Policies that decline payment in the event of hospital-acquired conditions have generated considerable public attention. Although the projected payment reductions are not large, small payment penalties have been effective in changing human behavior and ultimately in improving the hospital care experience for patients. Many state Medicaid programs and commercial payers have adopted similar policies. Medicare payment reductions for hospital-acquired conditions are only one component of several efforts to reduce their incidence. The Centers for Medicare and Medicaid Services (CMS) will refine these policies as appropriate. Other CMS strategies to reduce hospital-acquired conditions include public reporting, quality improvement initiatives, value-based purchasing, quality metrics and guidelines development, and national coverage decisions.