Does Experience Rating Improve Obstetric Practices? Evidence from Italy

Using inpatient discharge records from the Italian region of Piedmont, we estimate the impact of an increase in malpractice pressure brought about by experience-rated liability insurance on obstetric practices. Our identification strategy exploits the exogenous location of public hospitals in court districts with and without schedules for noneconomic damages. We perform difference-in-differences analysis on the entire sample and on a subsample which only considers the nearest hospitals in the neighborhood of court district boundaries. We find that the increase in medical malpractice pressure is associated with a decrease in the probability of performing a C-section from 2.3 to 3.7 percentage points (7-11.6%) with no consequences for medical complications or neonatal outcomes. The impact can be explained by a reduction in the discretion of obstetric decision-making rather than by patient cream skimming.