Medicare and its Hospital Acquired Condition (HAC) Policy

There's More to 'Never Events' Than Patient Safety

In the United States, the Centers for Medicare & Medicaid Services (CMS) covers many healthcare expenses for Medicare beneficiaries. Beginning in 2008, CMS identified specific "never event" medical complications and conditions for which it penalized medical facilities.

These conditions were called "never events" because they involved scenarios that should never happen to anyone hospitalized for care, such as surgery on the wrong body part.

This article explains the never events policy, known as the Hospital-Acquired Condition (HAC) Reduction Program since 2013, and how it has evolved since its implementation.

Man on a hospital bed
Morsa Images / Getty Images

Never Events and Medicare

The original 2008 rules from Medicare identified eight types of HACs that would cause a reduction in payment to the involved facility while eliminating the patient's financial obligation for any additional care because of them.

The list of these types of incidents included:

The CMS made clear that its primary goal was patient safety, and it followed industry efforts to limit these HACs, such as those of the National Quality Forum.

The policies also aligned with efforts from the health insurance industry, individual states, and other stakeholders seeking to minimize the incidence of these events.

Whether or not the Medicare rules have worked, in terms of reducing risk to patients or improving healthcare cost effectiveness, has been subject to much controversy.

Despite controversy over HAC policies, a 2015 study from the Journal of the American Medical Association (JAMA) found that the original CMS policy was of some value in reducing specific HACs targeted by the Medicare payment rules.

The study results were based on data from 1,381 U.S. hospitals, focusing on four of the eight HACs and their frequency, as logged in the National Database of Nursing Quality Indicators maintained by the American Nurses Association.

The JAMA study researchers found:

  • An 11% reduction in the rate of central-line bloodstream infections
  • A 10% reduction in the rate of urinary tract infections caused by catheters

A separate study tracked Medicare patients from 2009 to 2015, reviewing the records of more than 8.8 million people. Initially, there were 13.4 never events per 1,000 people, but that declined after the Affordable Care Act rules covering HACs were passed, and dropped further after the HAC Reduction Program began in 2013.

Impacts of the Affordable Care Act on HACs

Beginning in the fiscal year 2015, the Affordable Care Act (Obamacare) mandated the financial penalties assessed to hospitals that perform poorly under the Hospital-Acquired Condition Reduction Program.

It's complicated due to the program's alignment with related initiatives, such as the Hospital Readmissions Reduction Program. However, any facility rated in the lowest performing group overall has reduced patient care payments by an additional 1%.

HACs Tracked by Medicare

As of 2020, the CMS continued to track HACs that included:

  • A foreign object (instrument) left in the body during surgery
  • Transfusions with incompatible blood types and factors
  • Falls, fractures, dislocations, burns, head and other injuries
  • Pressure ulcers
  • Diabetes-related glucose management conditions, such as coma
  • Infections at surgical sites, such as after coronary artery bypass surgery
  • The development of deep vein thrombosis or pulmonary embolism after orthopedic surgeries

What Facilities Comply With HAC Rules?

CMS says its HAC Medicare reimbursement policies apply to any facility seeking payment for treating people covered by Medicare.

In 2021, these types of facilities included:

  • Critical care hospitals
  • Rehabilitation hospitals and units
  • Long-term care hospitals
  • Psychiatric hospitals and units
  • Children’s hospitals
  • Veterans Affairs medical centers and hospitals

Practical Issues in Managing HACs

While healthcare providers generally support the goal of protecting their patients from HACs, it can be difficult to make decisions about their care while keeping track of their risks.

One solution may be a visual dashboard system, tested at three hospitals where a "stoplight" system of red-yellow-green coding was used to identify multiple HAC risks.

Other concerns center on the impacts on hospitals with fewer resources and those that treat low-income populations. One study found that the odds of a poor HAC score, which impacts Medicare reimbursement rates, are greater in highly diverse communities. The financial impact may limit these facilities' ability to care for patients.

