"Many hospitals are struggling to survive financially," study co-author William Encinosa, senior economist at the Agency for Healthcare Research and Quality, said in a statement. "The point of our paper is that the cost savings from reducing medical errors are much larger than previously thought."

Encinosa and colleagues tracked insurance claims for 5.6 million enrollees from 2001 to 2002. The researchers concluded that the effects of medical errors continue long after a patient leaves the hospital. Medical error studies that focus only on inpatient stay can underestimate the costs by up to 30 percent, Encinosa said.

The study, published in the journal Health Services Research, found that the large difference in calculations for medical error expenses might mean that interventions to increase patient safety -- like adding more nursing staff -- could be more cost-effective than previously thought.

A 1998 report by the Institute of Medicine estimated 44,000 to 98,000 Americans die because of medical mistakes each year, costing some $17 billion to $29 billion.