The Deficit Reduction Act of 2005 required the Secretary of Health and Human Services to identify high cost and high volume preventable conditions that result in higher payments. Following this directive, the Centers for Medicare and Medicaid Services (CMS) promulgated regulations denying payment for claims occurring after October 1, 2008, in which selected conditions occurred during the hospital stay and were not present on admission (POA). In preparation, starting October 1, 2007, CMS required POA indicators on all secondary diagnoses for admissions. Furthermore, CMS prohibits the hospital from billing the beneficiary for the difference between the lower and higher payment rates. The intended net effect of this change is that claims would be paid as though the secondary diagnosis were not present, effectively transferring financial responsibility to the hospital. The goal of this policy change is to decrease costs while encouraging the prevention of adverse events.1 While the intent is desirable from a societal perspective, little is known about the true impact of this policy.