CMS is once again trying to eliminate the Medicare Inpatient Only (IPO) list, and this time it looks more likely to stick. For hospital executives, that would mean significant changes to revenue, capacity, and service line planning over the next few years – but it's worth a quick history lesson before making any big capital bets.
The Ins and Outs of the IPO
The IPO list was introduced in 2000 to designate which procedures must be performed in an inpatient setting to qualify for Medicare reimbursement. CMS placed procedures on the list based on their invasiveness, the underlying health of the Medicare population, and the need for at least 24 hours of postoperative monitoring before safe discharge – not a blanket assumption that outpatient settings were unsafe.
For hospitals and health systems, the IPO list effectively blocked outpatient providers from competing on some of the most complex and most expensive procedures, giving a certain measure of safety for big-ticket investments like surgical equipment and specialists.
Within 20 years, medical technology and know-how had advanced to the point that many critics viewed the IPO list as obsolete. If outpatient procedures were just as safe, they reasoned, then keeping the list was inflating costs unnecessarily.
CMS first tried to eliminate the list entirely between 2021 and 2024, removing 298 procedure codes in a single stroke – roughly 17% of codes on the list at the time. That attempt lasted barely a year. After a wave of stakeholder pushbackciting patient-safety concerns, CMS restored most of the deleted codes in 2022 and codified five specific criteria to govern future removals one at a time. The list then remained largely intact for three years.
Round 2: the 2026 Final Rule
That steady state ended with the 2026 Hospital OPPS/ASC final rule, finalized in November 2025. As before, the effort began with the immediate removal of 285 mostly musculoskeletal procedures. At the same time, more than 550 codes were added to the ASC Covered Procedures List.
Beyond the musical chairs of procedure codes shifting from one list to another, the 2026 final rule included two changes that could make it easier to achieve the goal of fully eliminating the IPO list by January 1, 2029:
- CMS dropped the five removal criteria from 2022 entirely. That means it can now work through the list systematically, rather than screening services individually.
- CMS removed a fixed expiration date for the 2-midnight rule that allows hospitals time to adjust their policies when a procedure is removed from the IPO list. Instead of a date certain, the adjustment period will now last only until CMS determines, based on claims data, that a given service has become more commonly performed outpatient.
What's Coming Next
The 2027 proposed rule, released in July 2026, continues on the path to full elimination by January 1, 2029. Of the 1,438 services still on the IPO list, CMS proposes removing 637 drawn from 11 clinical families it considers comparatively low complexity: auditory, digestive, endocrine, female genital, hemic/lymphatic, integumentary, male genital, maternity/delivery, mediastinum/diaphragm, respiratory, and urinary.
CMS is deliberately holding back the most complex families – neurological, cardiovascular, and solid organ/intestinal/islet cell transplant procedures – for a third and final phase expected in 2028 rulemaking.
What This Means for Your Organization
Attempts to eliminate the IPO list are nothing new, but this time, the mechanics look more durable. Even so, the smartest response is to plan for the end of IPO protections while maintaining flexibility in case Washington changes its mind again.
Here are 5 areas that deserve special attention in your strategic planning:
- Competitive exposure. Don't assume volume simply shifts from your bed tower to your own outpatient facilities. The expanded ASC Covered Procedures List means a growing share is contestable by independent and physician-owned surgery centers, many backed by private equity.
- Reimbursement modeling. Services moving off the IPO list shift from IPPS to OPPS or ASC payment, generally at lower rates for the same procedure. Model the payment differential ahead of each rule cycle, not after it.
- Capacity and staffing. Physician judgment still governs site of service, but payment incentives and cost-sharing will keep pushing volume outpatient. Assess OR/ASC throughput and same-day discharge protocols now for the CY 2027 target families.
- Billing and coding readiness. Every removal wave requires updated charge description masters, claims edits, and coding workflows – a recurring operational lift, not a one-time project.
- Downstream SNF effects. Procedures moving outpatient may no longer generate a qualifying inpatient stay for SNF coverage; discharge planning should build this in.
Conclusion
The IPO list has proven surprisingly resilient after a previous elimination attempt collapsed within a year. That history doesn't mean this phase-out will fail the same way, but it's a good reminder to treat the 2026-2029 timeline as directionally likely rather than guaranteed, and to sequence capital and staffing commitments accordingly.
This blog post summarizes a detailed, 17-page presentation on the future of the Inpatient Only list – and the implications for strategic planners. If you’d like to receive the full presentation at no cost, please click here to fill out the request form. Author David Meyer will send the deck via email within one business day.
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