Medical Liability:

Impact on Hospital and Physician Costs Extends Beyond Insurance

AIMD-95-169: Published: Sep 29, 1995. Publicly Released: Oct 16, 1995.

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Pursuant to a congressional request, GAO reviewed the types of medical liability costs that affect hospitals and physicians, and whether existing studies include these costs in their estimates of hospital and physician liability expenses.

GAO found that: (1) in general, hospitals' and physicians' medical liability costs account for about 1 percent of national health care expenditures; (2) estimates of malpractice premiums do not take into account direct and indirect liability costs other than some self-insurance costs; (3) these nonpremium liability costs include self-insurance costs and uninsured losses, defensive medical costs, liability-related administrative costs, and medical device and pharmaceutical liability costs; (4) it is difficult to quantify hospitals' and physicians' nonpremium liability costs because data on these costs are not usually collected, defensive medical practices are not clearly defined and are hard to distinguish from reasonable care, and administrative costs intended to minimize medical liability are included in efforts to improve service or adhere to accreditation standards; (5) medical device and pharmaceutical manufacuturers include in the cost of their products liability insurance and litigation costs and product design and marketing costs incurred to reduce the threat of law suits; and (6) it is difficult to obtain information on manufacturers' liability costs because of sealed court records and proprietary and competitive concerns.

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