doctors in surgery

Eliminating the CMS IPO List will Continue to Complicate Hospital Stays

For an update on this issue, please read: CMS reverses course in inpatient only list


The Centers for Medicare & Medicaid Services (CMS) has begun to dismantle its inpatient only list, which has directed the level of care for more than 1700 procedures for physicians and hospitals since 2000. CMS said the move gives physicians more options when performing these procedures. However, its elimination is more likely to complicate matters regarding level of care status for treating physicians and utilization review managers and eventually may open the door for insurers to deny inpatient care for many more procedures in the future.

Hospitals around the country are bleeding funds1 thanks to a pandemic that has stretched beyond a year. The pandemic has drained hospital resources and staff as well as significantly decreased its elective surgery income. Now, as hospitals work to recover financially, they are faced with a move by CMS that could potentially keep the drains open well into the future. As the CMS begins to phase out its inpatient only list, which started with 300 procedures in January 2021,2 hospitals could see more procedures moved to an outpatient level of care or loss of the procedure altogether to ambulatory surgery centers (ASCs). Most commercial insurance providers customarily require prior authorization of all elective inpatient stays. When the CMS inpatient only list is wholly eliminated, and it expands the ASC it reinforces the fact that “Both CMS (for Medicare beneficiaries) and commercial payers have historically pushed for the use of ASCs as an alternative, lower-cost site of care.”3

When making its final decision to phase out the inpatient only list, CMS Administrator Seema Verma said the move “allows doctors and patients to make decisions about the most appropriate site of care, based on what makes the most sense for the course of treatment and the patient without micromanagement from Washington.’” CMS also has said “The rule ensures that newly removed services utilized by inpatients cannot be denied on a claim — giving providers time to update their systems and procedures to come into compliance.”4

“In making the change to eliminate the list, CMS said, ‘We have concluded that we no longer believe there is a need for the IPO list in order to identify services that require inpatient care.’ ‘Instead, we agree with past commenters that the physician should use his or her clinical knowledge and judgement together with consideration of the beneficiary’s specific needs, to determine whether a procedure can be performed appropriately in the hospital outpatient setting or whether inpatient care is required for the beneficiary, subject to the general coverage rule requiring that any procedure be reasonable and necessary. We believe that this change will ensure maximum availability of services to beneficiaries in the outpatient setting.’”5

Yet American Academy of Orthopaedic Surgeons President Kristy Weber, M.D., voiced concern in a letter to CMS about, “Commercial payers attempts to interpret CMS’ rules to restrict patient access to appropriate care settings on the basis of cost alone. Forcing care to an outpatient or ASC setting when not appropriate.” She went on to say “AAOS requests that CMS refrain from removing any procedures from the IPO list until the issues that surfaced with the removal of TKA are fully resolved. …Considering the confusion precipitated by the removal of total knee arthroplasty (TKA) from the inpatient only (IPO) list in 2018, it is troubling to imagine the ways this change may be misconstrued by payers.” 6,7

Since the high-profile 2019 removal of Total Hip Arthroplasty and the earlier removal of the Total Knee Arthroplasty from inpatient only list, major orthopaedic societies expressed significant concern about the move. Now larger organizations including the American Hospital Association and AAOS have expressed disappointment with the elimination of the list altogether.

“The services on the inpatient-only list are often complex and complicated surgical procedures that require the close care and coordinated services provided in a hospital inpatient setting,” Tom Nickels, executive vice president for the AHA, said in a written statement.8

AHA made it clear its position against the proposed elimination of the inpatient-only list over a three-year period.
“Given the depth and breadth of the more than 1,700 procedures on [the inpatient-only list], it would be premature and myopic to adopt such a policy,” according to the letter. “First and foremost, the AHA says that the removal of the inpatient-only list poses a threat to patient safety as the procedures listed were placed on the list because they are complicated and/or invasive, requiring potential multi-day hospital stays. Secondly, the AHA says that the list’s elimination would pose a real and present financial threat to the security of hospitals. ‘It would be unconscionable to finalize this policy when the financial impact of the COVID-19 public health emergency (PHE) has already been devastating for hospitals—and there still remains an uncertain future as to the path of the pandemic,’ the letter says, recommending instead that CMS continue with its standard process of removing procedures from the list when it is deemed that they are safe to conduct in the outpatient setting.’”9

