Pa. Hospitals Paying 2.6% of Patient Revenues for Med-Mal Expenses

Pennsylvania’s 182 general acute care hospitals reported a total of $636 million in medical malpractice expenses in fiscal year 2004, according to a research report from the Pennsylvania Health Care Cost Containment Council (PHC4).

Hospital malpractice insurance expenses represent 2.67 percent of the total statewide net patient revenue, indicating that $2.67 of every $100 paid for hospital-associated patient care was used to satisfy malpractice insurance costs.

“This research brief plays a role in identifying some objective data regarding hospital-borne malpractice expenses that may help the debate over this important issue,” stated Marc P. Volavka, PHC4’s executive director. “It also establishes a baseline against which future data can be compared to see if the malpractice burden for hospitals is increasing, declining, or remaining the same.”

Over the past few years, commercial malpractice insurance has become increasingly expensive and difficult for hospitals to obtain. As a result, the report shows that more than two-thirds (67.4 percent) of hospital malpractice expenditures were incurred through a wide array of self-insurance arrangements. Most hospitals reported changes in the manner in which they met their malpractice exposure since 2002.

The report notes significant regional variations in hospital malpractice costs across the Commonwealth. Hospital malpractice expenses were highest in Southeast Pennsylvania and lowest in Southwestern Pennsylvania. The average hospital malpractice costs in Philadelphia County were 3.94 percent, more than double the average in the eight-county Pittsburgh area, where malpractice insurance costs averaged 1.60 percent of net patient revenue. The other four Philadelphia metro counties had an average rate of 3.29 percent compared to the statewide average of 2.67 percent.

The PHC4 research brief includes information on hospital payments to the Medical Care Availability and Reduction of Error (MCARE) fund, a mandatory state-administered malpractice insurance program for hospitals. The majority of hospitals also underwrite some portion of the malpractice and MCARE costs incurred by some of the physicians practicing at their hospitals. Malpractice expenses covered in this report include hospital costs to obtain malpractice insurance or pay claims not covered by insurance arrangements. The report does not include malpractice costs borne by physicians independent of those paid for by hospitals. It is not, therefore, a complete picture of all statewide malpractice costs.

The Pennsylvania Health Care Cost Containment Council (PHC4) is an independent state agency charged with collecting, analyzing and reporting information that can be used to improve the quality and restrain the cost of health care in Pennsylvania. The PHC4 periodically releases Research Briefs on health care topics relevant to public policy issues. PHC4 reports are available on the council’s Web site at www.phc4.org.