The Financial Impact of Medical Errors on Health Service Organizations - Essay Example

The Financial Impact of Medical Errors on Health Service Organizations The Financial Impact of Medical Errors on Health Service Organizations Introduction The main objective of any businesses is to generate a profit and healthcare organizations are no exception. In this viewpoint, it is impossible to discuss the impact of medical errors without similarly elucidating their financial or economic impact in-depth. Just like in any other business, errors can cost the business huge sums of money if not addressed amicably and strategies put into place to mitigate their effects. In the contemporary world, poor healthcare services and delivery of services are contributed by medical errors among other factors. This paper focuses on the financial impact of medical errors on health service organizations. Definition and extent of the problem A definition of medical errors cited by Neilipovitz (2005) denotes it as "Both as the failure of a planned action to be completed as intended or as the use of a wrong plan to achieve an aim, whether or not the error results in harm" (p. 28). Neilipovitz (2005) notes that it is hard to measure the extent of medical errors as a problem in the healthcare sector. This is in regard to the fact that some of the medical errors do not elicit unfavorable effects or outcomes hence are not easily identified. However, many fatalities have been reported over the past due to medical errors. In fact, Neilipovitz (2005) asserts that between forty four thousand and ninety eight thousand fatalities are reported in the U.S. per annum. Causes of medical errors In order to explicate and understand the financial impact of medical errors in health service organizations, it is of significance to delineate the causes of medical errors. Medical errors according to the American Society for Healthcare Risk Management (ASHRM) (2011) may result from a number of factors such as ineffective communication, poor flow of information within a healthcare facility, inadequate staffing levels, as well as poor action plans and strategy implementation. These medical errors impact on all stakeholders and the society in general socially, physically, emotionally, and economically. According to Naylor (2002), more than fifty percent of medical errors are caused by prescription mistakes while more than thirty percent relate to how drugs are administered. For instance, if a physician does not have all the information relating to a drug, then he or she is more likely to give the wrong dosage, give wrong directions on how the drugs ought to be administered, and sometimes even give the wrong medication for a specific ailment. Medical errors may also occur when a physician does not take time to assess a patients medical history (Naylor, 2002). Understanding the history of a patient is imperative in order to identify drugs that may have allergic reactions to the patient. Some surgical operations as Naylor (2002) additionally explicates involve more than one physician and hence elevate the chances of medical errors occurring. The cost of errors in general terms Economic impact of medical errors can either be on the patient or on the healthcare organization. On the part of healthcare organization, they lead to an increase in the cost of care. While the cost of medical errors to the healthcare system in the US is projected to be about $37.6 billion per year (Charney, 2012), this figure was at $19.5 billion in the year 2008 and out of this cost, approximately $17 billion were direct costs (Andel et-al, 2012). This data clearly shows that a lot of resources in the US are lost through medical errors that are preventable. Direct costs In the year 2008, Medicare limited and controlled their compensation on damages caused by medical errors in hospitals (Charney, 2012). These limitations were introduced by insurance providers with an intention of forcing the providers to cover the costs incurred through negligent medical errors on their own and this drains them financially. This approach to limit compensation on cases related to medical errors was reiterated by Obamacare, a healthcare Act introduced in the year 2010. In this Act, organizations that have implemented effective action plans to prevent medical errors are rewarded financially or given incentives whereas disincentives are allotted to those reporting numerous medial errors (Charney, 2012). This impacts on the financial situation of the healthcare organization in that rewarding increases the financial situation and disincentives weakens the financial capacity of the organization. Lawsuit costs The financial impact of medical errors can also be discussed in terms of legal fees when healthcare organizations are sued by patients for carelessness or negligence. For instance, Naylor (2002) brings forward the fact that total expenditure in healthcare relating to legal cases as a result of medical errors in the United Kingdom alone shot from one hundred and sixty six million pounds in the year 1990 to more than six hundred million pounds in the year 1996. Though this data was collected approximately two decades ago, it clearly delineates the financial burden brought by medical errors to healthcare organizations. In many cases, healthcare organizations are forced to compensate the victim and these costs can run into millions of dollars. Tort law We cannot discuss the litigation costs of medical errors without linking them to the tort law. Individuals who have filed lawsuits against healthcare organizations for negligence or harm as a result of a medical error receive their compensation under the tort law. Tort law inflicts or enforces financial costs on healthcare organizations whose employees give medical care carelessly and negligently and as a result cause harm or injury to a patient (Naylor, 2002). Naylor (2002) additionally states that the obligation of healthcare providers under the tort law is spontaneous in that even when a provider sued for negligence is found not guilty of negligence, they incur extra costs in the process. This