The safety of patients is an important responsability of health care providers, and significant compensation costs may arise if providers are negligent. A widely debated option involves liability for such compensation being placed with the hospital rather than the individual clinician, a system known as "enterprise liability". In the United States, partial adoption of enterprise liability and proposals for its universal introduction have accompanied high-profile "malpractice insurance crises" in the last two decades. Hospitals in England and Wales have been subject to this sytem since 1990, and risk-pooling arrangements have emerged subsequently allowing hospitals to tranfer their liability risk to an agency known as the National Health Service Litigation Authority. We explore some of the mechanisms used by this agency to provide hospital management with financial incentives to take care. We estimate the influence of these arrangements on the use of diagnostic imaging tests within shift took place leading to a form of "natural experiment". Our results suggest that the use of diagnostic tests did not respond to the incentives created during this period. We speculate that certain types of patient care activity, including the use of diagnostic tests, may be less responsive to incentives placed at the level of the hospital by comparison with incentives placed at the level of the clinician. Our findings may have implications for jurisdictions contemplating a move to enterprise liability as well as wider implications for public-sector organizations faced with financial incentives to improve service quality

Incentives and Public Service Performance: a special issue

Volume 20

Supplement 2

July 2010