Researchers calculate that hospitals spend between $2.7 million and $13.5 million on malpractice litigation.
Capnography, Monitoring Liability and Costs

5 Resources on the Costs of Adverse Events

by Sean Power

Patient safety advocates at hospitals sometimes face roadblocks when introducing new safety measures. One approach to overcome these obstacles involves looking at the financial costs absorbed when things go wrong.

An ounce of prevention is worth a pound of cure. This article explores the legal costs associated with adverse events and ways to minimize unnecessary expenses.

1. Reduce litigation costs.

Although most hospital executives know that one avoided medical malpractice case will pay for a particular patient safety measure, these executives often ask how these “soft savings” (i.e. a future possible expense) can be justified in the “hard dollars” world (i.e. paying for the safety measure today).

Each preventable adverse event costs about $8,750, according to the Institute of Medicine. This excludes potential litigation costs, which when included substantially increase the costs of not avoiding adverse events.

Researchers calculate that hospitals spend between $2.7 million and $13.5 million on malpractice litigation.

In “Malpractice Litigation and Medical Costs”, researchers calculated that malpractice litigation accounts for roughly 2-10% of medical expenditures.

According to the American Hospital Association, total expenditures for the 5,724 registered hospitals in 2011 were $773,546,800,000 or an average of $135,140,950 per hospital. This means that each hospital is spending from $2.7 million to $13.5 million on malpractice litigation.

These figures are supported by estimates from the American Medical Association that calculated that it costs $110,000 per case defending claims.

In short, being patient safe can reduce a litigation costs.

2. Learn from best practices.

Courtney Rowan, MD, pediatric critical care fellow at Riley Hospital for Children at Indiana University Health, in Indianapolis, observed the number of blood gas measurements required for mechanically ventilated patients in a pediatric intensive care unit. Dr. Rowan found that capnography decreased the number of measurements required, lowering expenditures by nearly $1 million over a six-month period.

The retrospective study, which looked at year over year number of measurements before and after implementing capnography, showed the number of blood gas measurements fell from 13,171 to 8,070, according to Anesthesiology News. The initial investment in capnography devices cost $112,000 and resulted in a total cost savings of $985,130.

In another case study, St. Joseph’s/Candler Hospitals in Savannah, Georgia had three opioid-related events with patient-controlled analgesia (PCA) resulting in serious adverse outcomes over a two year period. In response, the hospital implemented capnography monitoring. Carolyn Williams, RPh, the hospital’s Medication Safety Specialist, shared the SJC cost-benefit story, which outlines how the hospitals realized a $2.5 million return on investment.

These case studies detail the cost savings from two patient safety initiatives. While you analyze the costs of NOT implementing your patient safety initiative, you may find these case studies useful for finding best practices.

3. Use the Journal of Emergency Medical Services’ information on capnography.

JEMS.com provides information and resources for the emergency medical services community. Experts predict that within the next five years, capnography will become the “staple technology” of an emergency responder’s standard of care, so it may be beneficial to adopt a similar approach.

It is important that doctors set medical standards. As medical standards change, so does legal liability. Continuous electronic monitoring is already endorsed or recommended by The Joint Commission, the Anesthesia Patient Safety Foundation, the Institute for Healthcare Improvement, the Institute for Safe Medication Practices, and the VA Center for Patient Safety, to name a few.

Hospitals need to set their own standards that are in line with recommendations from these organizations before the courts set standards for them. Doing so will minimize exposure to legal risks associated with adverse events.

4. Saying sorry lowers costs.

In 2007, the University of Michigan Health System adopted a new approach to malpractice claims. The approach centers on apologizing and learning when the hospital is wrong, explaining and defending when it is right, and going to court as a last resort. They estimate that their average legal expense per case is down by more than 50 percent since 1997. Malpractice premiums are level despite increases in the hospital’s clinical business.

The U-M Health System approach tries to do the right thing by its own account. When weighing the costs of patient safety programs, consider the decrease in legal fees and litigation costs. A similar do-the-right-thing approach may yield comparable results.

5. Utilize research on the relationship between patient safety and malpractice risk.

The U-M Health System released lessons learned on how nurturing a culture of patient safety lowers malpractice risk that may prove useful in your cost analysis of your patient safety initiatives.

The researchers released more detailed facts about liability claims and costs in the journal Annals of Internal Medicine.

What other resources have you found useful when analyzing the costs of serious adverse events?

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