14.3 Hospital-Acquired Conditions (HAC) Reduction & Quality Programs

AHIMA Certified Coding Specialist CCS

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1 Chapter 1: ICD-10-CM Diagnosis Coding Fundamentals & UHDDS Guidelines

1.1 ICD-10-CM Structure, Formats, and Core Conventions 1.2 UHDDS Principal Diagnosis Selection Rules 1.3 Secondary Diagnoses Reporting & Present on Admission (POA) Indicators

2 Chapter 2: Circulatory, Cardiac & Vascular Inpatient Coding

2.1 Hypertension, Hypertensive Heart & Chronic Kidney Disease, and CAD 2.2 Acute Myocardial Infarction (AMI) Types & Sequencing 2.3 Heart Failure Types, Acuity & Cardiomyopathy 2.4 Cerebrovascular Disease, Acute Stroke, and Late Effects

3 Chapter 3: Respiratory, Sepsis & Infectious Conditions Coding

3.1 Sepsis, Severe Sepsis, and Septic Shock Guidelines 3.2 Pneumonias, Aspiration Pneumonia, and Influenza 3.3 COPD, Asthma, and Acute Respiratory Failure

4 Chapter 4: Renal, Endocrine, Gastrointestinal & Nutritional Disorders

4.1 Acute Kidney Injury (AKI) & Chronic Kidney Disease (CKD) 4.2 Diabetes Mellitus Types, Manifestations & Complications 4.3 Protein-Calorie Malnutrition & Endocrine Emergencies 4.4 Gastrointestinal Bleeding, Ulcers, and Acute Abdominal Pathologies

5 Chapter 5: Neoplasms, Obstetrics, Perinatal, Injury & Trauma Coding

5.1 Neoplasm Table, Primary, Secondary & Encounters for Therapy 5.2 Obstetrics, Normal/Complicated Deliveries & Puerperium 5.3 Perinatal Conditions & Congenital Malformations 5.4 Traumatic Injuries, Fractures & 7th Character Extensions

6 Chapter 6: ICD-10-PCS Architecture, Conventions & Approaches

6.1 ICD-10-PCS 7-Character System Architecture & Conventions 6.2 ICD-10-PCS The Seven Surgical Approaches 6.3 General PCS Guidelines & Multiple Procedure Rules

7 Chapter 7: ICD-10-PCS Root Operations: Cutting Out, Taking Out & Altering Body Parts

7.1 Excision vs Resection vs Destruction 7.2 Extraction, Drainage, and Extirpation 7.3 Detachment & Amputation Coding 7.4 Release vs Division

8 Chapter 8: ICD-10-PCS Root Operations: Putting In, Putting Back & Moving Body Parts

8.1 Replacement vs Supplement vs Insertion 8.2 Reposition, Transfer, and Reattachment 8.3 Bypass, Dilation, Occlusion, and Restriction

9 Chapter 9: High-Volume Inpatient Surgical & Medical Procedures in ICD-10-PCS

9.1 Coronary Artery Bypass Grafting (CABG) & Percutaneous Coronary Interventions 9.2 Total Joint Arthroplasties & Spinal Fusion 9.3 Mechanical Ventilation & Extracorporeal Therapies

10 Chapter 10: Outpatient CPT & HCPCS Level II Coding & Modifiers

10.1 CPT Evaluation and Management (E/M) Guidelines 10.2 CPT Surgical, Radiology, Pathology & HCPCS Level II Coding 10.3 CPT Modifiers in Hospital Outpatient & Professional Coding

11 Chapter 11: Inpatient Record Review, Clinical Validation & Documentation Integrity

11.1 Inpatient Health Record Analysis & UHDDS Documentation Hierarchy 11.2 Clinical Validation of Diagnoses vs Coding Compliance 11.3 Identifying Reportable Secondary Conditions & Complications

12 Chapter 12: Compliant Provider Queries & AHIMA/ACDIS Standards

12.1 AHIMA/ACDIS Compliant Query Standards & Ethical Principles 12.2 Compliant Query Formats: Open-Ended, Multiple-Choice & Yes/No 12.3 High-Impact Clinical Query Scenarios & Provider Workflow

13 Chapter 13: Inpatient Prospective Payment System (IPPS) & MS-DRG Mechanics

13.1 IPPS Reimbursement Structure & MS-DRG Grouping Logic 13.2 Complications and Comorbidities (CC) & Major CC (MCC) Impact 13.3 All-Patient Refined DRG (APR-DRG) System 13.4 Inpatient Transfer Policies, Cost Outliers & Short-Stay Rules

