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


  • This work was funded by a grant from the Commonwealth Fund (Grant 20020530). The original data collection was funded by the Robert Wood Johnson Foundation. All views presented herein are solely those of the authors. The authors gratefully acknowledge programming assistance from Timothy Zeena, research assistance from Carly Kelly, and helpful comments on earlier drafts of the article from Bill Sage and participants at the Columbia Law School Law and Economics Workshop and the 2006 Conference on Empirical Legal Studies.

*Michelle M. Mello, Harvard School of Public Health, 677 Huntington Ave., Boston, MA 02115; email: mmello@hsph.harvard.edu. Mello is the C. Boyden Gray Associate Professor of Health Policy and Law, Harvard School of Public Health; Studdert is a Federation Fellow and Professor of Law at University of Melbourne; Thomas is Associate Professor of Medicine at the University of Texas–Houston Medical School; Yoon is a Senior Statistical Programmer Analyst at Brigham and Women's Hospital in Boston; Brennan is Chief Medical Officer of Aetna.


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.