A growing legal and financial crisis is threatening the stability of Pennsylvania’s hospitals. The state’s shifting medical liability landscape — particularly the rise of “venue shopping” and high-severity malpractice settlements — has created an environment in which hospitals face extraordinary legal and financial risks.
In some cases, a single high-dollar lawsuit could push a financially strained hospital to the brink of closure. Hospital leaders are warning that without urgent legal reforms, Pennsylvania’s hospital infrastructure, especially in rural areas, will continue to erode.
Over the past five years, six rural hospitals in Pennsylvania have closed, and 18 more are at risk — 10 of which are deemed an imminent threat.
“Pennsylvania has the unfortunate distinction of having one of the highest percentages of rural hospital closures,” Nicole Stallings, president and CEO of the Hospital and Healthsystem Association of Pennsylvania, said during an episode of the Becker’s Healthcare Podcast. “In the northwest part of the state, there’s now an area the size of Connecticut without a birthing hospital.”
Workforce shortages exacerbate the problem. Recruiting specialized providers to rural areas is increasingly difficult, particularly for labor and delivery units. With declining patient volumes, maintaining the skill set and knowledge base necessary for an obstetric team to provide safe, high-quality care is a growing challenge.
“We live in a maternal care desert, so you’re likely receiving care from a family medicine physician or a nurse practitioner rather than an obstetrician,” Ms. Stallings said. “We’re really thinking through how to strengthen connections to regional specialists, considering a hub-and-spoke model, and leveraging remote patient monitoring to keep a closer eye on high-risk individuals. This requires strong partnerships between hospitals in both rural and urban areas, as well as policy changes to allow for better use of technology.”
Compounding workforce and financial concerns is the shifting legal landscape, which has made Pennsylvania one of the most challenging states for hospitals to operate.
A significant driver of this issue is the 2023 legal change allowing “venue shopping,” a practice that permits plaintiffs to file lawsuits in jurisdictions known for high plaintiff awards, even if the alleged malpractice occurred elsewhere.
Pennsylvania’s medical liability climate is one of the worst in the country, and “venue shopping” makes it increasingly difficult to recruit healthcare providers to rural areas. The “looming threat” of litigation in plaintiff-friendly jurisdictions, such as Allegheny County or Philadelphia County, combined with rising insurance costs, is affecting access to care, according to Ms. Stallings.
“Now, if you’re providing care in a rural community and there’s an adverse outcome — perhaps involving a travel nurse, for example — the lawsuit can be moved to jurisdictions like Philadelphia County, which is notoriously plaintiff-friendly,” she said. “We see a high number of nuclear verdicts there. Just in the past two years, there has been a surge in cases being brought into these challenging jurisdictions. That’s certainly a key reason why access to maternal healthcare continues to decline in Pennsylvania.”
Beyond impacting recruitment and hospital operations, rising malpractice settlements have placed severe financial pressure on hospitals. While the volume of malpractice cases has not necessarily increased, the monetary settlements have skyrocketed, particularly in Western Pennsylvania, according to Brian Devine, CFO of Pittsburgh-based Allegheny Health Network.
“Historically, this phenomenon has been more common in large metro areas where massive plaintiff demands and settlements are more typical,” Mr. Devine said during an episode of the Becker’s CFO and Revenue Cycle Podcast. “However, we’re now seeing out-of-state lawyers filing substantial claims in our region, which has raised serious concerns about malpractice litigation trends and the financial impact of these settlements on providers in our market.”
In response, hospital leaders are advocating for tort reform to mitigate the financial risks posed by excessive settlements and litigation. Some states have addressed this issue by capping settlement amounts, but Pennsylvania has yet to implement similar protections. In the absence of immediate legislative solutions, health systems are focusing on internal measures to minimize risk.
“When it comes to managing these cases, we can’t always control the rising demands from plaintiffs or the way cases are litigated. However, what we can do is ensure we have the right level of documentation, education, and communication across our clinical teams,” Mr. Devine said. “We’ve found that ensuring proper escalation protocols and thorough documentation can significantly aid in defending these cases, ultimately leading to more reasonable settlements as the facts emerge.”
Allegheny Health Network, a division of Highmark Health, has been having discussions with various service lines to implement this approach and manage risk, but the issue requires a broader lobbying effort to tackle a growing problem for Pennsylvania hospitals.
“Many providers in Western Pennsylvania are already financially struggling. A single large case could, quite frankly, put them out of business,” Mr. Devine said. “This is a major risk in our market as we continue to see malpractice claims and settlement demands rise at an alarming rate.”