The seminal Institute of Medicine report To Err Is Human estimated that preventable errors cost the US health care system more than $17 billion annually. Although hospitals themselves currently bear only a small proportion of these costs, payers are increasingly seeking to realign incentives to both improve safety and control costs. This study examined the costs associated with both preventable adverse events and redundant tests (duplicate tests ordered for the same patient by different physicians). The authors estimate that eliminating preventable adverse events (principally health care–associated infections) alone could save the US health system more than $16 billion annually, with an additional $8 billion in savings potentially achievable by eliminating redundant tests. The Centers for Medicare and Medicaid Services' policy eliminating reimbursement for certain preventable conditions is an attempt to address this issue. A companion article explains that the savings realized by this policy are likely to be minimal.