3 WINTER 2024 NO.90 / THOUGHT LEADERSHIP BRIEF To better understand whether winning or losing the litigation makes a difference to hospitals’ responses, we further explore the heterogeneity by court verdict. We divided the hospitals being sued into two groups, “winners” and “losers”, based on their obligation to pay court fees and compared the effects of winning and losing a lawsuit on the hospital’s diagnostic testing outcomes. We observe that the effects in negative cases are much greater than that in positive cases (Figure 2). The results also show that losing hospitals respond more significantly than their winning counterparts. Specifically, the number of negative cases of MRI tests at losing hospitals has significantly increased by 80.9%, while there is no significant effect on negative cases in winning hospitals. Further utilizing information on economic compensation paid by the losing hospital and the proportion of medical malpractice liability the hospital bears, we conduct a generalized differencein-difference estimation and find that after losing a litigation, for every 10,000 Chinese yuan (approximately 1377.09 USD) of compensation a hospital bears, there is an increase of 18.3 MRI scans per quarter. Similarly, for every 1 percentage point increase in the proportion of medical errors that the court finds the hospital liable for, the hospital would have 13.0 additional MRI scans per quarter (Table 1). Similarly, we observe a larger percentage increase in negative cases compared to positive cases. Table 1. Hospital Response to Financial Punishment and Malpractice. MRI Tests Volume (1) Positive Rate (2) Positive Cases (3) Negative Cases (4) Panel A. Claim fee as treatment intensity Claim fee (10,000 CNY) × Post 18.301*** (0.105) -0.184*** (0.005) 71.344*** (0.186) 28.575*** (0.029) Mean of Dep. Var 3012.736 88.410 3292.090 300.459 R-squared 0.994 0.892 0.954 0.954 Panel B. Medical error as treatment intensity Medical error (Percentage points) × Post 13.040*** (0.075) -0.131*** (0.003) 50.834*** (0.132) 20.361*** (0.021) Mean of Dep. Var 3012.736 88.410 3292.090 300.459 R-squared 0.994 0.892 0.954 0.954 Number of clusters 21 21 21 21 Observations 206 206 206 206 Notes: All models include hospital and district by year fixed effects, treatment-specific linear time trends and interaction terms between hospital basic characteristics (i.e., government-owned hospital, general hospital, land area, number of beds, employee, physicians, nurses, chief physicians, associate chief physician, and attending physician) and a linear time trend. Robust standard errors clustered at the hospital level are presented in parentheses. Significance at * 10%, ** 5%, and *** 1% levels. Figure 2. Heterogeneous Effect of Medical Litigation on Positive and Negative Cases of MRI Tests by Court Rulings. Note: Panel A and B plot the event study estimates using Poisson regression for positive and negative cases of MRI tests by court rulings. The estimated coefficients are reported in the form of Incidence Rate Ratios (IRRs). Winners and losers of the litigation are defined by the obligations to pay court fees, with those who pay more being the losing party. Panel A. Hetergeneous E ect on the Number of Positive Cases of MRI Tests Panel B. Hetergeneous E ect on the Number of Negative Cases of MRI Tests Estimated Coefficients (IRR) Estimated Coefficients (IRR) Quarter Relative to Medical Litigation Quarter Relative to Medical Litigation 10 7 4 1 -2 -5 ≤-6-5-4-3-2-1 0 1 2 3 4 5≥6 10 7 4 1 -2 -5 ≤-6-5-4-3-2-1 0 1 2 3 4 5≥6 Loser Winner Loser Winner
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