14 Chapter 14: Outpatient Reimbursement, Coding Edits & Fraud/Abuse Compliance

14.1 Hospital Outpatient Prospective Payment System (OPPS) & APCs 14.2 National Correct Coding Initiative (NCCI) Edits & MUEs 14.3 Hospital-Acquired Conditions (HAC) Reduction & Quality Programs 14.4 Healthcare Fraud, Abuse Laws, Audits & AHIMA Ethical Standards

15 Chapter 15: Health Information Technology, CAC, Encoders & Data Security

15.1 Electronic Health Records (EHR) & Computer-Assisted Coding (CAC) 15.2 Logic-Based Encoders, Groupers & Health Data Systems 15.3 HIPAA Privacy/Security, Cybersecurity & Internal Coding Audits

14.3 Hospital-Acquired Conditions (HAC) Reduction & Quality Programs

Key Takeaways Explain This Topic AI

Under Section 1886(d)(4)(D) of the Social Security Act, the CMS Hospital-Acquired Conditions (HAC) Payment Provision suppresses the Complication/Comorbidity (CC) or Major CC (MCC) payment weight of secondary diagnoses that were acquired during the inpatient hospitalization (POA = 'N' or 'U').

CMS currently lists 14 selected HAC payment-provision categories, including retained foreign object, air embolism, blood incompatibility, stage 3/4 pressure injury, falls/trauma, poor glycemic control, selected infections and surgical-site infections, post-orthopedic DVT/PE, and iatrogenic pneumothorax.

The HACRP applies a 1% reduction to overall Medicare fee-for-service payments for applicable subsection (d) hospitals with a Total HAC Score above the 75th percentile, using CMS PSI 90 and five CDC NHSN HAI measures.

The Hospital Readmissions Reduction Program (HRRP) imposes up to a 3% penalty on all inpatient base DRG operating payments for excess 30-day all-cause readmissions across six key clinical condition cohorts.

Last updated: August 2026

Hospital-Acquired Conditions (HAC) Reduction & Quality Programs

AHIMA CCS Exam Focus: Healthcare payment systems have fundamentally shifted from volume-based fee-for-service to value-based, quality-driven purchasing. On the CCS examination, candidates are tested extensively on the CMS Hospital-Acquired Conditions (HAC) Payment Provision , the impact of Present on Admission (POA) indicators on MS-DRG grouping, the 14 CMS-selected HAC categories , the Hospital-Acquired Condition Reduction Program (HACRP) 1% penalty, the Hospital Readmissions Reduction Program (HRRP) 30-day readmissions penalty, and the Hospital Value-Based Purchasing (VBP) program.

1. The CMS Hospital-Acquired Conditions (HAC) Payment Provision

Enacted under the Deficit Reduction Act of 2005 (DRA) and Section 1886(d)(4)(D) of the Social Security Act, the CMS Hospital-Acquired Conditions (HAC) Payment Provision established a statutory mandate preventing Medicare from paying hospitals a higher reimbursement for preventable complications that develop during an inpatient stay.

The Core Statutory Mechanism

Under traditional MS-DRG payment mechanics, when a patient admitted with a baseline illness (e.g., congestive heart failure) develops a major secondary complication during the stay (e.g., a severe catheter-associated bloodstream infection or a hospital fall resulting in a hip fracture), the secondary condition acts as a Complication/Comorbidity (CC) or Major CC (MCC). Absent the HAC rule, a qualifying secondary CC/MCC could shift an eligible claim into a higher-weighted severity tier. The HAC Payment Provision prevents that increase when its code and POA requirements are met: Condition on HAC List + POA Indicator N or U ⟹ C C / M C C S t a t u s S u p p r e s s e d f o r M S − D R G G r o u p i n g \text{Condition on HAC List} + \text{POA Indicator } \mathbf{N} \text{ or } \mathbf{U} \implies \mathbf{CC/MCC\ Status\ Suppressed\ for\ MS-DRG\ Grouping} Condition on HAC List + POA Indicator N or U ⟹ CC/MCC Status Suppressed for MS − DRG Grouping HAC Payment Provision Decision Tree

│
┌────────────────────────────┴────────────────────────────┐
▼ ▼
Secondary Condition is on HAC List Secondary Condition is NOT on HAC List
(e.g., Stage 4 Pressure Injury) (e.g., Acute Kidney Injury)
│ │
├────────────────────────────┐ ▼

▼ ▼ Standard POA Logic:

POA = 'Y' or 'W' POA = 'N' or 'U' POA = 'Y' ➔ Retains CC/MCC
(Present at Admission) (Hospital-Acquired) POA = 'N' ➔ Retains CC/MCC (if non-HAC)
│ │
▼ ▼
Retains Full CC/MCC Weight CC/MCC Weight SUPPRESSED
MS-DRG Groups with CC/MCC Condition Does Not Raise the CC/MCC Severity Tier
Critical Coding Impact on MS-DRG Grouping

If a secondary condition on the HAC list was Present on Admission (POA = Y or W ) , it retains its normal CC or MCC status and drives the MS-DRG to a higher payment tier.

