The Hidden Surcharge Americans Pay for Hospital Errors

July 26, 2013

During a time of flux for U.S. health care, employers and purchasers are increasingly concerned about how much value they receive for their enormous investment in health care. In a presentation yesterday evening at the World Health Congress Innovative Drivers of Value Based Purchasing Seminar, Leah Binder, President and CEO of the employer-driven nonprofit The Leapfrog Group (Leapfrog), unveiled a new tool that allows purchasers to calculate how much they spend annually on unnecessary costs due to medical errors that occur within general acute care hospitals.

The Hidden Surcharge Calculator, developed by a team of experts, has been awarded Gold Standard status by the Disease Management Purchasing Consortium. The calculator is accompanied by Leapfrog's descriptive white paper, "The Hidden Surcharge Americans Pay for Hospital Errors."

"It's counterintuitive and outrageous, but you will pay a lot more for hospitals that have more errors, accidents and infections."

"It's counterintuitive and outrageous, but you will pay a lot more for hospitals that have more errors, accidents and infections," said Ms. Binder. "Errors aren't typically marked as a line item on a bill but purchasers and consumers are paying millions of dollars for them, and we've substantiated it with our research."

"I participated with the Leapfrog team to help them ensure Gold Standard acceptability," says Disease Management Purchasing Consortium President Al Lewis. "They used the best available evidence and a rigorous process to build the Hidden Surcharge Calculator. Most importantly for Gold Standard acceptability, (1) the math is correct; (2) the calculations are transparent; (3) and the assumptions, all linked to authoritative sources, may nonetheless be changed by a user who prefers different assumptions."

Every year, more than 180,000 Medicare beneficiaries die from hospital-acquired infections, errors, accidents and injuries. In 2012, The Leapfrog Group launched the Hospital Safety Score, which uses letter grades of A, B, C, D, and F to rate the patient safety efforts and outcomes of more than 2,500 general acute care hospitals across the United States.

Using the Hospital Safety Scores, Leapfrog estimates that on average, for a patient admitted to a hospital with a grade of "C" or lower, purchasers pay $7,780 in hidden surcharges due to medical errors. The Hidden Surcharge Calculator offers an example of an employer with 1,000 hospital admissions per year that pays a hidden surcharge of more than $7.7 million. Employers can use the calculator to enter their own claims data and local hospital safety ratings from the Hospital Safety Score website to learn the estimated hidden surcharge they pay annually for hospital errors. By shifting employees to "A" hospitals, employers can decrease these hidden surcharges and protect their employees and dependents from harm, as well. It is worth noting that even "A" hospitals have patient safety challenges and are not exempt from this hidden surcharge.

"Purchasers can encourage their employees to choose safer, quality care by sharing the Hospital Safety Score, being transparent about hazards at certain area hospitals and considering changes in benefits design," says Ms. Binder. "Purchasers should also use the Hidden Surcharge Calculator in contract negotiations with their health plan provider, as well as in conversations with their benefits consultant and local business coalition on health."

The Hidden Surcharge Calculator, white paper and methodology can be viewed here.


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