Characterization of diagnostic error in the hospital setting has traditionally relied on data from autopsy studies, but the continuing decline in autopsy rates necessitates identification of diagnostic errors through other data sources. In this study, investigators utilized the National Practitioner Data Bank to examine the incidence and severity of inpatient diagnostic error and estimate the clinical and economic consequences of these errors. Diagnostic error accounted for 22% of paid malpractice claims over a 12-year period, resulting in $5.7 billion in payments, and the incidence of claims due to failure to diagnose increased over time. Paid claims due to diagnostic error were more likely to be for male patients older than 50, compared with other types of paid claims. Consistent with other studies, a small proportion (9%) of physicians accounted for a large proportion (51%) of payments. Although paid malpractice claims data have important limitations, this study advances our understanding of the epidemiology of diagnostic error among hospitalized patients and insights into possible preventive mechanisms.