fact alone compels healthcare providers to conduct every operation or medical activity with utmost care to prevent any incidents that may result to lawsuits. The cost of lost trust According to Handfield (2012), medical errors affects the attendance of individuals seeking treatment in a healthcare institution. Individuals seek services in specific healthcare facilities with hope, conviction or anticipation that they will get and benefit from quality care. Occurrence of medical errors erodes the trust between the patients and healthcare providers in a particular organization and hence patients opt the services of other care providers whom they hope and trust might give better services (Handfield, 2012). This has a negative impact on the revenue of the organization as the number of clients is significantly reduced. In other words, the success of healthcare organizations in terms of revenue is dependent on the number of patients served by the facility. The more the clients, the more the profits. It is also worth noting that medicals errors affects the confidence of medical practitioners. In most cases, physicians involved in medical errors feel embarrassed of their mistakes and this subsequently affects their morale in the workplace. It is common knowledge that motivation plays a key role in productivity in the workplace. Embarrassed and de-motivated physicians perform poorly in terms of productivity and this impacts the financial situation of the organization in terms of revenue or profits (Naylor, 2002). Cost of prolonged stay in hospitals Medical errors also contribute to prolonged periods of patients admission in hospitals (American Society for Healthcare Risk Management (ASHRM), 2011). Hospitals have specific number of patients they can admit at any given time in relation to the bed-capacity. A reduction in the number of days or hours a patient is admitted allows a hospital to admit another patient hence increasing the profit margin. The more the number of admission, the higher the revenue gained as more patients will pay for services. Therefore, the fact that medical errors prolongs the stay of patients in the hospitals means a reduction in revenue. In addition, increased length of stay also means that additional costs will be incurred by the organization in terms of additional clinical operations to correct the error, and also in terms of more drugs to reverse the effects of the error (American Society for Healthcare Risk Management (ASHRM), 2011). Cost of management systems Naylor (2002) points out that it is the obligation of each and every medical organization to put into place systems that help prevent the occurrence of medical errors. For instance. computerized medical records helps physicians access patients medical history or information easily and therefore prevent unnecessary medical errors. Installation of these systems is expensive and costs the organization a lot of money. Other than the installation costs, the organization has to employ additional skilled individuals to run and manage the system. On the other hand, it is very expensive to train existing employees on how to use these systems. It is also important to note that these systems such as computerized medical records require maintenance. Conducting regular reviews on the system and repairs is mandatory to ensure the system is working effectively (Naylor, 2002). This also costs the organization a lot of money in terms of man-hours as well salaries for the technicians. Lost productivity When major errors occur and a complaint is made by the patient, the physician or nurse involved may be required to step aside to allow investigations to be conducted. Investigations are necessary to identify whether the error occurred out of negligence or by accident. This is very expensive for an organization as the physician to patient ratio is affected by such an incidence (Charney, 2012). Today, many healthcare organizations are grappling to survive with insufficient number of nurses and physicians and this affects the quality of services across the board. A reduction of available physicians or nurses when one of them steps aside for investigations to be conducted puts pressure on the remaining workforce hence leading to burn out, increased stress, and also increased working hours. This improves the possibility of more errors occurring hence costing the organization even further. As an example, if the physician involved is the only specialist in a particular field and is asked to step aside to allow investigations to be conducted, this means that the organization may be forced by circumstances to temporarily replace the physician and this translates to additional costs for the organization. The recruitment process as outlined by Charney (2012) is very expensive in terms of time and resources. Investigating a medical error is in itself expensive for a healthcare facility as it also takes time and resources (Charney, 2012). Administrative costs Physicians, nurses, and other individuals involved in the process of care are human beings and therefore errors are inevitable. After investigations are conducted, it is also mandatory for the organization to compile a report detailing the findings and recommendations. In an economic perspective, time spent by the hospital staff compiling the report could as well be used to deal with new clients and cases. As a result, a lot of time is wasted conducting activities that in the long run will not benefit the organization financially. In fact, it may be very expensive for the organization as the report has to be printed and this costs money (Charney, 2012). Cost of medicine One of the major cause of medical errors relates to giving the wrong medication or prescription. Giving the wrong medication results to wastage of drugs for the organization. In most cases, the victims of medical errors are readmitted hence costing the organization extra in terms of additional prognosis and identification of the problems. A huge proportion of funds are used in purchasing drugs and medical equipments to address these issues (American Society for Healthcare