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Stanford Graduate School of Business Research: Must First Understand Medical Malpractice System in Order to Reform It

There is no perfect answer, but research on and experimentation with new approaches is essential to our system's future.

Business Wire Press Release
8/16/11

STANFORD, Calif.-(BUSINESS WIRE)-It's not hard to find critics of the medical malpractice system in the United States. There is widespread agreement that it simply does not do what it should. "It both fails to compensate patients who have suffered from bad medical care, and compensates those who haven't," writes Daniel P. Kessler, a professor at the Stanford Graduate School of Business and Stanford Law School, and senior fellow at the Hoover Institution.

Moreover, malpractice issues add significant costs to the health care system. Although the amount of money devoted to legal costs and the settlement of malpractice claims is less than 1% of the nation's health care spending, the cost of unnecessary treatments (known in the literature as "defensive medicine") by doctors who fear they might be accused of negligence is staggering - approximately $50 billion a year, or 2-3% of total health spending, says Kessler.

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