Health Business Blog » Blog Archive » Broader implications of Aetna’s never event policy

David E. Williams of the Health business blog

In normal industries when someone makes a mistake it has negative financial consequences. When a factory damages a widget during the manufacturing process, the company can’t sell the final product and has to absorb the labor, material and capital costs of the wasted efforts. To survive in a competitive industry factories focus on increasing first-pass yield, reducing scrap, and pursuing initiatives such as six sigma to virtually eliminate defects. Factories with low yields and high defect rates go out of business. That’s capitalism and it works.

Health care is a lot different. If a hospital or physician makes an error, they can typically bill for the work involved in making that error. Not only that –they can also bill for the work involved in correcting the mistake or mitigating the damage! Unlike sub-par factories, hospitals with low yields and high defects can be just as profitable or more profitable than hospitals that perform much better. And thanks to the complexity of health care and lack of solid measurement and reporting, such performance may be obscured from the general public and even from hospital management itself.
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