The Impact of CMS IPO List on Providers

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When the Balanced Budget Act of 1997 was implemented in 2000, the Centers for Medicare and Medicaid Services (CMS) Hospital Outpatient Prospective Payment System (OPPS) and the Inpatient Only (IPO) List were introduced. The new IPO List system classified services into payment groups for a single, predetermined payment. This list has faced scrutiny since the early 2020s with CMS proposing to eliminate the list, and it has resurfaced.

In July of 2025, the CMS proposed removing the IPO List over a three-year period, starting with 285 procedures in calendar year 2026. This article will cover what the IPO list is, what CMS has proposed, and how this could impact hospitals nationwide.

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What the IPO List Is

As part of the OPPS, the IPO list was created to cover specific surgical procedures that Medicare will only pay for if the patient is admitted as an inpatient at a hospital. Historically the IPO list has included procedures such as complex orthopedic surgeries, major vascular procedures, and certain cardiac surgeries.

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If a procedure is on the IPO list:

Medicare will not pay for it in an outpatient surgery center.
Hospitals are required to bill the procedure as an inpatient case.
Clears up potential confusion — less ambiguity, less audit risk.

What the CMS has Proposed

With the July 2025 proposal, procedures that previously required inpatient admission could now potentially be performed and billed in outpatient settings, including hospital outpatient departments or even ambulatory surgery centers.

This is not the first time the IPO list has been on the chopping block. In 2020, CMS announced its intention to retire the IPO list by 2024. CMS cited advancements in medical practice that made these inpatient procedures feasible in an outpatient setting. CMS began the prosses in 2021, but reversed course later that year.

The Big Deal with the IPO List Proposal

While CMS claims that eliminating the IPO list would result in more choices for patients, there are three major impacts that would occur.

Increased Compliance Risk

Without the IPO list for guidance on which procedures must be done as an inpatient surgery, hospitals would have to prove that it is medically necessary. This would add unnecessary steps like:

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Previously the status of these procedures were automatic if they were on the IPO list, but with the change they would require justification and be open to challenge.

Revenue Integrity Challenges

Reimbursement from CMS is different when looking at inpatient versus outpatient procedures. Inpatient procedures are paid under Medicare Severity Diagnosis Related Groups (MS-DRGs), which are bundled and often are paid at a higher rate. Outpatient procedures are paid under Ambulatory Payment Classifications (APCs), which are unbundled and typically receive lower payments.

If a procedure is moved off the IPO list hospitals may receive significantly less for the same surgery. There would also be an increased risk of status mismatch, claim rework, and DRG downgrades. Finally, some procedures could shift to ambulatory surgery centers, cutting hospital surgical volume. If the IPO list is eliminated, a large portion of hospital revenue becomes more sensitive to status decisions and audits.

Shift in Care Delivery and Site-of-Service

The IPO list dictates where surgeries take place. If it is eliminated, more procedures could and likely would move to outpatient or ambulatory surgery centers. This would lower surgical volume in hospitals, especially in orthopedic and cardiac cases. It would also potentially impact schedules, requiring operating rooms, anesthesia, post-op resources, and staffing to be moved around and potentially eliminated. This could be exacerbated as surgeons may prefer the flexibility of such outpatient sites

On the patient side, they could see outpatient care as more convenient. But it could also increase their out-of-pocket costs depending on their benefits.

Conclusion

The proposed elimination of the IPO list would affect hospitals on several fronts. Not only would hospitals lose the regulatory “guardrail” of clearly defined inpatient status, but they would have to be ready to justify every procedure as inpatient versus outpatient and run the risk of increased denials and recovery audit contractors. Revenue would become more volatile because the payment differences are so large depending on where the procedure is performed, and care delivery could be shifted from hospitals to outpatient settings.

Hospitals, especially CFOs, CMOs, UR leaders, and revenue integrity leaders, need to watch changes to the IPO list closely. The impact will be felt in revenue, compliance, and patient care – all at the same time.