Who Pays for Medical Errors? An Analysis of Adverse Event Costs, the Medical Liability System, and Incentives for Patient Safety Improvement

Patient safety advocates argue that the high costs of adverse events create economic incentives for hospitals to invest in safety improvements. However, this may not be the case if hospitals externalize the bulk of these costs. Analyzing data on 465 hospital adverse events derived from medical record reviews, we investigated the amounts that hospitals and other payers incurred in medical‐injury‐related expenses. On average, the sampled hospitals generated injury‐related costs of $2,013, and negligent‐injury‐related costs of $1,246, per discharge. However, hospitals bore only 22 percent of these costs. Legal reforms or market interventions may be required to address this externalization of injury costs.