CMS Proposes Elimination of Inpatient-Only List in Sweeping OPPS/ASC Proposed Rule

The Centers for Medicare & Medicaid Services (CMS) issued its Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Proposed Rule for the 2026 fiscal year this week, and in doing so said that the Inpatient-Only List (IPO) should be phased out over the course of the next three years.

The move will reportedly begin with the removal of 285 mostly musculoskeletal procedures in 2026. It drew immediate industry reaction, along with another proposal that payment for drug administration services in grandfathered outpatient departments be made at just 40 percent of the OPPS rate.

“We oppose the proposal to expand ‘site-neutral’ cuts and eliminate the inpatient-only list, as both policies fail to account for the real and crucial differences between hospital outpatient departments and other sites of care,” American Hospital Association (AHA) Senior Vice President of Public Policy Analysis and Development Ashley Thompson said in a statement. “Studies show hospital outpatient departments are more likely to serve Medicare patients who are sicker, more clinically complex, and more likely to be disabled or living in poorer, rural communities than patients treated in independent physician offices.”

The IPO, created by CMS in 2000, features a fluctuating number of 1,700 to 1,800 procedures deemed too serious and complex to perform on an outpatient basis, owing to the risk for complications, infection, and other issues. Medicare only reimburses providers for the procedures on the List when they are performed on an inpatient basis.

The proposed IPO elimination sat in the middle of CMS’s press release on the rulemaking, and was outlined in pages 450-463 of the 913-page Proposed Rule. The press release said the Rule’s proposals were meant to “modernize hospital payments, strengthen transparency, and put patients back in control.”

“We are advancing our mission to protect Medicare and its beneficiaries, fight fraud, and empower patients with access to the latest innovations, all while holding providers accountable and ensuring taxpayer dollars are spent wisely,” CMS Administrator Mehmet Oz said in a statement. “These reforms expand options and enforce the transparency Americans deserve to ensure they receive high-quality care without hidden costs.”

“We are building on our efforts to modernize Medicare payments by advancing site neutrality, simplifying hospital billing, and ensuring real prices – not estimates – are available to patients,” added Chris Klomp, Deputy Administrator and Director of the Center for Medicare at CMS. “These changes help make hospital care more predictable, accountable, and affordable.”

Klomp’s remarks alluded to the Proposed Rule’s measure to require hospitals “to post real, consumer-usable prices, not estimates, and provide data in standardized formats that allow patients to understand what their care will actually cost,” officials said. Hospitals that fail to comply could face civil monetary penalties, according to CMS.

The Proposed Rule’s language outlined the rationale behind the decision to do away with the IPO.

“While we agreed with commenters in previous rulemakings that the IPO list was necessary, and that it would be inappropriate for us to establish payment rates for those services under the OPPS … we have reconsidered the various comments from interested parties requesting that we eliminate the IPO list, and reevaluated the need for CMS to restrict payment for certain procedures in the hospital outpatient setting,” it read. “As a result of that reconsideration, we no longer believe there is a need for the IPO list to identify services that require inpatient care. We agree with past commenters that the physician should use clinical knowledge and judgment, together with consideration of the beneficiary’s specific needs, to determine whether a procedure can be performed appropriately in a hospital outpatient setting or whether inpatient care is required for the beneficiary, subject to the general coverage rules requiring that any procedure be reasonable and necessary. We believe that this change would ensure maximum availability of services to beneficiaries in the outpatient setting.”

A primary reason, the Proposed Rule indicated, was medical and technological advancements made in the quarter-century since the IPO was introduced.

“We acknowledged in the CY 2000 OPPS/ASC final rule with comment period that we believed that emerging new technologies and innovative medical practice were blurring the difference between the need for inpatient care and the sufficiency of outpatient care for many services … (and) we also stated in the CY 2001 OPPS/ASC interim final rule with comment period that, over time, given advances in technology and surgical technique, many of the procedures that were on the IPO list at the time may eventually be performed safely in a hospital outpatient setting,” the Rule read. “Specifically, we stated that, insofar as advances in medical practice mitigate concerns about these services being furnished on an outpatient basis, we would be prepared to remove them from the IPO list and provide for payment under the OPPS (65 FR 67826). Over the course of the last 25 years, these expectations have been borne out.”

The AHA also pushed back on the Proposed Rule’s plan to implement a 2-percent annual reduction to the OPPS conversion factor as a mechanism for providers to more quickly repay the government for $7.8 billion in increased payments they received for non-drug services in 2018-2022.

“We are also concerned with CMS’ proposal to claw back billions of dollars from hospitals at a far faster rate than originally promised,” Thompson said. “It is important to remember that this claw back punishes 340B hospitals for the agency’s own mistake in implementing a policy that a unanimous Supreme Court held to be unlawful. Doubling down on that unlawfulness, the proposed recoupment is both illegal and unwise, and it should not be finalized.”

The proposed rule will be open for public comment for 60 days following its publication in the Federal Register and can be viewed online at https://www.federalregister.gov/d/2025-13360. CMS encourages patients, providers, and stakeholders to review and submit feedback.

A fact sheet with additional information is available at https://www.cms.gov/newsroom/fact-sheets/calendar-year-2026-hospital-outpatient-prospective-payment-system-opps-and-ambulatory-surgical.

Mark Spivey is a national correspondent for RACmonitor and ICD10monitor who has been writing and editing material about the federal oversight of American healthcare for nearly 20 years. He can be reached at mcspivey33@gmail.com.