On August 1, 2007, the Centers for Medicare & Medicaid Services (CMS) issued a final rule to update the hospital inpatient prospective payment system (IPPS) for fiscal year (FY) 2008. Within the rule, CMS announced a significant policy change: Medicare will no longer cover hospital-acquired conditions. In a statement, Herb Kuhn, the acting deputy commissioner of CMS, said the change will make Medicare payments for inpatient services more accurate and “better reflect the severity of the patient’s condition.” The actual payment implications of the rule change will become effective October 1, 2008. But beginning October 1, 2007, hospitals must report certain conditions that are present as secondary diagnoses at the time of admission to the hospital. In most states, hospital records do not show whether a particular condition developed before or after a patient entered the hospital. There is concern, however, that under the new rules hospitals will have to perform more laboratory tests to determine, for example, if patients have urinary tract infections at the time of admission. According to the rule, the following 8 hospital-acquired conditions will no longer be covered by Medicaid:•Serious preventable event—object left in surgery;•Serious preventable event—air embolism;•Serious preventable event—blood incompatibility;•Catheter-associated urinary tract infections;•Pressure ulcers (decubitus ulcers);•Vascular catheter-associated infection;•Surgical site infection—mediastinitis after coronary artery bypass graft surgery; and•Falls—hospital-acquired injuries, including fractures, dislocations, intracranial injury, crushing injury, burn, and “other unspecified effects of external causes” may be considered in future rulemaking. CMS states the agency will also propose the following conditions for consideration in the FY 2009 IPPS proposed rule:•Ventilator-associated pneumonia;•Staphylococcus aureus septicemia; and•Deep vein thrombosis/pulmonary embolism. The agency also listed the following set of conditions “that signal further analysis for future implementation.”•Methicillin-resistant Staphylococcus aureus and•Clostridiumdifficile-associated disease. The rule appears in the Federal Register, August 22. To download the rule from the CMS Web site, go to www.cms.hhs.gov/center/hospital.asp, click the first “spotlight.” The hospital-acquired conditions discussion begins on page 295 of the rule, and the Serious Preventable Events (“never events”) that are included in the hospital-acquired conditions are discussed beginning on page 316.