Preventable medical errors are associated with additional costs that tend to be borne by patients, but little is known about organizational costs associated with such errors. Two composite case studies (a fall and a delay in diagnosis) were used to identify the organizational costs of preventable medical errors.Legal, marketing, and organizational costs--direct, indirect, and long term--were associated with each of the preventable medical errors. A model was generated to examine the theoretical relationship between the costs and four determinants of corporate performance--price, wages, cost of capital, and efficiency.Organizations may also have a financial incentive to improve patient safety, for beyond patient and societal costs, preventable medical errors appear to account for significant legal, marketing, and operational costs for the organizations that deliver health care. Some of these costs are not so much the cost of the error but the costs of organizational responses to the error. Three broad areas of inquiry could be used to test the model and improve our understanding of the organizational costs of errors: market response to patient safety interventions, before/after studies of interventions, and case-control studies.Health care leaders have a moral imperative to implement systems that reduce medical errors and improve patient safety. An understanding of the costs associated with medical errors may help leaders understand the importance of patient safety from a financial perspective, develop measures to evaluate the impact of patient safety initiatives, and efficiently allocate resources to address this important health concern.