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The short- and long-run effects of medical malpractice lawsuits on medical spending and hospital operations in China

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  • Liu, Gordon
  • Yi, Junjian
  • Yuan, Ye
  • Zhao, Shaoyang

Abstract

China is experiencing a surge in medical malpractice lawsuits. Using administrative hospital panel data, this paper investigates both short- and long-run impacts of medical malpractice lawsuits on patient medical spending and hospital operations. We find that after the occurrence of an additional malpractice lawsuit in a hospital, total medical spending per patient visit increases by 2.8% in the current year and by as much as 8.8% in the long run. This increase is mainly driven by spending on prescription drugs and diagnostic tests. In response, hospitals invest more in medical devices and procure more drugs. We find little evidence of changes in patient outcomes. Our findings show that the surge of medical malpractice lawsuits leads to defensive medicine and fuels the secular growth of medical spending in China.

Suggested Citation

  • Liu, Gordon & Yi, Junjian & Yuan, Ye & Zhao, Shaoyang, 2023. "The short- and long-run effects of medical malpractice lawsuits on medical spending and hospital operations in China," Journal of Comparative Economics, Elsevier, vol. 51(4), pages 1142-1161.
    • Handle: RePEc:eee:jcecon:v:51:y:2023:i:4:p:1142-1161
    DOI: 10.1016/j.jce.2023.05.002
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    More about this item

    Keywords

    Medical malpractice; Defensive medicine; Medical tort law; Healthcare market;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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