There have been an increasing number of descriptive analyses of pediatric medical errors as the release of the Institute of Medicine reports over 5 years ago (IOM 2000, IOM 2001, IOM 2004). These include single and multi-institution studies, studies of medication errors, and several broad characterizations of medical errors in hospitalized children. The incidence of medical errors in hospitalized children is estimated to range from 0.8 to 1.3 percent and is highly dependent upon the definitions and classifications used (Brennan et al. 1991; Localio et al. 1991; Smith, Langlois, and Buechner 1991; Rosen et al. 1992; Silber et al. 1992; Roos et al. 1995; Duke, Butt, and South 1997; Gawande et al. 1999; McCormick et al. 2000; Miller et al. 2001; Connors et al. 2001; Kaushal et al. 2001; Davis et al. 2002; Miller, Elixhauser, and Zhan 2003; Proctor et al. 2003; Slonim et al. 2003; Kanter, Turenne, and Slonim 2004; Miller and Zhan 2004; Sedman et al. 2005). The study of pediatric medical errors has been limited by the relatively small numbers of children hospitalized at individual institutions and the need for detailed prospective and retrospective reviews. One method of overcoming the methodological challenges of small sample sizes and the potential idiosyncrasies of data from a single institution is to use administrative datasets that contain large volumes of discharges from multiple institutions (McCormick et al. 2000; Miller et al. 2001; Miller, Elixhauser, and Zhan 2003; Proctor et al. 2003; Slonim et al. 2003; Kanter, Turenne, and Slonim 2004; Miller and Zhan 2004; Sedman et al. 2005). Miller and colleagues developed an effective method for screening the large number of discharges in these datasets to identify potential medical errors (Miller et al. 2001; Miller, Elixhauser, and Zhan 2003; Miller and Zhan 2004). This method uses events known as patient safety indicators (PSIs). For pediatric patients, analyses of PSIs have included both community hospitals and Children's hospitals (Miller et al. 2001; Miller, Elixhauser, and Zhan 2003; Miller and Zhan 2004). However, when synthesized, the prior literature on medical errors in children during hospitalization is subject to two important caveats, both of which are informed by this study. First, inpatient error estimates generated using the PSI method are likely to be higher in freestanding, academic Children's Hospitals where children with complex conditions receive their care, because children with more complex health care needs may be more prone to medical errors (Miller, Elixhauser, and Zhan 2003; Slonim et al. 2003). Therefore, a description of the types and frequencies of PSIs in a unique dataset of these institutions may help to prioritize efforts aimed at reducing their occurrence in specific subgroups of patients (Slonim et al. 2003). These associations and the incidence rates, however, may be misrepresented if the analytic approach inadequately considers the statistical methods used in the analysis. The second caveat addresses the analytic approach and the methodological challenge that occurs when modeling a multi-institutional dataset (Normand, Glickman, and Gastoonis 1997; y,Snijders and Bosker 1999; McCulloch and Searle 2000; Williams 2000; Leyland and Goldstein 2001; Palta 2003; Loehlin 2004; Luke 2004; Skrondal and Hesketh 2004; Zaslavasky, Zaborski, and Cleary 2004). Patients being treated in the same hospital may be more similar to each other than those treated in other hospitals. Independence, one of the key assumptions for regression, is violated under these circumstances. Therefore, unmeasured hospital characteristics that introduce variability into the results require additional effort to appropriately control. Several techniques can account for the “clustering” which exists in the dataset. Clustering represents the correlations associated with data that are organized at specific sites or levels. The techniques used to adjust for hospital clustering, which allow for measuring both patient and hospital level characteristics are, as a group, referred to as hierarchical or mixed models (Goldstein 1987, Goldstein, 1995; Gatsonis et al. 1995; Daniels and Gastonis 1999; Landrum and Normand 1999; Landrum et al. 1999; Burgess and Lourdes 2000; Bryck and Raudnebush 2002; Hox 2002). The justifications for performing these models arise from empirical, statistical, and theoretical foundations, but their usefulness in practice remains questionable. The empirical justification arises from the possibility that the rates of PSIs differ at the individual hospital level (Goldstein 1987; Snijders 1999; Williams 2000; Bryck and Raudenbush 2002; Palta 2003; Loehlin 2004; Luke 2004; Skrondal 2004). Second, a statistical justification arises from the fact that the cases are not independent, but are clustered by hospital and may have correlated errors. Third, a theoretical justification would suggest that a multilevel model will more accurately estimate the extent to which both the patient-level and hospital-level characteristics influence PSI rates. Consequently, we studied the incidence rates of PSIs in children hospitalized at a sample of academic Children's Hospitals and accounted for the effects of hospital “clustering” using three different statistical modeling techniques. We compared these models to a “base-state” that excluded institutional variables to determine the effect that each of these techniques may have on the characteristics associated with PSIs.