This article describes the development of Potentially Preventable Complications (PPCs), a new method that uses a present on admission (POA) indicator to identify in-hospital complications among secondary diagnoses that arise after admission. Analyses that used PPCs to obtain risk-adjusted complication rates for California hospitals showed that (1) the POA indicator is essential for identifying complications, (2) frequency of complications varies by reason for admission and severity of illness (SOI), (3) complications are associated with higher hospital charges, longer lengths of stay, and increased mortality, and (4) hospital complication rates tend to be stable over time.