Medicare's Hospital-Acquired Condition (HAC) Reduction Program provides financial incentive to hospitals by reducing reimbursements to those with elevated rates of health care-associated infections. This study found that community segregation impacts hospital HAC performance, and that hospitals in diverse communities fared worse than hospitals in homogenous communities. Policymakers should consider community socioeconomic status when designing performance measures and incentive programs, since factors such as health literacy and community health affect hospital performance. PSNet's Primer on Health Care- Associated Infections provides an explanation of infections as one of the HACs.