If the secondary condition was NOT Present on Admission (POA = N or U ) , the MS-DRG grouper suppresses the CC/MCC status of that code. If the patient has no other valid CC/MCC secondary diagnoses, the claim drops to the lower-paying base MS-DRG (without CC/MCC).

2. The 14 CMS-Selected Hospital-Acquired Condition (HAC) Categories

CMS identifies 14 high-cost, high-volume, or both, clinical condition categories that could reasonably have been prevented through the application of evidence-based clinical guidelines: The 14 CMS HAC Categories

┌─────┬───────────────────────────────────────────────────────────────────────────┐
│ # │ HAC Clinical Category Title & Diagnostic Description │
├─────┼───────────────────────────────────────────────────────────────────────────┤
│ 1 │ Foreign Object Retained After Surgery (Gauze, sponge, needle, retractor) │
│ 2 │ Air Embolism (Iatrogenic intravascular air embolism) │
│ 3 │ Blood Incompatibility (ABO / Rh transfusion reaction errors) │
│ 4 │ Stage 3 and Stage 4 Pressure Ulcers (Hospital-acquired skin breakdown) │
│ 5 │ Falls and Trauma (Fractures, dislocations, intracranial injury, burns) │
│ 6 │ Catheter-Associated Urinary Tract Infections (CAUTI) │
│ 7 │ Vascular Catheter-Associated Infections (CLABSI bloodstream infections) │
│ 8 │ Surgical Site Infection (SSI) Post-CABG — Mediastinitis │
│ 9 │ Surgical Site Infection (SSI) Post-Bariatric Surgery (Gastric bypass) │
│ 10 │ Surgical Site Infection (SSI) Post-Orthopedic Surgery (Spine/Neck/Elbow) │
│ 11 │ Surgical Site Infection (SSI) Post-CIED (Pacemakers / Defibrillators) │
│ 12 │ Deep Vein Thrombosis (DVT) / PE Post-Total Knee / Total Hip Replacement │
│ 13 │ Poor Glycemic Control (DKA, Hypoglycemic Coma, Hyperosmolar Coma) │
│ 14 │ Iatrogenic Pneumothorax with Venous Catheterization │
└─────┴───────────────────────────────────────────────────────────────────────────┘
Detailed Breakdown of Key Categories for the CCS Exam

Foreign Object Retained After Surgery ( T81.5- ): Unintended retention of surgical sponges, needles, clamps, or instruments following operative procedures. It is a serious reportable safety event and a CMS HAC category when the applicable code and POA requirements are met.

Air Embolism ( T80.0- ): Introduction of air into the vascular system following infusion, transfusion, or invasive catheterization.

Blood Incompatibility ( T80.3- ): Hemolytic transfusion reactions resulting from the administration of ABO/Rh incompatible blood products.

Stage 3 and 4 Pressure Ulcers ( L89.--- ): Full-thickness skin loss extending into subcutaneous tissue (Stage 3) or muscle/bone (Stage 4). Note: The selected HAC pressure-injury category covers the applicable Stage 3 and Stage 4 codes. Determine payment suppression from the current HAC code list and POA indicator, not by severity status alone.

Falls and Trauma: In-hospital traumatic injuries resulting from patient falls, including fractures (femur, hip, radius), joint dislocations, intracranial injuries (subdural/epidural hematoma), crushing injuries, and severe thermal burns.

Catheter-Associated Urinary Tract Infections (CAUTI) ( N39.0 with T83.511- ): Infection of the urinary tract developing after the placement of an indwelling urethral catheter.

Vascular Catheter-Associated Bloodstream Infections (CLABSI) ( T80.211- ): Central line-associated bloodstream infections occurring during hospitalization.

Surgical Site Infections (SSIs): Mediastinitis after CABG ( T81.4- ), surgical site infections following laparoscopic gastric restrictive procedures, and joint/spine infections following specific elective orthopedic procedures.

Deep Vein Thrombosis (DVT) / Pulmonary Embolism (PE) Following Total Knee or Hip Arthroplasty ( I26.- , I82.4- ): Hospital-acquired acute venous thromboembolism following elective joint replacement.