Working with hospitals to overturn inpatient denials for various procedures, AppriseMD case review physicians have seen how complicated hospital admission procedures are for treating physicians and expect the elimination of this list will continue to provide more work for utilization review teams having to address denials from payers. When CMS began to remove procedures from the list it “attempted to address some of these concerns (at least for TKA) in their MLN Article where CMS clearly reiterated its position that ‘removal from the IPO does not mean that all TKAs must be performed on a hospital outpatient/observation basis nor does it mean that there is a presumption about where TKAs are performed.’ The overall wording and positions statements from both CMS and the societies is again consistent with the premise that outpatient procedures are most appropriate in an ideal patient when performed in a facility and by a surgical team specifically equipped for this type of procedure.10 Physicians will be left to make that decision.
“CMS has stated that if the list is eliminated, the physician’s designation of the admission status of all surgeries will be based on the two-midnight rule that was adopted in October 2013. That rule states that the admission status of a patient should be based on three factors: the two-midnight expectation, the two-midnight benchmark, and the case-by-case exception for patients with an expected length of stay of one midnight. These guidelines have been in place for total knee replacement since 2018 and continue to cause confusion and consternation amongst physicians and utilization review staff. It is not yet known if CMS will release additional guidance. This means that the physician will be asked pre-operatively to make a determination if the patient is expected to need two or more midnights in the hospital for care; if the outpatient who was expected to need fewer than two midnights of care now needs a second midnight for medically necessary care; or if there are specific reasons why one midnight of care is expected, but inpatient admission is warranted.” 11

The confusion referred to resulting from the removal of total knee arthroplasty (TKA) from the inpatient only (IPO) list in 2018, revolves around questions such as what additional resources are needed for patients to receive safe surgery in an outpatient setting, how a case-by-case consideration is properly applied, what are the details of the denial exemption that CMS put in place, to name a few that are key.

The RAC Monitor tried to clear up some of this confusion in a published piece about the myth, truths and fact around the demise of the IPO list. In addition to clarifying these types of questions above, the article went deeper to defunct the myth that, “The physician can just ask the case manager to order the right status.” It went on to share that, “Medicare law only allows a provider licensed in the state, and with privileges to admit patients to a hospital, to designate and order the admission status of a patient. Case managers, utilization review specialists, and physician advisors can guide the physician, based on the available clinical details, but it is ultimately the physician’s obligation to order the correct status. The physician should consider the complexity of the planned surgery, the patient’s medical and psychosocial history, the time of day, and the expected peri-operative course in making the decision.”11 Thus the move will continue to place more burden on treating physicians to make the right decision both when it comes to care for his or her patient and payment for a given procedure.

Of further note, is that Dr. Weber in her letter to CMS, pointed that in addition to opposing the elimination of the IPO list the AAOS was not in favor of increasing the prior authorization burden for certain outpatient procedures as a further cost cutting approach. Her letter states, “Despite the increasing costs of health care spending in the United States, AAOS does not support the implementation of enhanced prior authorization requirements as a means for controlling spending. Prior authorization processes are burdensome for physicians and undermine their training and professional judgment and create critical delays in the care of patients. The proposals outlined in this rule for new prior authorization processes for certain covered outpatient procedures suggest additional burdensome requirements, including provisional affirmations for procedures that will certainly lead to greater confusion when claims are denied.”7

Perhaps one silver lining in the elimination of the list is that CMS is seemingly “not allowing denials for two years so we can admit everyone as inpatient.” However, the RAC Monitor also clarified that fact stating, “Although CMS has proposed to prohibit status determination audits by the Recovery Audit Contractors (RACs) for two years after a surgery is removed from the list, the Quality Improvement Organizations (QIOs) will be performing educational audits, and CMS will be monitoring claims data for evidence of gaming or intentional avoidance of compliance with regulations,”11 leaving physicians and UR managers scratching their heads as to how to proceed.

