a duty, in every circumstance with respect to such functions as they are required to undertake, to conduct themselves and all their examinations in a thorough and proper manner. Especially in a forensic setting, psychiatrists must bear in mind that they have a legal duty to perform a competent examination before they render an opinion. It is well established that malpractice liability does not require the preexistence of a doctor-patient relationship based on an undertaking for the purpose of treatment. The author discusses a long line of cases in New York State which holds that psychiatric examiners are potentially liable in malpractice for any breach of duty with respect to those functions that are undertaken. Failure to conduct a proper, careful, and competent examination may result in liability in a variety of areas: competency examinations, commitment proceedings, workers' compensation claims, and so on. Limitations on such malpractice liability are discussed. Unlike some jurisdictions, New York does not accord judicial immunity to psychiatric examiners.