Iatrogenic Pneumothorax ( J95.811 ): Accidental puncture of the pleura during central venous catheter placement, subclavian vein catheterization, or chest biopsy.

3. Hospital-Acquired Condition Reduction Program (HACRP)

Established by Section 3008 of the Affordable Care Act (ACA) , the Hospital-Acquired Condition Reduction Program (HACRP) is a mandatory federal quality penalty program that evaluates hospital safety performance. HACRP Operational Structure

┌─────────────────────────────────────────────────────────────────────────┐
│ Total HAC Score Calculation │
├────────────────────────────────────┬────────────────────────────────────┤
│ CMS Recalibrated PSI 90 │ CDC NHSN Measures │
│ (Claims-Based Measure) │ (Clinical Registry HAIs) │
├────────────────────────────────────┼────────────────────────────────────┤
│ • PSI 03: Pressure Ulcer Rate │ • CAUTI (Urinary Catheter) │
│ • PSI 06: Iatrogenic Pneumothorax │ • CLABSI (Central Line Bloodstream)│
│ • PSI 08: In-Hospital Fall Rate │ • SSI (Colon & Abdominal Hyst) │
│ • PSI 09: Postoperative Hemorrhage │ • MRSA Bacteremia │
│ • PSI 10: Postop AKI Requiring Dialysis │
│ • PSI 11: Postoperative Respiratory Failure │
│ • PSI 12: Perioperative PE/DVT │ • C. difficile Infection │
│ • PSI 13: Postoperative Sepsis │ │
│ • PSI 14: Postoperative Wound Dehiscence │
│ • PSI 15: Abdominopelvic Accidental Puncture/Laceration │
└────────────────────────────────────┴────────────────────────────────────┘
│
▼
[Hospitals Ranked Nationally by Total HAC Score (Quartiles)]
│
▼
┌─────────────────────────────────────────────────────────────────────────┐
│ THE HACRP 1% PAYMENT PENALTY │
│ Applicable hospitals above the 75th percentile of Total HAC Scores │
│ Receive a 1% reduction on Medicare FFS payments for the fiscal year │
└─────────────────────────────────────────────────────────────────────────┘

Penalty Structure: Applicable subsection (d) hospitals with a Total HAC Score above the 75th percentile receive a 1% reduction on overall Medicare fee-for-service payments for the fiscal year's discharges. The HACRP is separate from the claim-level HAC/POA payment provision described above.

4. Hospital Readmissions Reduction Program (HRRP)

Established under Section 3025 of the ACA , the Hospital Readmissions Reduction Program (HRRP) penalizes hospitals with excess, unplanned 30-day all-cause readmissions following discharge for specific baseline condition cohorts. The 6 HRRP Clinical Cohorts

┌─────────────────────────────────────────────────────────────────────────┐
│ 1. Acute Myocardial Infarction (AMI) │
│ 2. Heart Failure (HF) │
│ 3. Pneumonia (PNA) (including aspiration pneumonia & sepsis with PNA) │
│ 4. Chronic Obstructive Pulmonary Disease (COPD) │
│ 5. Elective Primary Total Hip Arthroplasty (THA) / Total Knee (TKA) │
│ 6. Coronary Artery Bypass Graft (CABG) Surgery │
└─────────────────────────────────────────────────────────────────────────┘

The 30-Day Rule: Evaluates unplanned readmissions to any acute care hospital within 30 days of discharge from the index admission, regardless of whether the readmission is for the same condition or a different clinical problem.

Statutory Penalty Cap: The maximum penalty under HRRP is a 3% reduction applied across all base Medicare inpatient operating DRG payments.

5. Hospital Value-Based Purchasing (VBP) Program

Authorized by Section 3001 of the ACA , the Hospital Value-Based Purchasing (VBP) Program transitions Medicare payments from volume to quality by withholding 2.0% of all participating inpatient IPPS base operating DRG payments and redistributing those funds to hospitals based on their Total Performance Score (TPS) .

VBP Domain Weight Core Focus & Quality Measures

Clinical Outcomes 25% 30-day mortality rates for AMI, Heart Failure, Pneumonia, CABG, and elective THA/TKA complication rates.

Safety 25% Healthcare-Associated Infections (HAIs) from CDC NHSN: CAUTI, CLABSI, SSI (Colon & Hysterectomy), MRSA, C. difficile .

Person and Community Engagement 25% HCAHPS (Hospital Consumer Assessment of Healthcare Providers and Systems) patient experience survey scores.

Efficiency and Cost Reduction 25% Medicare Spending Per Beneficiary (MSPB) index measuring total spending from 3 days prior to admission to 30 days post-discharge.