How Hospitals Can Cut Medical Liability Costs

HealthLeadersMedia | December 13 – Medical liability costs continue to grow for hospitals, but the secret to controlling this isn’t necessarily found in the financials. It’s cultural. And that may leave a CFO wondering just what he or she can do to bend that cost curve.

“The reality is there’s little finance can do directly to reduce those costs,” says Jeff Rooney, interim CFO at Saint Agnes Medical Center in Fresno, CA.

But the C-suite is far from powerless. In fact, a CFO can drive change by making it a priority. A greater commitment to patient safety drives lower liability expenses; the changes that reduce medical liability costs are cultural, not overtly financial, say the experts. “First and foremost, the CFO needs to be an ardent supporter of internal quality/safety initiatives,” says Rooney, who is a partner with Tatum, LLC, an Atlanta-based executive services firm, and has served as interim CFO at several hospitals and health systems.

Overall medical liability system costs, including defensive medicine, are estimated to be $55.6 billion in 2008 dollars annually, or 2.4% of total healthcare spending, according to a report by Harvard’s Michelle M. Mello and colleagues, published in the September Health Affairs. That study looked at the cost of the risk-management function. “Using the most conservative estimate of $185,000, the estimated national cost of risk-management operations for all 5,708 registered U.S. hospitals is approximately $1.06 billion. This figure is also conservative because it does not include risk-management costs for other types of facilities, such as independent ambulatory surgery centers.”


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