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To estimate the effect of preventing postoperative complications on readmission rates and costs.Policymakers are targeting readmission for quality improvement and cost savings. Little is known regarding mutable factors associated with postoperative readmissions.Patient records (2005–2008) from the American College of Surgeons National Surgical Quality Improvement Program (ACS-NSQIP) were linked to Medicare inpatient claims. Risk factors, procedure, and 30-day postoperative complications were determined from ACS-NSQIP. The 30-day postoperative readmission and costs were determined from Medicare. Occurrence of a postoperative complication included surgical site infections and cardiac, pulmonary, neurologic, and renal complications. Multivariate regression models predicted the effect of reducing complication rates on risk-adjusted readmission rates and costs by procedure.The 30-day postoperative readmission rate was 12.8%. Complication rates for readmitted and nonreadmitted patients were 53% and 16% (P < 0.001). Patients with a postoperative complication had higher predicted probability of readmission and cost of readmission than patients without a complication. For the 20 procedures accounting for the greatest number of readmissions, reducing ACS-NSQIP complication rates by a relative 5% could result in prevention of 2092 readmissions per year and a savings to Medicare of $31.0 million per year. Preventing all ACS-NSQIP complications for these procedures could result in prevention of 41,846 readmissions per year and a savings of $620.3 million per year.This study provides substantial evidence that efforts to reduce postoperative readmissions should begin by focusing on postoperative complications that can be reliably and validly measured. Such an approach will not eliminate all postoperative readmissions but will likely have a major effect on readmission rates.