Objective This study examines whether the hospital‐acquired infection (HAI) rates in hospitals in Pennsylvania of the USA have increased after reimbursement reductions, based on the Balance Budget Act of 1997. Methods This study used patient discharge data from 1994 to 2002 from the Pennsylvania Health Care Cost Containment Council and analyzed the pre‐post changes of the HAI rates in a hospital group, which had received a high level of reimbursement cuts, comparing this with a control group, using ordinary least squares regression analysis. Results Seven hundred six hospital‐year records from 89 different hospitals in Pennsylvania during 1994–2002 were examined. No statistically significant changes in the difference of the HAI rates were found between the hospital groups with high and low levels of financial impacts from the reimbursement cut in the short or long run. Conclusions After the implementation of the Medicare reimbursement cut by the Balance Budget Act of 1997, the HAI rates among hospitals in Pennsylvanian in the USA did not statistically significantly increase. The results suggest that, in cost‐saving healthcare reform, hospitals may not operate a simple cost‐quality trade‐off. Copyright © 2013 John Wiley & Sons, Ltd.