Objective To assess whether use of the AHRQ Patient Safety Indicator (PSI) composite measure versus modified composite measures leads to changes in hospital profiles and payments. Data Sources/Study Setting Retrospective analysis of 2010 Veterans Health Administration discharge data. Study Design We used the AHRQ PSI software (v4.2) to obtain PSI‐flagged events and composite scores for all 151 hospitals in the database (n = 517,814 hospitalizations). We compared the AHRQ PSI composite to two modified composites that estimated “true safety events” from previous chart abstraction findings: one with modified numerators based on the positive predictive value (PPV) of each PSI, and one with similarly modified numerators but whose denominators were based on the expected fraction of PSI‐eligible cases that remained after removing those PSIs that were present‐on‐admission (POA). Principal Findings Although a small percentage (5–6 percent) of hospitals changed outlier status based on modified PSI composites, some of these changes were substantial; 30 and 19 percent of hospitals changed ≥20 ranks after adjustment for PPVs and POA flags, respectively. We estimate that 33 percent of hospitals would see a change of at least 10 percent in performance payments. Conclusions Changes in hospital profiles and payments would be substantial for some hospitals if the PSI composite score used weights reflecting the relative prevalence of true versus flagged events.