What CMS's FY2026 HAC Penalties Mean for Hospital Fall Prevention

Every year, CMS gives hospitals a narrow window to challenge their Hospital-Specific Report before their Total HAC Score is finalized. Many hospitals are inside that 30-day review period for the FY2026 cycle right now — and most teams outside quality and compliance don't realize how directly CMS HAC penalties connect to fall prevention.

The CMS Hospital-Acquired Condition (HAC) Reduction Program is a Medicare value-based purchasing program that cuts payments by 1% for hospitals scoring in the worst-performing quartile on a set of patient safety measures. One of those measures — PSI-08, In-Hospital Fall with Hip Fracture Rate — ties your fall rate directly to your Medicare reimbursement.

Here's what the HAC Reduction Program actually measures, how falls factor into your score, and what hospitals can do about fall-related HAC penalties before the next review window closes.

What Is the CMS HAC Reduction Program?

The HAC Reduction Program is a Medicare payment-adjustment program that cuts reimbursement by 1% for hospitals in the bottom-performing quartile on hospital-acquired condition measures.

It operates under the Inpatient Prospective Payment System (IPPS) and applies a 1% payment reduction to any hospital whose Total HAC Score lands above the 75th percentile — the worst-performing quartile nationally.

That score is built from two domains. The first is the CMS Patient Safety and Adverse Events Composite, known as PSI-90, which bundles ten different patient safety indicators into a single measure. The second domain covers healthcare-associated infections (HAIs), including CLABSI, CAUTI, surgical site infections, and C. diff.

CMS releases each hospital's Hospital-Specific Report (HSR) through the QualityNet portal once a year. Hospitals then get roughly 30 days to review the calculation and submit questions before the score is finalized and payment adjustments take effect. Because the program is structured around a fixed percentile, roughly one in four eligible hospitals lands in the penalized quartile every cycle. In recent years, that has meant more than 750 hospitals losing a share of their Medicare payments annually.

How Do Patient Falls Factor Into Your HAC Score?

Falls enter the HAC score through PSI-90, a ten-measure composite — specifically PSI-08, In-Hospital Fall with Hip Fracture Rate, one of the highest-cost and most preventable events CMS tracks.

PSI-90 combines ten patient safety indicators into one composite score, using a harm-based weighting approach: each indicator is weighted by how often it occurs and how much harm it causes patients. The ten components are:

1. PSI 03 – Pressure Ulcer Rate
2. PSI 06 – Iatrogenic Pneumothorax Rate
3. PSI 08 – In-Hospital Fall with Hip Fracture Rate
4. PSI 09 – Perioperative Hemorrhage or Hematoma Rate
5. PSI 10 – Postoperative Acute Kidney Injury Requiring Dialysis
6. PSI 11 – Postoperative Respiratory Failure Rate
7. PSI 12 – Perioperative Pulmonary Embolism or DVT Rate
8. PSI 13 – Postoperative Sepsis Rate
9. PSI 14 – Postoperative Wound Dehiscence Rate
10. PSI 15 – Abdominopelvic Accidental Puncture or Laceration Rate

PSI-08 carries real weight in this mix because hip fractures from inpatient falls are severe, costly, and largely preventable. According to AHRQ, hospitalizations for hip fractures caused by falls average 5.6 days and roughly $11,700 in direct hospital costs, before rehabilitation, readmission risk, or long-term care are factored in. Peer-reviewed research puts the average total cost of a fall with injury even higher, at more than $64,000 once downstream care is included. That combination of frequency, severity, and cost is exactly what CMS's harm-based weighting is designed to penalize.

What Happens If Your Hospital Scores in the Bottom Quartile?

Hospitals with a Total HAC Score above the 75th percentile lose 1% of all Medicare payments for the fiscal year, not just on fall-related claims, but across the board.

For a hospital with $150 million in annual Medicare revenue, a 1% reduction is $1.5 million. That's not a one-time fine. It's every year the hospital remains in the penalized quartile.

That recurring exposure is why finance and quality leaders are increasingly aligned on fall prevention as a compliance issue, not only a clinical one. (For a deeper look at how that translates into a full financial model, see our earlier post, What Is the ROI of AI Fall Prevention in Hospitals?) The HAC Reduction Program simply makes the connection unavoidable: your fall rate now shows up on a Medicare remittance, not just a quality dashboard.

How VirtuSense's VSTOne Addresses HAC Penalty Risk

Continuous, automated fall monitoring gives hospitals a direct way to influence PSI-08 before it becomes a Total HAC Score problem. VirtuSense VSTOne is an edge AI platform that uses LiDAR and computer vision to monitor patients around the clock, predicting unassisted bed or chair exits roughly 31 to 65 seconds before they happen, all processed on-device, with no video transmitted or stored.

Because VSTOne targets the movement patterns that precede a fall, rather than only alerting after one occurs, it addresses the exact behavior PSI-08 measures. Northwell Health has reported a 4x ROI using VSTOne, and Emory Healthcare, which also hosted a VSTOne breakout session at AONL 2026, reported 5.5x ROI. Both figures reflect the combined impact of fewer fall events, reduced sitter costs, and fewer false alarms pulling nurses away from other patients.

VirtuSense built VSTOne to close the gap between a clinical fall prevention program and the financial reality of the HAC Reduction Program, not to replace nursing judgment, but to give nurses an earlier, more reliable signal than a bed alarm or a hallway check.

Frequently Asked Questions

What is the CMS HAC Reduction Program? It's a Medicare value-based purchasing program that reduces payments by 1% for hospitals in the worst-performing quartile on a set of hospital-acquired condition measures, including patient safety events and healthcare-associated infections. It applies to all subsection(d) acute care hospitals under the Inpatient Prospective Payment System.

How do patient falls affect a hospital's HAC score? Falls factor into the CMS Patient Safety and Adverse Events Composite (PSI-90) through PSI-08, In-Hospital Fall with Hip Fracture Rate. A higher fall-with-hip-fracture rate raises a hospital's Total HAC Score, increasing its risk of falling into the penalized quartile.

How much money can a hospital lose under the HAC Reduction Program? Hospitals scoring above the 75th percentile lose 1% of all Medicare payments for the fiscal year, not just payments tied to the specific harm event. For a mid-sized hospital, that can total well over $1 million annually.

How can hospitals reduce their fall-related HAC penalty risk? Continuous, technology-based fall monitoring, like VirtuSense VSTOne's ambient vision AI, helps identify fall risk before an event occurs, directly targeting the behavior measured by PSI-08. Combined with evidence-based nursing protocols, this can measurably lower a hospital's fall-with-hip-fracture rate over time.

The Bottom Line

Fall prevention isn't just a nursing quality metric anymore. Through PSI-90 and PSI-08, it's tracked annually and tied directly to your hospital's Medicare reimbursement under the HAC Reduction Program. Hospitals that treat fall prevention as a compliance and financial priority, not only a clinical one, enter each HAC review cycle in a stronger position, with fewer surprises in their Hospital-Specific Report.

See how VSTOne can lower your fall-related HAC risk. Request a demo →

For the full financial breakdown, read What Is the ROI of AI Fall Prevention in Hospitals?

Sources: CMS — Hospital-Acquired Condition Reduction Program; AHRQ — PSI 90 Patient Safety and Adverse Events Composite, Technical Specifications; AHRQ HCUP Statistical Brief #80 — fractures due to falls; Dykes et al., "Cost of Inpatient Falls and Cost-Benefit Analysis of Implementation of an Evidence-Based Fall Prevention Program," JAMA Network Open, 2023.