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Report: Economic Impact of Preventable Medical Errors Much Greater Than Expected

Mistakes may cost U.S. economy nearly $1 trillion annually (Oct. 19)

According to an article published in the current issue of the Journal of Health Care Finance, preventable medical errors may cost the U.S. economy up to $1 trillion in lost human potential and contributions. That estimate is exponentially higher than previous studies, which focused solely on direct medical expenses associated with preventable medical errors.

In the new report, the authors applied an economic approach using quality-adjusted life years (QALYs) in an attempt to answer the question, “What does poor-quality care cost on a human level?”

Using an estimated 98,000 deaths due to preventable medical errors annually, as stated in a 1998 report from the Institute of Medicine (IOM), and an average of ten lost years of life at a cost of $75,000 to $100,000 per year, the authors estimate that the IOM’s annual death rate would be associated with a loss of $73.5 billion to $98.0 billion in QALYs. Those numbers, the authors say, are much greater than estimates cited in studies that explored the direct costs of medical errors ($17 billion to $50 billion). Moreover, if the estimate given in a recent article in Health Affairs is correct — that the rate of preventable death is actually ten times the IOM estimate — then the annual cost to the U.S. economy would be $735 billion to $980 billion.

“Obviously, quality care is not being delivered consistently throughout U.S. hospitals,” the authors write. “Whatever the measure, poor quality is costing payers and society a great deal.”

The authors note that the Centers for Medicare & Medicaid Services (CMS) has for the first time said that it will stop reimbursing hospitals for two major medical problems that cost the government — and by extension, taxpayers — billions of dollars: 1) preventable readmissions, and 2) healthcare facility-acquired conditions, such as infections.

Healthcare institutions, however, are taking steps to improve quality of care and patient safety in response to the changing economic environment. For example, a center in Salt Lake City, Utah, applied quality-improvement methods to reduce rates of elective induced labor, unplanned caesarean sections, and admissions to newborn intensive-care units. The initiative saved an estimated $50 million dollars annually. On a national level, it would have saved $3.5 billion, the authors estimate.

The same institution also focused on improving the operation of mechanical ventilators that were used in treating acute respiratory distress syndrome. As a result, variation was reduced from 59% to 6% within 4 months; patient survival increased from 9.5% to 44%; and the total cost of care decreased by 25%.

The authors point out that developing a culture of safety and quality also can improve medical-liability insurance costs. A study sponsored by the Society of Actuaries showed that medical errors cost the U.S. $19.5 billion in direct medical costs in 2008, but other studies estimated the cost to be much higher.

Source: Journal of Health Care Finance, October 19, 2012.

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