February 27, 2025 - You’ve likely heard the statistics: More than 10% of healthcare provider expenditures go to correcting preventable medical mistakes, including infections people contract by visiting hospitals. The National Institute of Health estimates these costs at $20 billion per year.

Yet, that is only half the story. The other half is that it is a story about finance — many of those preventable errors occurred because of cost-cutting. Or because the parent organization was financially “unwell.” The pressure to financially stabilize the business can create situations where lives are reduced to variables in a spreadsheet. When executives recommend isolated cuts, they sometimes fail to realize how it affects the whole organization in small, cascading ways that lead to an uptick in patient harm.

In this article, we explore the connection between organizational finances and quality of care.

How finances can cause of patient harm

Healthcare leaders often talk about patient harm through two mechanisms: Omission and commission. The former is easier to determine than the latter; it is harder to prove that a required intervention did not happen than to prove that one that did was unnecessary, or failed. But the truth is that these are often distal causes, and the more proximate or “root” cause is actually the chain of events that led to it. Some call this the “swiss cheese” model of patient harm: A cascading series of gaps — the onboarding was poor, the doctor didn’t know, nobody thought to tell them, and so they recommended an unnecessary procedure that led to a serious infection.

When healthcare organizations are under financial pressure, and seeking to cut costs, they often apply interventions without a full understanding of the effects. And without control groups or following a scientific method of applying the intervention to, say, one clinic first and measuring a broad swath of outcomes to rule out cascading harms.

For example, while they sound benign, shift changes, software changes, staffing changes, and hardware changes can all seriously interrupt the flow of work — and lead to harm. Busy professionals accustomed to their routine and likely underslept will rely on a conceptual “model” of their workspace and miss details.

From this perspective, some of the leading causes of caregiver-caused-harm come from:

Sleep deprivation

When an organization decreases the number of employees and adjusts schedules, it can exacerbate issues of sleep deprivation, and sleep-deprived practitioners commit significantly more errors. For example, an employee asked to take a closing and then opening shift is sure to arrive unrested. A recent NIH study found that “sleep loss and burnout can lead to medical errors and patient harm by 37.7% of attending physicians and 39.9% of trainee physicians.”

Said another way, cutting jobs without careful study and a plan to implement it can cause harm.

Poor/missing documentation—mislabeling errors

Organizations that aim to cut costs by switching many providers and practices at once can throw off caregivers. For example, the NIH also finds that lost, damaged, and incomplete paperwork are a leading cause of harm. Blood, for example, must be transported securely, but its accompanying label is often accompanied by torn, missing, or inaccurate paperwork — leaving pathology labs no choice but to dispose of it. This contributes to the nearly 9% of blood that goes to waste each year.

By a similar mechanism, fewer staff members means less attention to sensitive materials like blood plasma. If materials are not stored at the correct temperature — or transported incorrectly and allowed to fall out of their temperature zones — they are ruined.

Cybersecurity gaps

Healthcare organizations are among the most-attacked and most-hacked. When such an organization changes out systems to save money, or has too few staff to accurately preempt and respond to cyber threats, those organizations grow more vulnerable.

Organizations don’t just have to prepare to be targeted themselves — cyber criminals are trying to reach their patient data through their providers, as evidenced by the 2023 cyberattack against the largest U.S. billing payment system.

According to The Lancet:

“[It disrupted] millions of patients’ prescriptions and services delaying access to medication and care. Even two months after the attack, an AHA survey revealed that many medical practices faced potential closure because of lost revenue from unpaid claims, putting patient access to medical services at risk.”

To reduce patient harm, fortify your financial position

Healthcare organizations in a sound financial position aren’t forced into cost-cutting measures that increase the patient harm, which of course would only compound their woes. One of the most effective interventions here is the least creative: Invest in a strong financial foundation. Organize your finance and accounting team to perform timely and accurate month- and year-end closes, increase tax efficiency, and report metrics to executives that help them make decisions.

If you don’t presently have that team, consider “renting” it. Citrin Cooperman’s Business Process Outsourcing team can give you access to all the healthcare finance talent you need and guide them to get your organization financially fit and in a place to care for more lives.

Want to start outsourcing your finance and accounting departments? Please contact Mike Zyborowicz at mzyborowicz@citrincooperman.com or Kieran Higgins at khiggins@citrincooperman.com to learn more about Citrin Cooperman’s Business Process Outsourcing Services and Healthcare Industry Practice services.