Who Really Pays for Medical Errors?
As we all know, medical errors cost the health system billions of dollars a year. Patient safety advocates have long sought to demonstrate that if healthcare organizations invest in safer practices and systems, they will reap financial returns in the form of reduced malpractice costs and other expenses. Our part of that conversation has been to demonstrate that the design of the physical environment also impacts those practices and systems.
But, as reported by the Commonwealth Fund, Harvard University researcher Michelle M. Mello, Ph.D., J.D., and her colleagues believe that hospitals may lack the financial incentives needed to improve safety. In their article, “Who Pays for Medical Errors? An Analysis of Adverse Event Costs, the Medical Liability System, and Incentives for Patient Safety Improvement” (Journal of Empirical Legal Studies), they found that most of the costs resulting from medical errors are actually shifted to outside parties–often to payers like Medicare.
Mello and colleagues compared the costs associated with adverse events that were absorbed by hospitals, including malpractice insurance premiums and extra inpatient care they were unable to recoup, against costs that were passed along to other payers. On average, the hospitals they studied externalized 78 percent of the costs of all injuries and 70 percent of the costs of negligent injuries.
According to the authors, changes in provider payment policy and legal reforms to allow more injured parties to pursue compensation could bolster incentives for hospitals to improve safety. This is good news, but I’d venture to guess that improving safety is in the top three priorities of most hospitals — it makes good business sense for reasons other than who ultimately pays for negligent injuries. Who would want to come to a hospital if it had a lousy safety record? Besides, it’s not morally or socially responsible.
Investing in safety improvement is not an option, it is an imperative. And design of the physical environment is an important piece of the puzzle that makes practices and systems work.