The effect of malpractice law on physician supply: Evidence from negligence-standard reforms

We explore whether the composition of the physician workforce is impacted by the clinical standards imposed on physicians under medical liability rules. Specifically, we explore whether the proportion of non-surgeons practicing in a region decreases-and thus whether the proportion of surgeons increases-when liability standards are modified so as to expect that physicians practice more intensively. For these purposes, we draw on a quasi-experiment made possible by states shifting from local to national customs as the basis for setting liability standards. Using data from the Area Health Resource File from 1977 to 2005, we find that the rate of non-surgeons among practicing physicians decreases by 2-2.4 log points (or by 1.4-1.7 percentage points) following the adoption of national-standard laws in initially low surgery-rate regions-i.e., following a change in the law that effectively expects physicians to increase their use of surgical approaches.