Venous thromboembolism (VTE) is a common complication among hospitalized patients. Suboptimal prevention practices have prompted payers to consider hospital-associated VTE as a potentially preventable condition for which financial incentives or penalties exist to drive practice improvement. The authors reviewed all cases of hospital-associated VTE at the Johns Hopkins Hospital between July 1, 2010, and June 30, 2011, that were identified by ICD-9 codes used by a state-run pay-for-performance quality improvement program. Of 157 patients identified as having developed hospital-associated, potentially preventable VTE, only 92 (58.6%) patients developed radiographically confirmed VTE that were potentially preventable. This misclassification of VTE overestimates the marginal additional treatment cost by more than $860 000 and amounts to nearly $200 000 in lost reward in one year alone. ICD-9 codes alone have extremely low positive predictive value to identify true VTE events. The authors recommend linking provision of risk-appropriate prophylaxis to VTE outcomes as a better target for performance improvement.