Risk Management (ASHRM), 2011). Wastage of drugs is a loss for the hospitals economically as the drugs did not benefit the patient or were not used for their intended purpose. A cut in Healthcare funding Healthcare organizations largely depend on donors and other external organizations to donate funds and grants in support of their healthcare services. The federal and State governments are also donors in healthcare. These donors rely on various Acts to guide them in determining and calculating the amount of funds to allot to these healthcare organizations. Donors are more likely to give financial aid to hospitals with the least incidences of medical errors as opposed to those with many cases reported. Andel et-al (2012) notes that "Under the Patient Protection and Accountable Care Act (PPACA), hospitals and other providers that deliver poor or substandard care will no longer be able to participate in the Medicare and Medicaid programs" (para. 11). Medicare and Medicaid are some of the major contributors of financial aid and assistance to healthcare facilities in the United States. Hospitals are unable to support their daily services and activities in absence of financial assistance from Medicaid and other donors. This clearly shows that medical errors can limit the amount of financial aid available for a particular organization (Andel et-al, 2012). As a result, services will be affected and will as well translate to a reduction in revenue. Electronic health records are part of the Affordable Care Act coined in by President Obama. This act has changed the mindset of the public and has also changed how people view healthcare. People are now more interested on the outcome of the care provided to them by their care providers. The Act has also changed the approach in healthcare to a pay-for-performance rather than pay-for-services. This fact is denoted by Handfield (2012) who posits that "The need to begin thinking about how to link patient outcomes to prescribed drugs and procedures will become increasingly important for hospitals to be paid for their services" (p. 96). This assertion by Handfield (2012) brings forward the notion that frequent incidences of medical errors will have a negative effect on the revenue of the organization as poor services will not be paid for by the patients. Costs relating to inefficiency According to the Joint Commission (2014), "Less obvious but possibly of greater magnitude are costs related to diagnostic inefficiency, including over and under-testing, and ordering tests that are inappropriate or of low value" (p. 103). Over testing lead s to increased expenditure for the healthcare organization because the expenses incurred are deemed as wastage of resources. In the view of under-testing, more expenditure may be incurred when loopholes in the testing process are identified and additional tests necessitated subsequently (Joint Commission, 2014). This may cost the organization more than what was initially budgeted for hence causing variations in the budget. Ordering inappropriate tests means that the requested tests are unnecessary and hence the healthcare organization ends up wasting its financial resources. Low value tests may also be regarded as wastage since they may not achieve the intended purpose and hence more funds wasted when additional tests are required (Joint Commission, 2014). At times, a physician may misdiagnose a health problem and end up conducting the wrong tests. This in itself also costs the organization additional finances as misdiagnosed cases may lead to infections and hence prolonged stay in the hospital. All these issues relating to testing impacts negatively on the revenue or profit of a healthcare organization. Screening and reviewing medical errors Some of the medical errors are preventable. When a patient presents himself with adverse effects from a suspected medical error, then screening ought to be conducted to determine the extent of the problem (Neilipovitz, 2005). Some screening techniques may be very expensive on the part of the organization in terms of time and money spent in addressing a problem that could have been prevented. Screening is followed by monitoring the patient after proper steps to address the problem have been taken. Similarly, this costs the organization financially in an indirect manner since the time spent observing the patient could have been used to deal with new cases or new patients who could have brought in additional revenue for the organization (Neilipovitz, 2005). After medical errors have been reported, review of the reports has also to be conducted (Neilipovitz, 2005). A lot of man-hours are used for this purpose. In some cases, a healthcare organization may be forced to purchase computer software to analyze the data collected from the reports. Purchasing these software costs huge sums of money and therefore decreases the total revenue of the organization. Other indirect financial costs Medical errors taints the name of involved healthcare organizations. When cases occur, much attention is given to these cases and much less time given to other activities as the organization tries to clear its name through fixing the problem before it gets worse. In an economic perspective, all other money generating activities are given less time hence revenue of profit is decreased (Neilipovitz, 2005). Since errors are considered a major cause of death in the healthcare sector, leaders are encouraged to ensure their employee are well trained and motivated in order to decrease error incidences. Conducting trainings within a healthcare facility is very expensive in terms of financial input. For instance, training venues will need to be prepared and in cases where trainings are conducted outside the healthcare facility, renting the venue adds on the total cost of expenditure. There are also other costs involved in trainings as trainees will need to be fed and transported to the venue of training. All these are indirect financial costs to the organization. The need for addressing medical errors Other than the fact that medical errors impact on the financial situation