The economics of health care quality and medical errors

Hospitals have been looking for ways to improve quality and operational efficiency and cut costs for nearly three decades, using a variety of quality improvement strategies. However, based on recent reports, approximately 200,000 Americans die from preventable medical errors including facility-acquired conditions and millions may experience errors. In 2008, medical errors cost the United States $19.5 billion. About 87 percent or $17 billion were directly associated with additional medical cost, including: ancillary services, prescription drug services, and inpatient and outpatient care, according to a study sponsored by the Society for Actuaries and conducted by Milliman in 2010. Additional costs of $1.4 billion were attributed to increased mortality rates with $1.1 billion or 10 million days of lost productivity from missed work based on short-term disability claims. The authors estimate that the economic impact is much higher, perhaps nearly $1 trillion annually when quality-adjusted life years (QALYs) are applied to those that die. Using the Institute of Medicine's (IOM) estimate of 98,000 deaths due to preventable medical errors annually in its 1998 report, To Err Is Human, and an average of ten lost years of life at $75,000 to $100,000 per year, there is a loss of $73.5 billion to $98 billion in QALYs for those deaths--conservatively. These numbers are much greater than those we cite from studies that explore the direct costs of medical errors. And if the estimate of a recent Health Affairs article is correct-preventable death being ten times the IOM estimate-the cost is $735 billion to $980 billion. Quality care is less expensive care. It is better, more efficient, and by definition, less wasteful. It is the right care, at the right time, every time. It should mean that far fewer patients are harmed or injured. Obviously, quality care is not being delivered consistently throughout U.S. hospitals. Whatever the measure, poor quality is costing payers and society a great deal. However, health care leaders and professionals are focusing on quality and patient safety in ways they never have before because the economics of quality have changed substantially.