The objective was to investigate the effect of admission health status on hospital adverse events and added costs. Secondary data were from merged administrative and clinical sources for Mayo Clinic Rochester, Minnesota hospital discharges in 2005 (N = 60 599). This was a retrospective cross-sectional study of the effect of demographics, diagnosis group, comorbidity, and admission illness severity on adverse events, incremental costs, and length of stay (LOS) using the Agency for Healthcare Research and Quality Patient Safety Indicators and provider-reported events with harm. Estimates are derived from generalized linear models. Admission severity increased the likelihood of all types of adverse events (7.2% per unit acute physiology score for any event); 7 specific comorbidities were associated with increased events and 2 with decreased events. High admission severity increased incremental costs and LOS. Selected comorbidities increased incremental LOS but had no significant effect on incremental costs. Adverse event reporting should incorporate comorbidity and admission severity. Reimbursement incentives to improve patient safety should consider adjustment for admission health status.