Clarifying the exemptions

“For procedures removed from the IPO list, CMS will ‘indefinitely’ exempt them from: Site-of-service claim denials under Medicare Part A, Eligibility for referrals to recovery audit contractors (RACs) for noncompliance with the 2-midnight rule, and RAC reviews for ‘patient status.’” Those exemptions “will last until we have Medicare claims data indicating that the procedure is more commonly performed in the outpatient setting than the inpatient setting,” CMS has stated.12


In spite of the burden placed on patients, physicians, hospitals and health systems, by eliminating the IPO list, the tide has already turned with the approval of the final rule. The important steps that your health care organization can take to be most effective in facing this challenge include:

  • Educating your team on understanding the details of the changes beyond the procedures removed from the IPO list to include items such as the case-by-case consideration process and the denial exemptions currently in place.
  • Analyzing and addressing the implications of this change to your organization both financially and in required processes.
  • Effect on your participation in Bundled Payment Programs.
  • Impact on your physicians with preop evaluations and documentation.
  • Impact on your patients considering their individual psychosocial needs, preparing them preoperatively and providing resources for post-operative care such as SNF placement.
  • Investigating the capabilities of the facilities in your own network and what resources are needed to provide the broader model of care.
  • Understanding and preparing for the current approaches and changes of your common commercial carriers and Medicare replacement plans with regards to IP vs OP surgery protocols (Some may already be even farther down the road than Medicare).

These changes, once completely implemented beyond the exemption period, will likely mean your organization will experience a greater number of inpatient payer denials in their attempt to reduce cost even when this may be a short-sighted approach. Unless you prepare by taking steps now to understand and address the nuances of this change, your efforts may fall short. Leveraging utilization review strategies and utilizing Peer-to-Peer reviews to prevent and overturn denials is critical to thriving in this ever-evolving model of an already complicated system.

What the change means
“To illustrate this using 2020 payment rates from the Medicare Inpatient Pricer for total joint replacement, a common surgery that can be performed as both inpatient or outpatient, a surgical specialty hospital in Arkansas would be paid $10,660 for outpatient surgery and $10,980 for inpatient surgery, a 3-percent difference. A suburban Chicago hospital without a teaching program would be paid $12,360 for outpatient surgery and $13,594 for inpatient surgery, a 10-percent difference, and a large teaching hospital in San Francisco would be paid $17,539 for outpatient surgery and $27,548 for inpatient surgery, a 57-percent difference. It is clear that the revenue implications vary depending on the hospital characteristics, so for some, ensuring that the status determination is made accurately can have significant revenue implications.” 11



  1. King, Robert. “Hospitals could lose between $53B and $122B this year due to pandemic.” Fierce Healthcare Feb. 24, 2021 
  1. Dyrda, Laura. “266 orthopedic procedures CMS may remove from the inpatient-only list in 2021.” Becker’s ASC Review Aug. 6, 2020
  2. Kehayes, I. Naya, et al. “Total Hip Arthroplasty: CMS 2021 OPPS Proposed Rule.” ECG Management Consultants Oct. 26, 2020
  3. “OPPS Final Rule Eliminates Inpatient Only List.” AAPC Dec. 23, 2020
  4. Dyrda, Laura. “What CMS’ proposal to eliminate the inpatient only list means for ASCs.” Becker’s ACS Review Aug. 10, 2020.
  5. Young, Robin. “AAOS Slams CMS’ Rule to Exclude Hip Replacement from Inpatient Only List.” Orthopedics This Week. Nov 13, 2019.
  6. Weber, MD, FAAOS, Kristy L. “To Seema Verma, MPH, Administrator, Centers for Medicare & Medicaid Services.” Sept. 27, 2019.
  7. Daly, Rich. “Medicare phases out the inpatient-only list, backs off further 340B payment cuts.” Healthcare Financial Management Association Dec. 4, 2020.–backs-off-further-3.html
  8. News: AHA opposes inpatient-only list elimination, applauds star rating revamp in comments to CMS.” ACDIS 14 Oct. 8, 2020.
  9. Outpatient Arthroplasty Surgery: A Position Paper from AppriseMD.” AppriseMD. 2020
  10. Hirsch, Ronald. “The Demise of the Medicare Inpatient-Only List – The Myths and Facts.” RAC Monitor Aug. 19, 2020.
  1. Daly, Rich. “Medicare phases out the inpatient-only list, backs off further 340B payment cuts.” Healthcare Financial Management Association Dec. 4, 2020.–backs-off-further-3.html


Additional Sources

Healthcare Dive “CMS proposes eliminating inpatient-only list”

“Surgery Migration Is Accelerating. Do You Have an ASC Plan?”



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