Incentives are a strange thing. Sometimes, there are unintended consequences, ranging from schools teaching to tests, to corporate executives focusing on short-term goals to maximize their bonuses. Hospitals are reimbursed from insurance companies for providing care for patients, even when the patients are in the hospital because of medical malpractice caused by the hospital. Ironically, hospital negligence and medical malpractice can become a profit center for a hospital and improving their treatment of patients can be detrimental to their bottom line.
A study published in The Journal of the American Medical Association found that the current system actually rewards hospitals for poor care and that the current payment system leaves little incentive for these hospitals to improve, because the additional treatment necessary after an incident of medical malpractice is much more profitable than the initial treatment.
The study found that patient stays in the hospital increased four times over unaffected patients and the revenue increased by $30,000 for the patients with complications. The researchers analyzed costs of hospital stays and realized that aggressive improvements in patient care would cost the hospital and reduce profitability.
The authors were not suggesting that hospitals were intentionally injuring patients so they could charge more for the additional care, but they recommended that insurers stop covering the treatment necessary for dealing with the complications from substandard care. Additionally, the recommend that hospitals be required to publish their complication rates, so that patients would know which hospitals to avoid.
A spokeswomen for insurers noted the current system has "perverse incentives" and an expert on medical economics said the findings were "troublesome but not surprising." One function of medical malpractice lawsuits beyond compensating victims is providing a financial incentive for hospitals to improve their treatment and procedures.