In general, it is the practice of using excessive testing and proceedures to justify a diagnosis or to rule out any possible other medical explanations, mainly in responce to the threat of a lawsuit.
Patients can sue the hospital and doctor for any reason, as long as a lawyer will take the case. In medicine, there are always bad outcomes...people may sue because of the outcome (which testing often doesn't change) or a failure to test. Some patients come in and want every test done in the book. Docs (and hospitals) are afraid of suits -because even if they are bad lawsuits, its always on your record and your malpractice costs go up forever- so they give in to patients and the treat of lawsuits.
We must also decrease spending and testing at the end of life. When a patient has less than 6 months or a year to live, we cannot continue to spend excessive amounts of money on their care. Defensive medicine practices, overtesting, frivelous lawsuits, allowing lawyers to push for excessive damages (because they receive a %), malpractice premiums, and excessive end of life spending are all significant factors driving up the costs of medicine.