The study determines the extent to which payment thresholds for reporting malpractice claims to the National Practitioner Data Bank identifies substandard health care delivery in the Department of Defense. Relevant data were available on 2,291 of 2,576 medical malpractice claims reported to the closed medical malpractice case data base of the Office of the Assistant Secretary of Defense (Health Affairs). Amount paid was analyzed as a diagnostic test using standard of care assessment from each military Surgeon General office as the criterion. Using different paid threshold amounts per claim as a positive test, the sensitivity of identifying substandard care declined from 0.69 for all paid cases to 0.41 for claims over $40,000. Specificity increased from 0.75 for all paid claims to 0.89 for claims over $40,000. Positive and negative predictive values and likelihood ratio were similar at all thresholds. Malpractice case payment was of limited value for identifying substandard medical practice. All paid claims missed about 30% of substandard care, and reported about 25% of acceptable medical practice.