The shift of musculoskeletal procedures from inpatient to outpatient alone is potentially a multi-billion-dollar opportunity for ambulatory surgery centers (ASCs).
That’s according to a recent analysis from Trilliant Health, a health care data and analytics company.
“With the removal of the [IPO] list, we’re tracking the potential for accelerated migration to the outpatient setting, which has the potential to increase care value somewhat broadly, but also has very real implications for hospital revenues,” Alli Oakes, vice president and chief research officer at Trilliant Health, told ASC News. “And we expect those revenues to decrease.”
The U.S. Centers for Medicare & Medicaid Services (CMS) finalized a proposal to do away with the IPO list in November. The elimination of the IPO list will be a phasing out over three years, starting in 2026.
To understand what the IPO list phaseout could mean, Oakes and her colleagues at Trilliant Health used national all-payer claims data to determine how often individual surgeries occur, connecting procedure codes (CPTs) to inpatient and outpatient payment categories. Pulling payment amounts directly from the latest Inpatient Prospective Payment System (IPPS) and Outpatient Prospective Payment System (OPPS) rules, the team modeled various what-if scenarios to explore the pace and extent of migration.
Focusing on 285 mostly musculoskeletal codes removed from the CMS IPO list this year, the analysis found a significant gap between inpatient and outpatient reimbursement: an average of $16,344 per case.
“While this is definitely a challenge for hospitals, it presents a major opportunity for ASCs,” Oakes explained. “This opens up millions, if not potentially billions, in revenue that ASCs were previously unable to capture.”
While the analysis looked at 285 musculoskeletal codes shifting from inpatient to outpatient, 271 procedures were also allowable in ASCs.
Another major takeaway from the analysis: For every 20% shift in volume from inpatient to outpatient, hospital reimbursement drops by over $1 billion.
“If just 20% go to the outpatient setting and are reimbursed at that lower outpatient rate, revenue drops by over $1 billion,” Oakes said. “And with each 20% increase in migration to the outpatient setting, it’s another $1 billion in revenue lost.”
For some procedures, the reimbursement difference is much higher than the overall average of $16,344, too.
For example, payments for sternum procedures can amount to more than $50,000 per case.
However, overall impact depends on volume as well, Oakes noted.
“Nationally, some of the biggest [hospital] revenue losses were for things like treatment of thigh fractures, some spinal procedures and revisions of previous joint replacements – procedures that are both high volume and have a high differential between the inpatient and outpatient negotiated rate, which leads to a major revenue hit,” Oakes said.
Using 2024 inpatient Medicare data for volumes, Trilliant’s mapped various IPPS and OPPS reimbursement scenarios for the 2026 IPO List removals. Total reimbursement would be $9.3B under a fully inpatient scenario (100% IPPS/0% OPPS) and $4.0B under a fully outpatient scenario (0% IPPS/100% OPPS), a difference of $5.3B. At an 80/20 inpatient-to-outpatient distribution, total reimbursement would be $8.2B, while a 20/80 inpatient-to-outpatient distribution would yield $5.1B in reimbursement. Image courtesy of Trilliant Health.
Overall, Trilliant’s analysis underscores the full impact of regulatory tailwinds that are fundamentally reshaping surgical care economics. And it’s not just the elimination of the IPO list changing the landscape.
Other examples include congressional and CMS pushes for site-neutral payment reform, CMS’ new mandatory TEAM model and more.
“These changes are real,” Oakes said. “ASCs should be looking at the list and asking which procedures they can reasonably perform in a safe, high-quality environment.”
What’s more, to help ASC stakeholders understand how quickly the musculoskeletal-procedures opportunity may materialize, Trilliant looked for past examples of procedures migrating from inpatient to outpatient.
There was the 2018 removal of total knee arthroplasty (TKA) from the IPO list, for instance, plus the 2020 removal of total hip arthroplasty (THA).
For context, CMS under the first Trump administration began phasing out the IPO list. The administration had planned on a wholesale phaseout back in 2020, but the Biden administration changed course in 2022, reinstating the IPO list and removing hundreds of codes that could have been added to the ASC Covered-Procedures List (CPL).
“Why does all of this matter? So historically, the [IPO] list is a list of procedures – around 1,700 or so – where … CMS was only able to reimburse for those procedures if they were performed in the inpatient setting,” Oakes said. “The claim was that that list existed for sort of safety reasons, quality reasons – that sort of thing. But also what it did was it insured hospitals were receiving a certain amount of patient volume and a certain amount of revenue each year tied to those services.”
Now that the tides have turned again definitively, history offers a window into what to expect, Oakes continued.
The total joint surgery migration “happened quickly,” she said, citing an inpatient volume drop of 85% for TKA and 66% for THA procedures by 2024.
“This is not to say that every procedure that’s being removed from the inpatient only list will drop by that much within a four- to five-year period, but it’s something that hospitals should be preparing for,” Oakes said. “On the flip side, it’s something that ASCs should be looking at — figuring out ‘what can we reasonably provide in a safe and high-quality environment?’”
This shift – and the opportunities for ASCs – extends beyond traditional Medicare as well.
In Trilliant’s analysis, Oakes and her colleagues pointed out that commercial payers and Medicare Advantage (MA) plans typically follow what fee-for-service Medicare does.
“The policy also introduces potential reimbursement changes for payers beyond Traditional Medicare,” Trilliant’s analysis explained. “Commercial payers and Medicare Advantage plans have historically relied on the IPO list as a reference point for coverage determinations and site-of-service requirements. These payers are likely to accelerate their own shifts toward outpatient care, amplifying the volume migration beyond Traditional Medicare.”
