Overview
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.
Industry benchmark
HAC Payment Reduction Program: excludes HACs (POA = N) from DRG severity upgrade. HAC Reduction Program: 1% Medicare payment reduction for lowest-performing hospital quartile.
Worked example
A Medicare patient admitted for hip fracture surgery develops CAUTI on hospital day 5. Without POA policy, the CAUTI diagnosis would upgrade the MS-DRG to a higher-severity level paying approximately $3,000 more. With POA = N, the CAUTI is a HAC and excluded from DRG severity upgrade. The hospital receives the lower-severity MS-DRG payment. If the hospital is in the lowest HACRP performance quartile for the fiscal year, all Medicare discharge payments are additionally reduced by 1%.
HAC list FY2027: the 14 categories in MS-DRG v44
Appendix I of the CMS ICD-10 MS-DRG Definitions Manual v44, in force for discharges from October 1, 2026, defines the hospital-acquired conditions the inpatient grouper applies. Each of the 14 categories is a list of secondary diagnoses, 3,996 codes in all and every one of them a CC or an MCC; 6 categories also require a procedure from their own list, and HAC 11 (bariatric surgery) also requires one of 2 obesity principal diagnoses. Falls and Trauma (HAC 05) is by far the largest category, with 3,778 fracture, dislocation, intracranial injury, crushing, burn and other injury codes.
The payment effect works through the present-on-admission (POA) indicator. When a HAC code is reported as a secondary diagnosis with POA indicator N (not present on admission) or U (documentation insufficient) and the category's criteria are met, the MS-DRG v44 grouper does not count it as a CC or MCC, so the stay groups as if the condition were absent; indicators Y and W keep it. Hospitals exempt from POA reporting are outside this logic. Check any code's HAC category and CC or MCC level in the FY2027 CC/MCC lookup, for example the urinary tract infection code N39.0, which HAC 06 counts together with a urinary catheter complication code.
Secondary diagnoses are split by their CC or MCC level; the conditions column gives the procedure list (and, for HAC 11, the principal diagnoses) a stay must also have for the category to apply.
| HAC | Category | Secondary diagnoses | Other conditions | Example codes |
|---|---|---|---|---|
| 01 | Foreign Object Retained After Surgery | 53 (0 MCC, 53 CC) | none | T81.500A |
| 02 | Air Embolism | 1 (1 MCC, 0 CC) | none | T80.0XXA |
| 03 | Blood Incompatibility | 5 (0 MCC, 5 CC) | none | T80.30XA |
| 04 | Stage III and IV Pressure Ulcers | 50 (50 MCC, 0 CC) | none | L89.003 |
| 05 | Falls and Trauma | 3,778 (1,777 MCC, 2,001 CC) | none | S82.001A, S52.001B |
| 06 | Catheter-Associated Urinary Tract Infection (UTI) | 16 (1 MCC, 15 CC) | catheter code plus one of 14 infection codes | N28.84, B37.41 |
| 07 | Vascular Catheter-Associated Infection | 4 (0 MCC, 4 CC) | none | T80.211A |
| 08 | Surgical Site Infection-Mediastinitis After Coronary Bypass Graft (CABG) | 2 (2 MCC, 0 CC) | 280 procedure codes | J98.51 |
| 09 | Manifestations of Poor Glycemic Control | 19 (18 MCC, 1 CC) | none | E08.00, E09.00 |
| 10 | Deep Vein Thrombosis (DVT) / Pulmonary Embolism (PE) with Total Knee or Hip Replacement | 46 (10 MCC, 36 CC) | 166 procedure codes | I82.401, I26.02 |
| 11 | Surgical Site Infection - Bariatric Surgery | 9 (0 MCC, 9 CC) | 49 procedure codes; principal diagnosis E66.01 or E66.813 | T81.40XA, K95.01 |
| 12 | Surgical Site Infection - Certain Orthopedic Procedures of Spine, Shoulder and Elbow | 18 (0 MCC, 18 CC) | 644 procedure codes | T84.60XA, T81.40XA |
| 13 | Surgical Site Infection (SSI) Following Cardiac Implantable Electronic Device (CIED) Procedures | 8 (0 MCC, 8 CC) | 119 procedure codes | T81.40XA, K68.11 |
| 14 | Iatrogenic Pneumothorax with Venous Catheterization | 1 (0 MCC, 1 CC) | 25 procedure codes | J95.811 |
The procedure-based categories reach 87 MS-DRGs through their procedure lists. HAC 10, deep vein thrombosis or pulmonary embolism after a total knee or hip replacement, applies to 166 joint replacement codes that group to MS-DRGs such as 469, 470, 521 and 522. Each MS-DRG page names the HAC procedure lists that lead to it.
Sources: ICD-10 MS-DRG Definitions Manual v44 (text) (v44, effective 2026-10-01); MS-DRG grouper with Medicare Code Editor (MSGMCE) v44 installation and user's manual (HAC and POA logic) (v44.0, effective 2026-10-01); ICD-10-CM FY2027 POA-exempt codes (full list, additions, deletions and revisions) (FY2027, effective 2026-10-01).
Look it up in CMS data
Free reference pages and tools rebuilt from the current CMS release files, for looking up the CMS data behind this term.
Frequently asked questions — Hospital-Acquired Condition (HAC)
What's the difference between HACPRP and HACRP?
HACPRP excludes individual HACs (POA = N) from DRG severity upgrade on a per-claim basis. HACRP is an aggregate program: the lowest-performing hospital quartile on HAC rates receives a 1% payment reduction across all Medicare discharges.
Are HACs preventable?
CMS defines HACs as reasonably preventable with proper care. Clinical literature supports prevention for most HAC categories through infection prevention bundles, pressure ulcer prevention, fall prevention, and other evidence-based practices.
How do hospitals reduce HAC rates?
Infection prevention bundles (CAUTI, CLABSI), pressure ulcer prevention protocols, fall prevention programs, glycemic control, surgical site infection prevention, and strong CDI documentation of POA status.
Disclaimer
This glossary entry is operational reference for revenue-cycle and medical-billing professionals. It is not legal, clinical, or contractual advice. Industry benchmarks cite named public sources where available; always verify against the current guidance from the authority body before relying on a number in a contract, policy, or compliance filing.