1 who pays for medical errors? an analysis of adverse event costs, the medical liability system, and...
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Who Pays for Medical Errors?An Analysis of Adverse Event Costs, the Medical Liability System, and Incentives for Patient Safety Improvement
Michelle Mello, JD, PhDHarvard School of Public Health
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Project on Legal Approaches to Improving the Business Case for Quality
Sponsor: Commonwealth Fund
Study Team: Michelle Mello, JD, PhD (P.I.)
David Studdert, LLB, ScD
Eric Thomas, MD, MPH
Cathy Yoon, MS
Troy Brennan, MD, JD, MPH
Research questions:
Who bears the costs of medical errors?
What implications does this have for safety incentives?
How can the law be used to effect greater cost internalization?
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Project Impetus
Significant burden of avoidable medical injuries
Policy discourse around the “business case for quality” conflates societal and hospital perspectives
Epidemiology of medical injury suggests significant cost externalization
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Empirical Strategy
1. Estimate the components of medical injury costs
2. Allocate components to payers
3. Determine the total amounts absorbed and externalized by hospitals
4. Judge whether the absorbed costs are sufficient to create incentives for safety
Using data on medical injuries & malpractice premiums in Utah and Colorado hospitals in 1992,
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Injury Data
13 Utah and 15 Colorado hospitals selected through stratified sampling
15,000 discharge records from 1992 randomly selected
Reviewed by physicians and insurance adjusters who judged:
1. Whether a medical injury occurred2. Whether it was due to negligence3. Economic consequences
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Analytical Sample
24 hospitals
12,514 discharges
465 adverse events
127 negligent adverse events
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Outpatient Care Costs
Disability Payments
Pain & Suffering
(Negligent Injuries Only)
Burial Costs (Fatal
Injuries Only)
Lost Income /
Lost Household Production
Inpatient Care Costs
Components and Flow of Medical Injury CostsStep 1.
Estimate injury costs Using data abstracted From medical records in Utah-Colorado study
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Outpatient Care Costs
Disability Payments
Pain & Suffering
(Negligent Injuries Only)
Burial Costs (Fatal
Injuries Only)
Lost Income /
Lost Household Production
Inpatient Care Costs
Nonbillable
Externalized to Health Insurer or Patient / Family †
Absorbed by Hospital
Externalized to Patient / Family †
Externalized to Disability Insurer
Components and Flow of Medical Injury Costs
Billable
Step 1.
Estimate injury costs Using data abstracted From medical records in Utah-Colorado study
Step 2
AppApply reimbursement rules to determine hospitals’ ability to bill for extra services
Step 3
Characterize each cost component as internalized or externalized
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Outpatient Care Costs
Disability Payments
Pain & Suffering
(Negligent Injuries Only)
Burial Costs (Fatal
Injuries Only)
Lost Income /
Lost Household Production
Inpatient Care Costs
Nonbillable
Externalized to Health Insurer or Patient / Family †
Absorbed by Hospital
Externalized to Patient / Family †
Externalized to Disability Insurer
Malpractice Premium
Total Costs Incurred by Hospital
Components and Flow of Medical Injury Costs
Billable
Step 1.
Estimate injury costs Using data abstracted From medical records in Utah-Colorado study
Step 2
AppApply reimbursement rules to determine hospitals’ ability to bill for extra services
Step 3
Characterize each cost component as internalized or externalized
Step 4
Determine hospitals’malpractice premiums paid
Step 5
Calculate hospitals’ absorbed costs as a proportion of their total injury costs
† Except for portion recouped through malpractice awards, represented by malpractice premium.
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ResultsCost per admission,
averaged over 24 hospitalsAll medical
injuriesNegligent injuries
Total medical injury costs $2,013 $1,246
Absorbed costs Unrecoupable care costs Malpractice premium
$238 $115 $123
$180 $57 $123
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ResultsCost per admission,
averaged over 24 hospitalsAll medical
injuriesNegligent injuries
Total medical injury costs $2,013 $1,246
Absorbed costs Unrecoupable care costs Malpractice premium
$238 $115 $123
$180 $57 $123
Externalized costs $1,775 $1,066
Proportion externalized 78% 70%
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Conclusions
Because they can externalize injury costs, hospitals lack strong financial incentives to improve safety
The single largest contributing factor is the low rate of malpractice claiming
Hospitals’ ability to bill for injury-related services further facilitates externalization of costs
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Cost-Internalizing Policy Reforms
Expand safety-based purchasing initiatives, e.g. the Leapfrog Group and “pay-for-performance”
Adjust reimbursement policy to preclude billing for care necessitated by a preventable medical injury
Develop alternative dispute resolution systems with lower barriers to claiming
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Study Limitations
Limitations of retrospective record review: Interrater reliability Can’t detect undocumented injuries and errors
1992 data
Exclusion of newborns
Did not consider physicians’ insurance premiums
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Detail: Costing Methodology in the Utah-Colorado Study Economic consequences estimated using injury
descriptions (newborns excluded)
2 physicians and 10 insurance adjusters estimated health care utilization, disability/lost work time, lost household production
Lost income estimated using occupation and Current Population Survey Consumption deduction applied to lost income estimates
for decedents
Lost household production estimated at $20/day
Health care prices came from several sources
Inflation and discounting applied
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Detail: Noneconomic Loss Estimates
Data: 889 paid claims from the MIMEPS study 85% settled, 15% tried
Divided claims into 35 severity/age cells
Calculated median total award for each cell
To isolate noneconomic damages, applied a multiplier representing noneconomics as a proportion of total awards from previous study of jury verdicts in California
Sensitivity analysis: Applied a flat 35% proportion
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Hospitals (n = 24) Medical Injuries (n = 465)
State Prevalence
Utah 11 (46%) All injuries 465/12435 (4%)
Colorado 13 (54%) Negligent injuries 127/12435 (1%)
Location Clinical Type
Urban 18 (75%) Operative 280 (61%)
Rural 6 (25%) Drug 54 (12%)
Teaching Status Medical procedure 49 (11%)
Major teaching 2 (8%) Incorrect/delayed diagnosis 27 (6%)
Minor teaching 7 (29%) Incorrect/delayed therapy 24 (5%)
Nonteaching 15 (63%) Postpartum/neonatal 13 (3%)
Ownership Anesthesia 6 (1%)
For-profit 7 (29%) Other 9 (2%)
Not for profit 12 (50%) Disability Rating
Government 5 (21%) Emotional only 1 (<1%)
Volume (# admissions) 8689 (4728) Insignificant 24 (6%)
Patient Mix Minor temporary 145 (36%)
Mean % Medicare (s.d.) 30% (8) Major temporary 167 (42%)
Mean % Medicaid (s.d.) 12% (7) Minor permanent 14 (4%)
Casemix index 1.4 (0.23) Significant permanent 7 (2%)
Major permanent 4 (1%)
Grave 2 (<1%)
Death 34 (9%)
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