Shifting Liability with Licensing: An Empirical Analysis of Medical Malpractice and Scope-of-Practice Laws

Abstract Medical malpractice liability plays an important role in the healthcare system, as evidenced by the many studies finding that changes in malpractice liability risk induce changes in the delivery and consumption of care. Importantly, the effect of malpractice liability depends on who is held liable, and recent developments in the healthcare system have clouded which providers face the risk of liability in certain situations. In particular, as the United States continues to face a physician shortage, nurse practitioners (NPs) have assumed greater roles within the healthcare system. Their ability to provide care, however, depends on state scope-of-practice (SOP) laws which often mandate that physicians supervise NPs’ practices. These mandatory supervision laws can facilitate the ability of injured patients to use various familiar doctrines, e. g. respondeat superior and negligent supervision, to hold supervising physicians liable based on the acts of NPs. As healthcare becomes increasingly team-based and as NPs deliver more care traditionally provided by physicians, understanding the interaction between malpractice liability and SOP laws will become critical. This Article reports novel empirical evidence on the interplay between malpractice liability and SOP laws. Examining a unique dataset of the malpractice premiums charged to physicians in various specialties, I analyze the extent to which SOP laws requiring that physicians supervise the practices of NPs impact the malpractice liability risk faced by physicians. In general, eliminating physician supervision requirements reduce the malpractice risk faced by physicians (as measured by the premiums paid to insure against this risk) by 7.5 %. In addition to elucidating a previously unappreciated interaction between tort law and state SOP laws, this evidence suggests that the imposition of physician supervision requirements may blunt the role of tort law in deterring the provision of unsafe or low-quality care. If SOP laws facilitate the shifting of liability risk from NPs to physicians through various tort doctrines, then neither NPs nor physicians will be appropriately deterred. Indeed, reaching optimal deterrence for one group would necessarily imply suboptimality for the other. This Article reviews several options to address this problem and recommends removing physician supervision requirements from state SOP laws.