http://www.d20pfsrd.com/gamema...holds-optional-rules

With it you take your normal max HP and divide it into quarters, when someone takes damage to drop them down a tier, they end up taking modifiers which impact people's ability to act.

She takes a –1 penalty on all attack rolls, saving throws, skill checks, and ability checks, as well as to AC and caster level.

Interesting enough, it is VERY MUCH similar to some of our negative level discussions related to injuries in the past.

Dropping the spell level of casters is a strong impact, which could be very lethal to low level casters, even with just small injuries.  Maybe that is OK, but I'll admit that it is a concern I have.

I'm considering there being an option where you focus and can drop the penalty for their condition one step less than their actual condition.  Any form of injury would knock you back, status-wise.  There would be a couple explanations.  One would be application of a healing kit, alleviating some of the wounding and starting the healing if not stressed.  Another, more quick but perhaps not as long term, could simply be the rush of adrenaline and focus.  Such an application would only last during the combat for the adrenaline rush.

I had an idea... if a players' caster level drops below the level that they can cast a memorized spell, I'm contemplating looking at the mechanics for a caster casting a spell from a scroll for which is a higher level than they can cast.  It might be somewhat relevant... they memorized it in a state where they could cast it, their memory might be somewhat faulty, but it might also still work, and it might be then leveraging an existing mechanic.  It would allow injured lower level casters to still cast their spells, but makes it perhaps a little more risky.

Another thought/question is limiting the number of tiers that are stepped through for lower level characters.  If 1HD creatures at most get Grazed for instance, perhaps at 1/2hp, taking 1 negative level; 2HD creatures might be grazed and then bloodied, at 1/2hp and 2/3hp respectively; then tiers stop at the 3HD with 1/4, 1/2, 3/4 (and that I think they also introduce the condition where they might still be conscious under 0.

Just some thoughts.