Abstract
Observational healthcare data offer the potential to estimate causal effects of medical products on a large scale. However, the confidence intervals and p-values produced by observational studies only account for random error and fail to account for systematic error. As a consequence, operating characteristics such as confidence interval coverage and Type I error rates often deviate sharply from their nominal values and render interpretation impossible. While there is a longstanding awareness of systematic error in observational studies, analytic approaches to empirically account for systematic error are relatively new. Several authors have proposed approaches using negative controls (also known as "falsification hypotheses") and positive controls. The basic idea is to adjust confidence intervals and p-values in light of the bias (if any) detected in the analyses of the negative and positive control. In this work, we propose a Bayesian statistical procedure for posterior interval calibration that uses negative and positive controls. We show that the posterior interval calibration procedure restores nominal characteristics, such as 95% coverage of the true effect size by the 95% posterior interval.