Aiming to economize and modernize US government-funded healthcare programs, the Centers for Medicare and Medicaid Services (CMS) proposed significant regulatory adjustments to Medicare in 2025 (1, 2). In addition to eligibility requirements and prescription medication rules, the adjustments include changes to Medicare coverage of outpatient procedures (3, 4). Finalized by CMS in November, upcoming changes to coverage, hospital payment, and prior authorization stand to significantly impact outpatient procedure policies for patients and providers (4, 5).
First, CMS intends to “control unnecessary increases in the volume of outpatient services” by applying new changes to relevant hospital policies and payments (3). Crucially, the Inpatient-Only (IPO) List—a 25-year-old safety-focused regulation that has required certain complex procedures to be performed in inpatient settings in order to qualify for Medicare coverage—is set to be phased out over the next three years (2, 6). By repealing the IPO, CMS aims to nudge hundreds of traditionally inpatient procedures, such as surgical and anesthesia care for cardiovascular and neurological indications, into outpatient settings (6, 7).
In 2026, the phase-out will begin with the removal of 286 procedures from the IPO List, though CMS will offer a “two-midnight” exception to facilitate a smooth transition (6, 8). Similarly, CMS modified the Covered Procedure List (CPL) for ambulatory surgical centers (ASCs) (3, 6). With 5 fewer eligibility criteria and 289 additional covered procedures, the updated CPL also aims to allow traditionally inpatient procedures to be performed in outpatient settings under Medicare coverage, though ASCs will also face expanded prior authorization requirements (6, 7).
Second, upcoming “site-neutral” Medicare changes carry significant financial implications for outpatient facilities (6). Historically, compared to ASCs, hospitals have received higher Medicare payment rates for outpatient services to account for ostensibly greater costs. However, in 2026, CMS plans to implement the same rate increase of 2.6% for hospital outpatient departments and ASCs alike (3, 6). Additionally, for the first time in years, rates for physicians will modestly increase, though benefits will be counterbalanced by practice expense cuts, along with a -2.5% “efficiency adjustment” to account for presumed technological improvements in time, labor, and experience (4, 9, 10). Overall, site-neutral Medicare changes effectively redirect financial support from outpatient hospital facilities toward private practices (10).
Ideally, these changes may increase flexibility and decrease costs by allowing providers to consider more options for procedure settings (7). However, opponents argue that these shifts may cause administrative burden and financial stress, while also motivating private insurers to unduly scrutinize inpatient procedure claims, simultaneously harming hospitals by channeling payments and patients to private practices (6, 8). In fact, analyses predict that providers working in private practices will see payments increase by an average of 4%—meanwhile, hospital providers may see cuts of at least 7% (11).
In response, several provider organizations have begun lobbying CMS, but in the meantime, facilities and providers should prepare to adapt to these significant upcoming changes (4, 12). Specifically, experts recommend that outpatient providers arrange prior authorization processes, consider staffing and resource implications of changing procedure settings, and anticipate changes in patient volume as a result of changes to Medicare coverage, while communicating logistic and financial impacts to patients (13, 14).
References
1: Centers for Medicare and Medicaid Services (CMS). 2025. CMS Proposes Bold Reforms to Modernize Hospital Payments, Strengthen Transparency, and Put Patients Back in Control. CMS Newsroom. url: https://www.cms.gov/newsroom/press-releases/cms-proposes-bold-reforms-modernize-hospital-payments-strengthen-transparency-and-put-patients-back
2: Centers for Medicare and Medicaid Services (CMS). 2025. CMS Empowers Patients and Boosts Transparency by Modernizing Hospital Payments. CMS Newsroom. url: https://www.cms.gov/newsroom/press-releases/cms-empowers-patients-boosts-transparency-modernizing-hospital-payments
3: Centers for Medicare and Medicaid Services (CMS). 2025. Calendar Year 2026 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center Final Rule (CMS-1834-FC). CMS Payment Rules. url: https://www.cms.gov/newsroom/fact-sheets/calendar-year-2026-hospital-outpatient-prospective-payment-system-opps-ambulatory-surgical-center+
4: American Hospital Association (AHA). 2025. CMS increases Medicare hospital outpatient department payment rates by 2.6% in CY 2026. AHA News. url: https://www.aha.org/news/headline/2025-11-21-cms-issues-cy-2026-opps-final-rule
5: Department of Health and Human Services, Centers for Medicare and Medicaid Services (CMS) & Office of the Secretary. 2025. Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems; Quality Reporting Programs; Overall Hospital Quality Star Rating; Hospital Price Transparency; and Notice of Closure of a Teaching Hospital and Opportunity To Apply for Available Slots (42 CFR Parts 410, 412, 413, 415, 416, and 419). Federal Register. url: https://public-inspection.federalregister.gov/2025-20907.pdf
6: Halleman, S. & Olsen, E. 2025. Medicare targets site neutrality, price transparency in hospital outpatient rule. Healthcare Dive. url: https://www.healthcaredive.com/news/medicare-hospital-outpatient-2026-site-neutrality-price-transparency-proposed/753176/
7: Casey, L. 2025. Medicare’s Inpatient Only List to end per the 2026 Final Rule. IMO Health. url: https://www.imohealth.com/resources/medicares-inpatient-only-list-faces-uncertainty-yet-again/
8: Adventist Health Policy Association (AHPA). 2025. Elimination of Inpatient-Only List Could Accelerate Outpatient Shift. AHPA News. url: https://adventisthealthpolicy.org/elimination-of-inpatient-only-list-could-accelerate-outpatient-shift
9: California Medical Association (CMA). 2025. CMS finalizes significant changes in 2026 Medicare Physician Fee Schedule. CMS Newsroom. url: https://www.cmadocs.org/newsroom/news/view/ArticleId/51050/CMS-finalizes-significant-changes-in-2026-Medicare-Physician-Fee-Schedule
10: O’Reilly, KB. 2025. Physicians will see Medicare payments rise in 2026. AMA Medicare & Medicaid. url: https://www.ama-assn.org/practice-management/medicare-medicaid/physicians-will-see-medicare-payments-rise-2026
11: Pifer, R. 2025. Doctors slam specialty cuts in 2026 Medicare pay proposal. Healthcare Dive. url: https://www.healthcaredive.com/news/doctors-slam-medicare-cuts-2026-fee-schedule/760106
12: Congress of Neurological Surgeons (CNS). 2025. Physician Organizations Urge Congress to Halt 2026 CMS Cuts to Facility-Based Practice Expenses. CNS Legislative Affairs. url: https://www.cns.org/advocacy/legislative-affairs-detail/physician-organizations-urge-congress-to-halt-2026
13: Henry, T.A. 2025. What to expect from the 2026 Medicare Physician Fee Schedule. AMA Medicare & Medicaid. url: https://www.ama-assn.org/practice-management/medicare-medicaid/what-expect-2026-medicare-physician-fee-schedule
14: Willis, L. 2025. Get Ready for 2026 Medicare Reimbursement Changes. AAPC Industry News. url: https://www.aapc.com/blog/93784-get-ready-for-2026-medicare-reimbursement-changes/?srsltid=AfmBOorwFDgRFT2nBkDLV0nnX0W6gr-K8dxIpiyMsboItU1doPLmpQmD
