In 2008, CMS made a landmark policy change: it stopped paying hospitals the additional reimbursement that comes with treating certain serious complications that should not have occurred — what it called "Hospital-Acquired Conditions" (HACs). The message was clear: if something was preventable, hospitals should prevent it rather than profit from treating it. The policy has driven meaningful quality improvement.

The 11 Hospital-Acquired Conditions

These are conditions that CMS has determined are: (1) high cost or high volume, (2) result in assignment to a higher-paying DRG (diagnosis-related group), and (3) could reasonably have been prevented through evidence-based guidelines:

🛡️ The 11 CMS Non-Reimbursable HACs

  • Foreign object retained after surgery — Surgical sponge or instrument left in patient after procedure
  • Air embolism — Air introduced into bloodstream through IV or surgical procedure
  • Blood incompatibility — Transfusion of incompatible blood type
  • Stage III and IV pressure ulcers — Deep pressure sores developing during hospitalization
  • Falls and trauma — Fractures, dislocations, burns caused by falls during hospital stay
  • Catheter-associated urinary tract infections (CAUTI)
  • Vascular catheter-associated infections (CLABSI)
  • Manifestation of poor glycemic control — Diabetic ketoacidosis, hypoglycemic coma, secondary to poor glucose management
  • Surgical site infection — Cardiac implantable devices
  • Surgical site infection — Bariatric surgery for obesity
  • Surgical site infection — Orthopedic procedures (spine, neck, shoulder, elbow)

The Impact of This Policy

The HAC non-payment policy, combined with the Hospital-Acquired Condition Reduction Program (which penalizes the worst-performing quartile of hospitals by reducing their Medicare payments by 1%), has demonstrably reduced occurrence of the targeted conditions. CLABSI rates fell approximately 46% nationally between 2008 and 2016. CAUTI rates fell 16%. Pressure ulcer rates declined significantly. These are meaningful reductions in preventable patient harm attributable substantially to the financial pressure of this policy.

What This Means for Patients

First, practically: if you develop a HAC during your hospitalization, the hospital cannot bill Medicare for the additional costs associated with treating it. Your personal financial exposure depends on your insurance coverage, but the hospital absorbs the incremental cost. This creates aligned incentives — the hospital bears the financial cost of conditions it causes.

Second, strategically: hospitals that score worst on HAC measures are financially penalized by CMS. Looking at a hospital's HAC performance data gives you a meaningful proxy for their investment in basic safety systems. Hospitals with high pressure ulcer rates, CAUTI rates, and fall/injury rates are telling you something important about their nursing protocols, staffing, and safety culture.