Reports the Philadelphia Business Journal:
Pennsylvania's 182 general acute-care hospitals spent $636 million -- which equates to 2.67 percent of the total statewide net patient revenue -- on medical malpractice expenses in fiscal 2004, according to a report released Monday by the Pennsylvania Health Care Cost Containment Council [an independent state agency].
The numbers do not include premiums paid by independently practicing doctors or by other professionals such as nurse-midwives, so the true cost of malpractice insurance in the state is higher than the $636 million figure, probably considerably so.
The report also finds a dramatic gap in the cost level between hospitals located in Philadelphia, which on average spent 3.94 percent of their revenue on insurance, and those at the other end of the state in Pittsburgh, which paid a modest 1.60 percent. (Those in the Philadelphia suburbs averaged 3.29 percent). The long-honored conventional wisdom, of course, is that Pittsburgh has a far less litigious legal culture than Philadelphia. The cost gap between cities thus makes perfect sense if you assume that insurance rates bear a logical relation to expected future payouts and legal costs. If, on the other hand, you accept the arguments of some in the trial bar that insurance rates are driven by everything other than expected future costs, you have to wonder why Pittsburgh hospitals are getting off so easy. Do the famed (and much mythologized) "bad investments" of insurance companies not affect their rates too?