Hospital morbidity data were analysed to determine their usefulness for reporting adverse events. The entire ICD-10-AM classification system was reviewed in conjunction with the Australian Coding Standards to identify external cause codes and code prefixes associated with adverse events. For the 50,712 separations registered at The Alfred from July 2000-June 2001, 4,740 external cause codes were associated with adverse events. Place of occurrence code CY92.22 was considered the best indicator of the number of separations associated with adverse events. Approximately 4% of all separations were associated with adverse events occurring during an episode of care. Results suggest that hospital morbidity data are useful for monitoring adverse events at hospital level. Reliable reporting across the health care industry requires consistent reporting requirements at state and national levels and the adoption of standard code prefixes nationally.