While the "free market solution" of letting patients discover and inform each other which doctors are "bad" and which are "good" certainly requires the free market principle of open information about goods, services, and prices, it also also masks a second assumption, that practicing medicine is a right and that we injure doctors unforgivably by revoking their right to practice it.
Practicing medicine is a privilege. We trust these men and women with extraordinary rights, to slice into bodies, dose us with precise amounts of radiation, and prescribe us medicines which in the right dose can kill or cure. If there is evidence that this trust has been betrayed and a doctor is killing us instead of curing us, that privilege should be revoked immediately until we can ascertain the facts of the matter.
I'm not in favor of higher malpractice maximums, but some mechanism needs to be in place to "encourage" hospitals and doctors to blow the whistle more loudly and forcefully.