Costs to HCOs resulting from medical errors include operating, legal, and marketing costs. When preventable medical errors occur, the organization incurs the immediate cost of staff resources involved in reporting the error to internal (and external, if required) entities and in intervening to prevent recurrence and mitigate the effect of the error. Risk managers and providers expend time in generating reports and designing and carrying out error analyses. An HCO also may incur additional patient care costs created by the error, such as costs associated with transfer to higher level of care, use of additional diagnostic resources, or an extended hospital stay.1 If legal claims are made, direct costs incurred include legal fees, settlements and payments, and the time expended by risk management personnel. Indirect litigation costs include time spent by providers and others in litigation and depositions, which not only decreases productivity, but also can impair morale. Long-term legal costs include higher premiums. Marketing costs are also increased in efforts to contain “bad press” and loss of market share (Weeks et al., 2001).

A review by the Agency for Healthcare Research and Quality (AHRQ) of practices used by hospitals to decrease adverse drug events (ADEs) found that costs to hospitals (excluding malpractice and litigation costs) increased as a result of the ADEs occurring within their facility. These increased costs resulted in part from extended lengths of stay. Patients who experienced an ADE were hospitalized an average of 8 to 12 days longer than those who did not experience such an event. AHRQ estimates that, depending on facility size, hospital costs for all ADEs can be as high as $5.6 million per hospital. AHRQ notes that before the advent of managed care, hospitals would have shifted a large portion of these costs to the patient or the insurer. Today, hospitals are more likely to have to absorb the added expense (AHRQ, 2001).

LDS Hospital in Salt Lake City, for example, found in a 4-year, matched case-control, severity-adjusted study that the occurrence of the ADE resulted in an average increased cost to the facility of $2,013 (p < 0.001), with a range of $677 to $9022. In 1992, direct hospital costs for ADEs were $1,099,413; over the 4-year study period, the excess hospital costs attributable to ADEs totaled $4,482,951 (not including liability costs or the costs associated with injuries to the patient). The authors estimate that, at the time of the study, if 50 percent of the ADEs had been potentially preventable, successfully targeted programs could have saved more than $500,000 annually (Classen et al., 1997). AHRQ notes that a 50 percent reduction in

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Although, perversely, organizational costs associates with errors may be offset through increased reimbursement for treatment of complications resulting from the error (Weeks et al., 2001).



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