"Although hospital quality of care is not intentionally segregated, its surrounding community is impacting its performance," the authors note. "Thus, policymakers need to accommodate the diversity of communities when developing pay-for-performance or merit-based initiatives."

Other issues centered on HAC program compliance include:

  • Increased or unnecessary use of antibiotics, in an era of concern over antibiotic resistance
  • Additional and costly testing for conditions that may have existed before facility admission
  • Concerns that an infected or injured patient may be discharged too quickly and then require readmission


The Centers for Medicare & Medicaid Services (CMS) seeks to prevent Hospital Acquired Conditions (HACs), also known as never events, through its HAC Reduction Program. The program is designed to improve patient safety and patient care.

Its goals are achieved through several strategies, including financial penalties that apply to healthcare facilities that perform poorly when limiting these events. HAC incidents include falls, blood transfusion errors, and surgical mistakes.

While there is research evidence to suggest the HAC programs have reduced the number of never events, healthcare providers continue to work at identifying best practices to keep their facilities successful at meeting HAC standards while providing competent and cost-effective patient care.

Frequently Asked Questions

  • How many hospitals are penalized under Medicare never event polices?

    In 2022, there were 764 hospitals affected by the 1% penalty applied to patient care payments because of Hospital Acquired Conditions (HACs).

  • Do hospital costs increase with an effort to prevent HACs?

    A reduction in Hospital Acquired Conditions (HACs) may lead to cost savings because these never events don't need to be treated, and because the facility avoids penalties. But one study suggests the actual savings are unclear, while a more targeted approach to fewer HACs might offer more benefit.

10 Sources
Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Centers for Medicare & Medicaid Services. CMS improves patient safety for Medicare and Medicaid by addressing never events.

  2. Waters TM, Daniels MJ, Bazzoli GJ, et al. Effect of Medicare’s nonpayment for Hospital-Acquired Conditions: lessons for future policy. JAMA Intern Med. 2015;175(3):347-354. doi:10.1001/jamainternmed.2014.5486

  3. Arntson E, Dimick JB, Nuliyalu U, Errickson J, Engler TA, Ryan AM. Changes in hospital-acquired conditions and mortality associated with the Hospital-Acquired Condition Reduction Program. Ann Surg. 2021;274(4):e301-e307. doi:10.1097/SLA.0000000000003641

  4. Centers for Medicare & Medicaid Services. Hospital Acquired Conditions.

  5. Centers for Medicare & Medicaid Services. Hospital Acquired Condition Reduction Program.

  6. Makic MBF, Stevens KR, Gritz RM, et al. Dashboard design to identify and balance competing risk of multiple hospital-acquired conditions. Appl Clin Inform. 2022;13(3):621-631. doi:10.1055/s-0042-1749598

  7. Hamadi H, Tafili A, Apatu E, Park S, Spaulding A. Medicare’s Hospital-Acquired Condition Reduction Program and community diversity in the United States: the need to account for racial and ethnic segregation. Hosp Top. 2019;97(4):148-155. doi:10.1080/00185868.2019.1659122

  8. Geisler BP, Jilg N, Patton RG, Pietzsch JB. Model to evaluate the impact of hospital-based interventions targeting false-positive blood cultures on economic and clinical outcomes. J Hosp Infect. 2019;102(4):438-444. doi:10.1016/j.jhin.2019.03.012

  9. Greater New York Hospital Association. The American Health Care Landscape.

  10. Sankaran R, Gulseren B, Nuliyalu U, et al. A comparison of estimated cost savings from potential reductions in hospital-acquired conditions to levied penalties under the CMS Hospital-Acquired Condition Reduction Program. Jt Comm J Qual Patient Saf. 2020;46(8):438-447. doi:10.1016/j.jcjq.2020.05.002

By Trisha Torrey
 Trisha Torrey is a patient empowerment and advocacy consultant. She has written several books about patient advocacy and how to best navigate the healthcare system.