Hospital Pay Cuts: Breaking Down the HAC Scoring System

Hospital Pay Cuts: Breaking Down the HAC Scoring System

with Christian Nicholl, and Hank Neuhoff


The Affordable Care Act was implemented to ensure that patients would have access to affordable, high quality, and safe healthcare. Regulations and measures were put in place to make certain that hospitals were meeting these newly implemented standards of care and safety. These standards, known as the Health-Acquired Conditions (HAC) requirements, have led to more in-depth scrutiny into whether hospitals are truly doing everything they can to reduce preventable infections and patient death through unnecessary complications.

Data released by the Center for Medicare and Medicaid Services (CMS) shows that 758 hospitals will see their Medicare payments reduced by 1% in 2016 for their noncompliance with the HAC requirements. As pointed out in a recent article on, more than half of these hospitals are repeat offenders.

The following provides more detail into how HAC scoring is calculated. The determination is initially based upon two domains:

Domain 1: The Agency for Healthcare Research and Quality (AHRQ) Patient Safety Indicator (PSI) measures the:

  1. PSI composite score.


Domain 2: Centers for Disease Control and Prevention (CDC) National Healthcare Safety Network (NHSN) Healthcare-Associated Infection (HAI) measures:

  1. Central Line-Associated Bloodstream Infection (CLABSI)
  2. Catheter-Associated Urinary Tract Infection (CAUTI)
  3. Surgical Site Infection (SSI) – colon and hysterectomy **new for 2016**

Hospitals are given a score from 1 to 10 for each category in Domain 1 and 2. This score places hospitals in 10 percentiles, with the higher scores representing hospitals with worse performance.

Percentile Points
1st - 10th 1
11st - 20th 2
21st - 30th 3
31st - 40th 4
41st - 50th 5
51st - 60th 6
61st - 70th 7
71st - 80th 8
81st - 90th 9
91st - 100th 10

If a hospital has a measure score for CLABSI, CAUTI, and SSI, then the hospital’s Domain 2 score equals the average of the three scores.  If a hospital has two of the three Domain 2 measures, it is an average of the two.  And if only one of the three is available, that is simply their score.

Some might argue that this scoring method is too lenient on hospitals that do not have the means to receive a score in any of the three categories in Domain 2, leading to the question as to whether we should allow hospitals with insufficient record keeping slide when they cannot produce the data needed to receive a score?

Hospitals with a Total HAC score above the 75th percentile of the Total HAC Score distribution may be subject to payment reduction.

Scores greater than 6.75 earned penalties in FY 2016.

Scores greater than 7.00 earned penalties in FY 2015.

Reasons that a hospital may have been exempt from these payment reductions:

  • The number of cases/patients is too few to report or rate.
  • Data submitted were based on a sample of cases/patients.
  • Results are based on a shorter time period than required.
  • Data suppressed by CMS for one or more quarters.
  • Insufficient record-keeping and missing data.
  • Very few patients were eligible for/ completed the HCAHPS survey. (These numbers of surveys may be too low to reliably assess hospital performance.)
  • The lower limit of the confidence interval cannot be calculated if the number of observed infections equals zero.
  • No data are available from the state/territory for this reporting period.
  • There were discrepancies in the data collection process.
  • The results for the hospital’s state are combined with nearby states to protect confidentiality.  

**Certain types of hospitals, such as critical-access hospitals, children's hospitals, Veterans Association hospitals, and all hospitals in Maryland (because of its unique all-payer rate setting system) are exempt from the readmissions program.**

The Stratasan mapping team was able to geocode the entire database (6,097 records) with 99.77% (6,083/6,097) of those addresses being at the street level or greater. (This includes work that upgraded hospital's geocodes from Street Level to Point Level.)

Now that we have a bit of background into the data, here are some interesting findings. 

35% of penalized hospitals were teaching hospitals*:

303 teaching hospitals in Texas were penalized

292 teaching hospitals in California were penalized

168 teaching hospitals in Florida were penalized

152 teaching hospitals in New York were penalized

*A teaching hospital is one that is affiliated with a medical school, in which medical students receive practical training.

 Affected hospitals profit vs. nonprofit:

Not for profit 59.8%

For profit 23.3%

Gov’t 15.1%

States with the highest percentage of affected hospitals 2016 (penalized/assessed):

CT - 52.9% (9/17)

DC - 83.3% (5/6)

ME - 50% (7/14)

MT - 45.5% (5/11)

RI - 62% (5/8)

**Region 1 (Northeast) has the most states with the highest percentage of affected hospitals.  

Summary of the Scoring Process:


It is undeniable that U.S. hospitals as a whole have improved their preemptive measures for preventable deaths. However, some speculate that the threshold is simply too low, or that the measurement system is flawed due to insufficient record keeping, poor data collection processes, and several other problems that question the validity and reliability of this data. This information speaks to the importance of proper record keeping and data compilation. Hospitals have a long way to go in terms of eliminating hospital-acquired conditions. Teaching hospitals (35% of affected) especially must aim to improve their total HAC scores to keep up with, what will hopefully be, an improving standard for all hospitals.  


Article by:

Christian Nicholl

Jason Haley, GIS Manager for Stratasan

Hank Neuhoff, Production Manager for Stratasan  


health care health system healthcare healthcare budget hospital hospital budget hospital budgeting hospitals healthcare trends