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In 2008, Medicare implemented a policy limiting reimbursement to hospitals for treating avoidable hospital-acquired conditions (HACs). Although the policy will expand nationally to Medicaid programs in 2011, little is known about the impact on safety-net hospitals. Using data from the 2006 American Hospital Association Annual Survey and MEDPAR, we compared the incidence of cases that met the HACs criteria at safety-net and non-safety-net hospitals. We found that safety-net hospitals had an average of 65.5 HACs per 1,000 Medicare discharges compared with 57.6 at non-safety-net hospitals. Hospitals in the lowest quintile for financial margins had higher rates of HACs on average than other hospitals. Safety-net hospitals and hospitals with the lowest financial margins may be more likely than others to be affected by policies that reduce payment for HACs.