Uncertainty,information and resolution of medical malpractice disputes

This study assesses the role of defendant liability in determining whether the plaintiff receives payment, relationship of compensation to economic loss, and stage of dispute resolution. An options pricing model explains how information acquired affects both decisions to drop or continue and settlement values, as well as the role of pecuniary motives for claiming. Cases in which a panel of physician evaluators thought defendant(s) to be innocent were much more likely to be dropped, as were cases in which innocence became more apparent as the case developed. Compensation was much less than economic loss on average. Questionable defendant liability meant reduced compensation.The research was supported in part by a grant from The Robert Wood Johnson Foundation entitled, Resolution of Malpractice Claims: Birth- and Emergency Room-Related Injuries (Grant No. 14045). We thank Mingliang Zhang, Lars Runquist, and Stephen van Wert for research assistance.