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Hospital Mistakes Are…Profitable?

By Rheingold Giuffra Ruffo Plotkin & Hellman LLP

Who knew mistakes could be profitable, especially in a hospital? The common perception of medical mistakes is that, when a hospital commits wrongdoing, it can be easily assumed that the hospital would suffer. Wrong. Thanks to a revealing study published in The Journal of the American Medical Association, the hospital’s mistakes leads insurers to pay the negligent hospital for the lengthier stay and attentive care of patients who experienced surgical mistakes.

The Boston Consulting Group, Harvard’s school of medicine and public health, and Texas Health Resources who authored this study, fundamentally tells the public that hospitals can actually lose money if better care is given to patients. Based on the study, it can easily be assumed that hospitals have more to lose by improving their care and Dr. Barry Rosenberg (Managing Director of Boston Consulting) provided this in an interview which appeared in the New York Times article: “We said, ‘Whoa, we’re working our tails off trying to lower complications, and the prize we’re going to get is a reduction in profits.”

Over 30,000 people in 2010 who underwent surgery at one of 12 hospitals run by Texas Health Resources became the subjects of the study that poses a certain question- are hospitals causing mistakes on purpose to make money? While the other managing director of the Boston Consulting Group and author of the study David Sadoff, disagrees with the phenomenon of hospitals purposely making surgical errors, Sadoff did include in the New York Times that the “current payment system makes it difficult for hospitals to perform better because improvements can wind up costing them money.”

So how exactly can hospital mistakes be reduced? Conductors of the study assert that: insurers should award bonuses for exceptional care, abolish insurers from paying for sub-par care, and require hospitals to reveal their complication rates so that patients and the public alike, could improve or even close those hospitals with uncomfortably high rates. According to an email written by Dr. Robert M. Wachter, a specialist on medical errors who was not associated with the report, believed that Medicare along with other payers had already “tried to encourage better care by refusing to pay for certain kinds of medical errors and cutting reimbursement if too many patients were readmitted.”

The studied hospitals that are operated by Texas Health Resources, recently implemented a checklist system in goal to reduce medical negligence where “reducing complications and increasing safety is why we’re there. If in doing that, some payments don’t come our way, it’s not of consequence. What’s of consequence is that people who come to us are in a safer environment” said Dr. Mark C. Lester, executive vice president of Texas Health Resources.

Picture of Edward A. Ruffo, Partner

Edward A. Ruffo, Partner

Mr. Ruffo currently litigates cases at the state and federal levels in New York and New Jersey and has obtained numerous multi-million dollar medical damage awards for his clients. He has been annually ranked as a Top 10 and Top 100 Trial Lawyer by numerous professional societies including The National Trial Lawyers Association.

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