Money From Mistakes

Medical errors during hospitalization are strikingly common in the United States. One study of ten hospitals, published in 2010 in The New England Journal of Medicine, found that out of 2,341 admissions, 588 incidents of harm were identified — a rate of 25.1 cases of harm per 100 admissions. According to one source, around 98,000 Americans die as a result of preventable medical errors each year. To put this number in perspective, diabetes contributes to about 75,000 deaths each year in the United States and ranks sixth among all causes of death (after heart disease, cancer, stroke, lower respiratory disease, and accidents). Perhaps most disturbingly, as the 2010 study noted, awareness of the dangers posed by medical errors has been rising, yet the frequency of preventable errors has barely gone down.

Why haven’t hospitals taken the steps necessary to bring their error rates down? In a new study, published earlier this month in the Journal of the American Medical Association, researchers decided to “follow the money” and see if there was a relationship between postsurgical complications and the amount of money paid from insurance plans, using a 12-hospital system in the South as their subject.


As a New York Times article reports, out of 34,256 people who had surgery in these hospitals during the study period, 1,820 had preventable complications such as blood clots, pneumonia, or infection at the incision site. These patients tended to stay in the hospital four times as long as those who experienced no complications, leading to $30,500 more revenue per patient, on average. Complications in patients with private insurance or Medicare led to a net increase in revenue for hospitals, while for patients with Medicaid or who paid out-of-pocket, the extra costs of hospitalization were more than the extra reimbursement resulting from complications. As the authors of the study note in the article, no one is suggesting that hospitals are trying to create complications for profit. Rather, the financial disincentives may help explain why hospitals aren’t trying more vigorously to curb medical errors and reduce surgical complications.

So how could methods of payment be adjusted to change these warped incentives? One idea, long championed but seldom implemented, is to pay doctors and hospitals based on the value they provide, as measured objectively by outcomes, rather than for each service performed. As an article published last month by Kaiser Health News notes, several major employers in the Unites States have formed a consortium called Catalyst for Payment Reform (CPR) in an attempt to help rein in health-care costs — including their own — by fostering value-based payment methods.

In a report that was the focus of the article, CPR found that only 10.9% of health-care spending by employer-sponsored insurance plans last year took value into account. The other 89.1% of spending followed the regular fee-for-service pattern, indicating that doctors and hospitals had incentives to perform as many services as possible. The article notes that even large employers and insurance companies often lack the power to implement new methods of payment, since large hospital systems often have the upper hand in the negotiations to decide whether they are included in an insurance network.

What do you think — could changing the way doctors and hospitals are paid reduce medical errors? Should Congress or regulators force hospitals to adopt procedures that reduce errors and surgical complications, even if this costs hospitals a significant amount of money? Is there a fair way to pay doctors whose patients have chronic conditions, like diabetes, based on results rather than directly for the services they provide? Have you ever been the victim of a preventable medical error? Leave a comment below!

  • Ferne

    I had a colonospopy and the doctor snipped an artery in my colon. I hemmorhaged for 24 hours with 18 of those hours in the hosp. before they did a second colonoscopy to use metal clips to stop the bleeding. I would have bled out and died without that. Medicare refused to pay for the second colonoscopy because they said it wasn’t medically necessary!! The hosp. had to swallow that cost. I was in the hosp. for 4 days and had to have packed red cells. I still am anemic from that 3 years later. I don’t know how they would have made money from that. Also I was in a private room that I didn’t request so they could only charge for a double room. It would be interesting to know about all the charges. It also required an ambulance ride because anyone with GI bleeding has to be transported by ambulance.

  • joan

    The questions asked are tough ones to respond to. I am a T1D for 56 years. I suspect that no matter how medical professionals at all levels are paid, including hospital, some errors will occur but we should be able to reduce the cost.

    I have never had anyh serious issues receiving the care that I need, ever! I ask questions and fully understand what will occur and I am watchful!- always

    It has been more than 35 years since I was in hospital for a diabetic issue. All medical help from the U.S., Canada and England!

    What to do about this health care cost problem?
    1. One Payer!
    2. Medicare for ALL![or something similar for all]
    3. Doctors paid based on time it takes to help a patient with a chronic disease like diabetes.
    4. Affordable Care Organizations [ACO] are a new and enterprising means for better health care.
    It is a part of the ACA that is now being implemented. Lots of bureaucratic regulations that are hard to read but we should read it anyway!

    A report by the Association of American Medical Colleges about ACOs.

    5. Pharmaceuticals need to be regulated also.
    6. Hospital should be forced like all other medical professionals to reduce errors and surgical complications.
    7. Insurance companies should stick to insurance or increase their own awareness of what those with chronic illness or diseases need to have to be healthy. They should not be allowed to refuse chronic patients’ need for medication, and equipment [pumps & CGM]] and surgical procedures.

    It will not cost more if everyone is on the same health care plan; Medicare for All! Millions using one health care plan will reduce the cost a all by itself!
    9. The FDA is a whole decade or two behind on upgrades at every level they are responsible to over-see.

    It is well past the time when this nation has a health care plan for everyone based on need, with reasonable cost and payment plans! if reason and common sense would prevail and especially leave politics out of the equation entirely!

    Thanks for this opportunity to say it all!