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Do Negligent Hospitals Actually Profit from Malpractice?

In an ideal world, medical professionals would do everything in their power to eliminate every manner of preventable error, because they would have to pay for the consequences of mistakes. Medical malpractice lawsuits are supposed to work somewhat in that manner–requiring hospitals to pay for the consequences of their inadequate care, spurring them to make changes that eliminate harmful care.

Yet, a troubling new Yahoo Health article is a reminder that in a perverse way, many hospitals actually profit from making medical mistakes. That is because the mistakes cause patients more harm, requiring even more care—and hospitals get paid for that extra care. This cycle of more and more treatment is obviously bad for the patient, bad for insurance companies, and bad for taxpayers footing the bill on much medical care. Hospitals are the only ones to benefit. All of this is one key reason why more are looking at alternative ways to make medical payments–like “managed care” systems.

Profitable Medical Errors
The Yahoo story points to a new study in the Journal of the American Medical Association (JAMA) which took a look at profitability of hospitals compared with adverse surgical outcomes at those facilities which could have been prevented. What they found is frustrating, though perhaps not surprising: Hospitals with the most errors made the most money.

In particular, the average surgical error–the development of a complication which could have been prevented–provides an extra $30,500 in profits for the facility. Those profits are paid by insurers who are required to cover the medical care required to treat the complications themselves.

The co-author of the study did not hide his anger at the situation: “It’s shocking, crazy and perverse that hospitals are being financially rewarded for harming patients, while the prize for hospitals that are working hard to improve patient safety and reduce surgical errors is losing money.”

Obviously discussions about ways to lower healthcare costs have been raging for years. But virtually nothing has been done to actually make a difference. Our med mal lawyers have frequently argued that more focus needs to be given to the connection between medical errors and high healthcare costs. As this study verifies, not only does inadequate care cause untold suffering and death–it is downright expensive. Committing much more to minimizing these preventable harms therefore has the dual benefit of increasing standards and saving money. Those steps actually don’t have to be that complicated. Studies have found repeatedly that simple actions–checklists–can go a long way to lowering the error rate.

All of this is leading many to call for a switch away from the “fee-for-service” model that creates these perverse incentives for medical professionals. Obviously most medical caregivers take their oath seriously, and would never endanger a patient intentionally for their own financial gain. But when medical errors have no cost to the facility–and actually are a financial plus–then one wonders why facilities would actually commit resources toward patient safety efforts. They are benefitting just fine from leaving the system as it is.

See Other Posts:

Leading Cause of Litigated Malpractice – Diagnostic Errors

Using “Accountable Care” To Save Medical Costs