The University of Michigan Health System recently asked itself this question: what happens when a hospital admits it caused a medical mistake, takes responsibility and offers compensation to patients who have been harmed? Do patients sue or do they settle?

For employers, this is not just a matter of legal theory or even a question of whether you think tort reform and capping damages on lawsuits is the best way to bring malpractice insurance down.

It's about unnecessary costs in the system that are passed on to employers. Employers who are members of the Leapfrog Group for Patient Safety have long argued that when medical establishments admit their mistakes then costs for everyone go down.

The Institute for Healthcare Improvement, whose past president is now the head of the Centers for Medicare & Medicaid Services, has also encouraged medical professionals to admit mistakes and apologize to patients.

The University of Michigan now has some evidence to show that a system that holds itself accountable is not only doing right by its patients, it is doing right by its trustees, shareholders and those with whom it does business.

The University of Michigan Health System was one of the first in 2004 to begin identifying, reporting and apologizing for medical errors.

In doing so, according to a study published this week in the Annals of Internal Medicine, the system's legal costs went down as did the number of new legal claims filed against the health system, the number of claims that were paid out and the time it took to settle them.

The study suggests that saying you're sorry rather than hiding behind a lawsuit can bring to a swift and less expensive close lawsuits that can drag on for years and create huge costs for the health system, which are then passed on to the employers and the insurers that pay for medical care.

Beyond the legal costs to the system, the question employers need to ask their insurers and the hospitals they contract with is whether the hospital has a way of identifying medical errors.

Preventable medical errors are estimated to cost between $17 billion and $29 billion a year. That's a huge, unnecessary cost to the health system, not to mention to the productivity of workers and the bottom line of employers.

Employers, through the National Business Coalition on Health or the Leapfrog Group, should learn which hospitals report medical errors and what they do to avoid them. Because apologizing is only meaningful if the error doesn't happen again.