Hospitals should be fined if they harm patients, the government's chief medical officer has proposed.
Patient safety must be a top priority, say experts
Sir Liam Donaldson said the taxpayer should not have to foot the bill for poor care that resulted in longer stays in hospital.
His comments come as the National Patient Safety Agency (NPSA) reported significant progress in safe standards of care in the NHS in the past year.
More than 700,000 NHS "patient safety incidents" were reported in 2006-7.
Some 6,500 resulted in severe harm and nearly 3,000 people died.
Figures have been increasing in recent years, which the NPSA has put down to better reporting of incidents by trusts.
Sir Liam said: "Why should the health service, funded by the taxpayer, pay for the care of a patient that's had bad care?
"In any other walk of life if you receive very bad service then you don't pay for it, you get a refund, and I don't think it should be any different in the health service."
"If somebody develops MRSA and has to stay in hospital longer to be treated, why should it be funded?"
He gave an example of schemes in the US, where some states require hospitals to report so-called "never events" - serious medical errors that are entirely preventable.
Last month, the Rhode Island Department of Health reprimanded and fined Rhode Island Hospital $50,000 for performing "wrong site" surgery on a patient for the third time this year.
Sir Liam said similar systems should be introduced to the UK and would recommend the idea to Lord Darzi who is carrying out a review of the NHS.
Primary care trusts (PCTs) could withhold some of the individual hospital's funding or recover money from them if they caused harm with possible tariffs for different errors.
"I have not thought about all the details but as a concept it is something I think should be introduced," he said.
Former NHS chief executive Sir Ian Carruthers said there was a culture in the NHS that prevented patient safety being properly addressed.
"Our culture is to pretend things don't happen or to recognise they do but try to deal with them outside any processes.
"If we continue to do that, we won't make the impact in making the changes we require."
The comments come as a report from the NPSA said in the past year many major milestones had been reached on patient safety but there is still a lot of work to do to make it a priority throughout the NHS.
Progress includes the setting up of patient safety action teams within health authorities and work with Royal Colleges to include patient safety in training.
Martin Fletcher, NPSA Chief Executive, said "significant strides" had been made.
Responding to Sir Liam's comments on hospital fines, he added: "We support this as an important principle to create stronger incentives for safer care."