of healthcare facilities, many people have been reported to have lost their lives as a result of complications arising from them. Affecting the financial situation of a healthcare facility also affects other activities. The normal running of an organization is dependent on the revenue or profit gained from its activities. Therefore, if medical errors are not addresses, many hospitals may end up closing down and many people lose their source of livelihood. The way forward Designing and implementing ways to prevent medical errors within a health care facility is important as it saves a lot of money for the institution. All the funds that could have been used to readdress medical issues arising from the errors are used for other purposes. There are a number of ways that healthcare providers can adopt in order to prevent or avert medical errors. For instance, identification of errors is of significance as it forms the benchmark for improvement (Charney, 2012). Physicians are challenged by medical errors and hence strive to conduct operations with utmost care in a bid to eliminate the errors. Secondly, adoption of technology can help prevent errors within a healthcare facility (Charney, 2012). Electronic health records as mentioned earlier assists physicians to access patients information easily and therefore make pragmatic decisions on the basis of available data and information. Additionally, electronic medical records can help physicians identify cases of allergies experienced by a patient and hence helps them in decision making. Thirdly is teamwork. Charney (2012) posits that medical errors are less likely to occur in an environment where all individuals involved in the process of care work together as team. This is attributed to the fact that teamwork helps each of the individuals involved to understand and comprehend his or her responsibilities and hence minimizing incidences of medical errors. Fourthly, a patient-centered approach to care helps prevent errors (Naylor, 2002). Reporting incidences of medical errors is also important as it aids a healthcare organization identify the need for implementing new strategies aimed at prevention of errors (Naylor, 2002). Therefore, the management should ensure an environment that encourages physicians to report all cases of errors. Some of the of the physicians or nurses may fail to report an incident for fear of reprisal. It is therefore the obligation of the management to ensure that any information relating to employees who reports an incident is treated confidentially. Fifthly, improving on communication can also go a long way in the prevention of medical errors. In a healthcare organization that has an effective communication system put into place, nurses and other medical practitioners tend to clarify issues they have difficulties in comprehending form other skilled and specialized medical personnel (Naylor, 2002). In a friendly work environment that also encourages teamwork, nurses also tend to clarify issues relating to the dosage and administration of a drug or medication from the pharmacy (Charney, 2012). In doing so, medical errors associated with the dosage and administration of drugs are significantly reduced. Conclusion Medical errors may be caused by negligence on the part of the physician or by accident. Errors may occur as a result of lack of information regarding particular drugs or medicines, poor communication between individuals involved in the provision of care, and failure to conduct proper assessment of a patients medical records. Medical errors impact on all stakeholders including the patient, medical practitioner, the organization, and the society in general. An organization is impacted greatly economically by medical errors. A health service organization may be sued by the patient for negligence and end up spending huge sums of money in litigation fees. The organization may also be required by a court of law to compensate the patient and this may run into millions of dollars. Other than litigation fees, insurance providers have limited compensation for cases involving medical errors. Therefore, hospitals are forced to cover for all expenses that may arise as a result of a medical error. Victims of errors may also end up spending additional days under admission and hence limiting the number of patients the hospitals can admit at any given time. Other financial costs include the cost of lost productivity, the cost of additional medicines and drugs, and administrative costs. There are also other costs associated with over-testing or under-testing of samples in relation to medical errors. All these decreases the revenue generated by the organization. Medical errors can be minimized through ensuring proper reporting is done so that the necessary action plans can be created and implemented, teamwork that encourages healthcare workers to clarify issues, effective communication, and adopting a patient-centered approach to care. References American Society for Healthcare Risk Management (ASHRM). (2011). Risk Management Handbook for Health Care Organizations, 3 Volume Set. Hoboken, NJ: Wiley. Andel, C., David, S. L., Hollander, M., & Moreno, D. A. (2012). The Economics of Health Care Quality and Medical Errors. Journal of Health Care Finance. Retrieved from http://www.wolterskluwerlb.com/health/resource-center/articles/2012/10/economics- health-care-quality-and-medical-errors Charney, W. (2012). Epidemic of Medical Errors and Hospital-Acquired Infections: Systemic and Social Causes. Boca Raton, FL: CRC Press. Handfield, R. (2012). Biopharmaceutical Supply Chains: Distribution, Regulatory, Systems and Structural Changes Ahead. Boca Raton, FL: CRC Press. Naylor, R. (2002). Medication Errors: Lessons for Education and Healthcare. Abington, OX: Radcliffe Medical Press Ltd. Neilipovitz, D. (ed.). (2005). Acute Resuscitation and Crisis Management: Acute Critical Events Simulation (ACES). Ottawa, Ontario: Ottawa Press. The Joint Commission. (2014). Addressing Diagnostic Error: The Challenge for Health Care Organizations. Journal on Quality and Patient Safety, 40(3), 102-110. Read More