What is Hospital-Acquired Condition (HAC)? Definition, Formula, and Benchmark

A Hospital-Acquired Condition (HAC) is a reasonably preventable condition that develops during a hospital stay rather than being present at admission. CMS defines specific HAC categories that drive two distinct Medicare payment adjustments: the HAC Payment Reduction Program (HACPRP), which excludes specified HACs from DRG severity upgrade when flagged as not-present-on-admission, and the Hospital-Acquired Condition Reduction Program (HACRP), which penalizes the lowest-performing hospital quartile on aggregate HAC rates with a 1% Medicare payment reduction.

HACPRP HAC categories include: foreign objects retained after surgery, air embolism, blood incompatibility, stage 3 and 4 pressure ulcers, falls and trauma, catheter-associated urinary tract infection (CAUTI), vascular catheter-associated infection (CLABSI), manifestations of poor glycemic control, surgical site infection after specific orthopedic and cardiac procedures, deep vein thrombosis and pulmonary embolism following specific procedures, and iatrogenic pneumothorax. When any of these conditions is documented as not-present-on-admission (POA = N), the MS-DRG severity upgrade does not apply. The hospital is paid as if the HAC had not occurred, removing the perverse incentive to allow HACs.

HACRP aggregates HAC rates across domains: Patient Safety Indicator 90 (aggregate PSI composite), CLABSI, CAUTI, SSI, MRSA bacteremia, and C. difficile infection. Hospitals are ranked nationally on a composite HAC score; the lowest-performing quartile receives a 1% Medicare payment reduction across all discharges. The HACRP penalty is a blunt instrument — a 1% reduction on all Medicare revenue can be material for a large hospital.

For RCM operations, HAC management requires cross-functional coordination between quality and safety, infection prevention, CDI, HIM/coding, and finance. Accurate POA documentation and coding materially affect HAC classification; a true HAC documented as POA = U or W may be treated as N by default, triggering payment adjustment even when clinical evidence was actually supportive of POA = Y. CDI programs heavily monitor POA for HAC-eligible diagnoses to minimize inappropriate HAC classification.

Quality improvement programs target HAC reduction through infection prevention bundles, pressure ulcer prevention, fall prevention, glycemic control protocols, and surgical site infection prevention. HAC rates are publicly reported via CMS Hospital Compare, affecting hospital reputation and patient choice.

For RCM operations, HAC-related denials and adjustments include RAC reviews of HAC coding accuracy, payer audit of POA assignment consistency, and ongoing CDI engagement to optimize documentation. The financial impact of HAC reporting accuracy is material: misclassification of a single HAC case can shift DRG payment by thousands of dollars, and systemic HACRP performance affects all Medicare revenue.

Coding audits specifically targeting HAC-relevant diagnosis pairs (e.g., pneumonia with CAUTI, surgery with surgical site infection) are common practice at mature hospital systems. Audit findings drive both retrospective corrections on paid claims and prospective CDI focus on high-impact documentation behaviors.