Hospitals' behavior in a tort crisis: observations from Pennsylvania

Pennsylvania, like many states around the country, is in the throes of a "tort crisis." The cost of professional liability insurance for physicians and hospitals is escalating rapidly, as its availability shrinks. Many hospitals are poorly situated to bear these rising costs, especially in an environment of flat reimbursement rates and poor investment returns. This paper examines the impact of the liability crisis on Pennsylvania hospitals and the strategies being used to weather the storm, including alternative risk financing and closer ties between hospitals and affiliated physicians. It concludes by connecting these trends to larger medical malpractice policy issues.