Scandinavian Working Papers in Economics

HERO Online Working Paper Series,
University of Oslo, Health Economics Research Programme

No 2003:10: Medical errors: Getting the incentives right

Sverre Grepperud ()
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Sverre Grepperud: Institute of Health Management and Health Economics, Postal: P.O. Box 1089 Blindern, NO-0317 Oslo, Norway

Abstract: This work examines the role of penalties as providers of incentives to prevent medical errors and ensure that such incidents, once they occur, become common knowledge. It is shown that a scheme with two penalties (accountability and non-report) is able to induce the first-best solution. However, this scheme needs not imply a punitive environment, but may, under given circumstances, yield insignificant and even negative penalties. Alternative incentive systems, such as voluntary reporting and legal immunity, are found to have less desirable properties. An exception is the principle of confidentiality (anonymity) which turns out to be an optimal scheme. It is also shown that when a judicial upper limit is binding, for the non-report penalty, it becomes rationale to go “soft” on the accountability penalty.

Keywords: Iatrogenic injury; adverse events; reporting incentives; confidentiality

JEL-codes: D82; I18; K42

27 pages, June 21, 2009

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