Study: Hospitals often lack financial incentive to reduce medical errors

Research shows hospitals often make more money when medical errors occur; this relationship may make it difficult for hospitals to address malpractice.

Medical professionals in Costa Mesa have a responsibility to provide patients with the highest quality of care and the best outcomes possible. While hospitals must support this professional duty, they also must generate revenue to support ongoing operations. Unfortunately, these two goals are sometimes at odds. Research shows that hospitals often profit more from injury and other adverse patient outcomes than from successful treatment, which may create a problematic conflict of interests.

Perverse incentives

A 2013 study published in the Journal of the American Medical Association found that hospitals often profit from surgical errors, which generate additional revenue through prolonged patient hospital stays and corrective treatments, according to the New York Times. Researchers analyzed the records of 34,256 patients who had surgery in a Texas hospital in 2010. The study produced the following findings:

  • Complications that should have been prevented affected 1,820 patients, with some patients suffering from more than one complication.
  • On average, the patients who experienced complications had to spend 14 days in the hospital. This represented a fourfold increase over the length of time that other patients spent in the hospital.
  • For each patient who suffered from complications, the hospital earned an extra $30,500 in revenue, on average.

The study's authors note that the findings do not suggest hospitals intentionally make or allow errors to generate extra revenue. However, the fact that better performance is generally tied to financial loss may make it difficult for hospitals to make needed improvements to address the issue of medical malpractice.

There are a few potential solutions to this problem, according to the New York Times. Insurance companies could pay hospitals "bonuses" for providing a higher quality of care. Insurers could also stop paying for expenses associated with subpar care and resulting complications.

Sanctions in California

The use of financial sanctions to discourage poor hospital performance is a model currently being used to a limited extent in California. The state's Department of Health Care Services has stopped reimbursing hospitals for treatment that Medi-Cal patients need after suffering from preventable errors. According to Southern California Public Radio, 85 hospitals have been penalized for errors made between July 2013 and August 2014.

These sanctions represent a step in the right direction, but they do not affect every hospital that has caused unnecessary harm. The DHCS only penalized 85 hospitals out of the 145 that reported mistakes. Since reporting guidelines leave room for interpretation, many hospitals may not report the full extent of preventable errors. Additionally, the DHCS only penalizes hospitals for errors affecting Medi-Cal patients; many hospitals may make mistakes that harm other patients without facing any sanctions.

Sadly, given the state of the current healthcare system, many patients may be affected by preventable medical errors. People who have suffered injuries or other harm because of substandard medical care should speak with a medical malpractice attorney about pursuing compensation for those injuries.

Keywords: malpractice, injury, negligence