Health Tr a c k i n g Tr e n d s The Growth Of Physician Medical Malpractice Payments Evidence From The National Practitioner Data Bank The growth of malpractice payments is less than previously thought by Amitabh Chandra Shantanu Nundy and Seth A Seabury ABSTRACT We used data from the National Practitioner Data Bank NPDB to study the growth of physician malpractice payments Judgments at trial account for 4 percent of all malpractice payments settlements account for the remaining 96 percent The average payment grew 52 percent between 1991 and 2003 4 percent per year and now exceeds 12 per capita each year These increases are consistent with increases in the cost of health care A preoccupation with data on judgments extreme awards or specific specialties results in an incomplete understanding of the growth of physician malpractice payments I n f lu e n t i a l t r a d e associations such as the American Medical Association AMA and the Physician Insurers Association of America PIAA have attributed the dramatic increase in physician malpractice insurance premiums to the growth in malpractice payments 1 Other factors such as declines in insurers investment income are acknowledged to have contributed to the new medical malpractice crisis however losses from rising malpractice payments are believed to be the primary contributor to the growth of malpractice premiums 2 To restrict the growth of payments both groups advocate a nationwide 250 000 limit cap on noneconomic damages a policy endorsed by President George W Bush 3 Support for damages caps is largely driven by the belief that malpractice payment growth has been concentrated in the very largest awards 4 Discussions of the malpractice crisis often rely on restrictive subsets of malpractice data so a precise description of the problem is lacking The AMA has drawn attention to trends in jury verdicts even though only a small fraction of malpractice cases are resolved at trial 5 This restriction overstates the size of payments and by ignoring information on settlements it may drastically understate the overall burden of malpractice payment The PIAA s tabulations while more complete in principle than those that only rely on jury verdicts rely on data that are not publicly available In this paper we establish new facts on the growth in malpractice payments made on behalf of physicians by using a national database of payments from judgments at trial and settlements during 1 January 1991 31 December 2003 Amitabh Chandra amitabh chandra dartmouth edu is an assistant professor of economics at Dartmouth in Hanover New Hampshire a senior research associate at the Center for the Evaluative Clinical Sciences Dartmouth Medical School and a faculty research fellow at the National Bureau of Economic Research NBER Shantanu Nundy is a medical student at the Johns Hopkins University in Baltimore Maryland Seth Seabury is an economist at the Institute for Civil Justice ICJ at RAND in Santa Monica California W5 240 DOI 10 1377 hlthaff W5 240 2005 Project HOPE The People to People Health Foundation Inc 31 May 2005 Tr e n d s Study Data And Methods n Data and study sample All malpractice payments made on behalf of a licensed health care provider must be reported to the National Practitioner Data Bank NPDB within thirty days under the Health Care Quality Improvement Act of 1986 6 Noncompliance is subject to civil penalties codified in 42 USC 11131 11152 7 The NPDB has information on 250 137 such payments made between 1 September 1990 and 31 December 2003 We restricted our sample to the fifty states and excluded payments made for Washington D C areas with missing state information and other U S territories N 3 200 The NPDB became operational late in 1990 so we deleted observations in this year N 2 132 We excluded payments that were linked to dentists pharmacists social workers or nurses N 53 538 In a small fraction of payments n 10 823 there are multiple physician defendants and thus multiple reports but only the total payment by all defendants is reported In these cases we averaged the payment by the number of physicians involved 8 In the NPDB 5 percent of payments are made by state funds in addition to other payments made by the primary insurer for the same incident N 9 919 We matched such payments based on an algorithm that used physician identifiers state of work state of licensure area of malpractice type of payment judgment or settlement and year of occurrence We also experimented with using additional data fields to perform this match but values were missing for many of these fields Fund payments that could not be matched were retained in the data N 3 822 Because these cases were rare we experimented with deleting them from the analysis With the exception of Pennsylvania which had 5 308 state fund payments 53 percent of all fund payments recorded in the NPDB our results were essentially unchanged Our final sample consists of 184 506 payments made between 1 January 1991 and 31 December 2003 in the fifty states Ninety four percent of these were for physicians with a medical degree MDs the remaining 6 per H E A LT H A F F A I R S We b E x c l u s i v e cent were for osteopathic physicians DOs Each malpractice payment in the NPDB is classified in ten major categories of liability such as surgery diagnostics obstetrics which we used for our primary analysis Data on health care spending for 1991 2002 are from the National Health Accounts NHA published by the Centers for Medicare and Medicaid Services CMS 9 We converted all payment amounts into 2000 dollars using the Implicit Gross Domestic Product GDP Price Deflator 10 Finally data on state and national population levels by year for 1991 2003 come from the U S Census Bureau 11 n Data quality and the role of the corporate shield Most previous studies of malpractice awards used data from publications that recorded information on jury verdicts in local jurisdictions known as jury verdict reporters Data from these reporters and the NPDB differ for several reasons all of which make the NPDB better suited to our analysis First the reporters are not meant to cover the universe of awards information is collected only on jury verdicts in local jurisdictions and no data on settlements are included Second amounts recorded in the NPDB measure the amount of actual payments not jury awards If a jury awards a plaintiff 1 million that figure is recorded by a reporter however if a malpractice policyholder has coverage