The Centers for Medicare and Medicaid Services (CMS) released final rules on June 1 prohibiting Medicaid federal financial participation (FFP) on state expenditures for provider-preventable, health-care acquired conditions, such as certain preventable infections and injuries that occur during an inpatient admission. This federal Medicaid rule implements section 2702 of the Affordable Care Act (ACA). It adopts Medicare’s list of preventable conditions in inpatient hospital settings under Medicare rules that have been in effect since October 2007. It also allows each state to define additional preventable conditions and settings for which each state may deny payments. The federal Medicaid rule is effective July 1, 2011 but states have until July 1, 2012 to complete any necessary changes in state Medicaid plans, rules, billing instructions, and Medicaid Management Information System (MMIS) pre-payment edits. The rule also applies to Medicaid contracts with managed care organizations. Such contracts must be amended also. The diversity of state Medicaid payment methods and systems will affect how each state designs its strategy to correctly implement the new restrictions. Twenty-one states have already pioneered exemplary practices to identify, deny, or adjust Medicaid payments to providers for various types of claims involving treatment of provider-preventable conditions. CMS has encouraged states to do so since July 2008, informed by years of superb research by the National Quality Forum (NQF), as a means to reduce unnecessary expenditures while promoting patient safety and quality of care.