The operation of the currently existing institutions and processes for managing risks associated with the use of medical devices are reviewed and analyzed. Questions addressed include the definition(s) of device failure, the establishment of acceptable failure rates, and the selection of the parties to be involved in these risk-management processes, both prospectively and retrospectively. Currently perceived difficulties associated with the unilateral risk-management activities of both the FDA regulatory apparatus plus the product liability and medical malpractice litigation systems are described. A pluralistic risk-management approach based upon marketplace incentives is proposed. This marketplace-in-centive approach encourages the development and use of performance standards both to enhance benefits to patients and to reduce the adversarial tension between the FDA and the private sector as well.