The Medicare Inpatient-Only List is ending. Here’s what that means

Modern Healthcare – Wednesday, November 26, 2025
By Bridget Early

A new Medicare policy on complex surgical procedures could drive a deluge of patients to outpatient facilities. But while some view the change as a win for beneficiaries and taxpayers, others see clinical risks.

The Centers for Medicare and Medicaid Services will phase out the Medicare Inpatient-Only List over the next three years under the Hospital Outpatient Prospective Payment System final rule for 2026, which it published Friday. The first stage is allowing outpatient providers to bill for 285 musculoskeletal codes that currently are only reimbursable for inpatient hospitals.

The Inpatient-Only List, which CMS reviews annually, contains 1,731 billing codes for procedures the agency deems appropriate only in inpatient settings. CMS assigns procedures to this list when it determines their invasiveness, complexity and recovery time require inpatient care and monitoring.

Eliminating the Inpatient-Only List will enable outpatient providers such as ambulatory surgical centers to be paid for a wider array of services. CMS implemented the same policy near the end of President Donald Trump’s first term in 2020, but President Joe Biden’s administration restored the list the following year.

“CMS believes that the evolving nature of the practice of medicine allows more procedures to be performed on an outpatient basis with a shorter recovery time,” the agency in a news release Friday. “This policy allows for these services to be paid by Medicare in the hospital outpatient setting when determined to be clinically appropriate, giving physicians greater flexibility in determining the most appropriate site of service.”

The new policy has the potential to improve access to care, and to reduce federal spending because inpatient care tends to be costlier, according to proponents such as conservative think tanks the Paragon Health Institute and the Heritage Foundation.

The Ambulatory Surgery Center Association welcomed the relaxed rules. “The elimination of the Inpatient-Only List provides Medicare beneficiaries the ability to work with their surgeon to best determine the appropriate site of care,” Chief Advocacy Officer Kara Newbury wrote in an email.

Similarly, the Medical Group Management Association believes this policy will enhance access and reduce costs, said Senior Vice President of Government Affairs Anders Gilberg.

Yet the American Hospital Association stands firmly against ending the Inpatient-Only List. “The AHA opposes CMS’ proposal to eliminate the [Inpatient-Only List] over three years. Instead, the AHA recommends that CMS continue with its standard process for removing procedures from the [Inpatient-Only List],” Ashley Thompson, senior vice president of public policy analysis and development, wrote CMS on Sept. 15.

“We are concerned that, given the depth and breadth of the 1,731 procedures on the [Inpatient-Only List], it would be reckless to eliminate them all,” Thompson wrote. “We are concerned that CMS is proposing a blanket policy to essentially remove all procedures without an examination of any safety or other implications.”

The American Occupational Therapy Association sees the advantages of tossing out the list for its members who work outside of hospitals, said Heather Parsons, vice president of federal affairs. But delays in accessing therapy following an outpatient procedure could impede recovery, she said.

Some providers also worry that Medicare Advantage plans will use the new CMS policy as a justification for limiting coverage of those procedures at inpatient hospitals, said Jordan Heyman, senior director of policy and regulatory affairs for the American Association of Orthopaedic Surgeons.

It’s not a theoretical concern, Heyman said. When CMS removed total knee, hip and shoulder replacements from the list between 2018 and 2021, some Medicare Advantage insurers stopped covering them in inpatient settings, she said.

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