Why site-neutral payment does not mean eliminating the IPO list

During my tenure at the Medicare Payment Advisory Commission (MedPAC), the Commission recommended that Medicare implement site-neutral payment for certain services and procedures in defined circumstances. The premise was sound at the time, but ideas about this approach have evolved in recent years — to the point that it may have led CMS to the decision to eliminate Medicare’s list of inpatient-only (IPO) services.

The original goal of site-neutral payment

The initial premise for site-neutral payments was that Medicare should pay the same rate for a service wherever it is delivered, despite different payment systems indicating that the payment should vary by site of service. For example, under current law, Medicare payments for a simple nerve injection performed in a hospital, which are determined by the hospital outpatient prospective payment system (OPPS), are higher than payments for the procedure performed in a physician’s office, which are determined by the physician fee schedule.

While stakeholders might reasonably disagree on the premise, MedPAC’s motivation was to help Medicare be a prudent payer, based on the idea it can ill-afford to pay $100 for a service that can be safely and widely delivered for $50.

These points are important. MedPAC’s recommended services for site-neutral payment had to have been provided the majority of the time in physicians’ offices (thus safely and widely available) and no more than a small share of the time in conjunction with emergency services (so as not to constrain access to critical care by setting payment rates too low).

MedPAC’s statement of the policy goal, explanation of the analytic basis and financial impacts and discussion of patient safety guardrails were compelling enough in informing Congress’ passage of a limited version of site-neutral payments in the Balanced Budget Act of 2015.^a

In subsequent years, CMS expanded the policy and, most recently, has proposed an additional expansion in this year’s OPPS proposed rule.^b

The new focus on the IPO list

In 2025, CMS took the concept of site-neutrality in a perplexing different direction by resurrecting a proposal under the first Trump administration to eliminate Medicare’s IPO list.^c

 Historically, this was a list of procedures deemed risky to perform on an outpatient basis (think “heart transplant” as a quintessential example). Medicare’s standing policy was not to prohibit these procedures from being performed in outpatient settings, but it absolutely would not pay for them in those settings. Moving procedures off the IPO list involved a deliberative and analytically based process that acknowledged advances in medical practice, technique and technology.

Now, however, CMS is eliminating the IPO list in broad strokes over a three-year period. Hundreds of procedures were removed in 2025, and hundreds more are proposed for removal this year, with the entire IPO list to be eliminated by Jan. 1, 2029.

CMS offers almost no information about its clinical deliberations behind the removal of each tranche of services, nor does it explain how procedures removed from the IPO list were assigned ambulatory patient classifications (APCs). Neither does CMS provide any information comparing costs for these services under the OPPS with their inpatient costs.

By contrast to MedPAC’s prior analytic approach to site-neutral payments, CMS’s recent proposed rule suggests the agency is eliminating the IPO list on philosophical grounds:

“ …. from the beginning, we have emphasized our expectation that, in every case, the physician or surgeon and hospital will exercise their professional judgment and assess the risk of the procedure or service to the individual patient, taking into account the site of service and act in that patient’s best interest. … [W]e rely on the practitioner’s judgment to determine on a patient-by-patient basis whether or not a particular procedure would be most appropriately performed in the inpatient setting.”

A policy fraught with uncertainty — and potential risk

In contrast to MedPAC’s site-neutral payment policies, it is unclear, at least to this author, what problem eliminating the IPO list aims to solve. To the extent medical practice changed over time, the IPO list accommodated procedures being performed in ambulatory settings where supported by evidence: For example, total knee replacement came off the list in 2018.

Access to care doesn’t seem to be driving this policy: Are there beneficiaries needing a lung transplant who can’t get one because they don’t have access to inpatient care at a transplant center?

Physician autonomy is also unclear as a driver: Are there physicians who want to do exploratory heart surgery in a hospital outpatient department but won’t because Medicare won’t pay for it in that setting?

Eliminating the IPO list opens up a variety of Medicare payment and patient safety issues.

Having decided that Medicare will pay for a formerly IPO procedure under the OPPS, CMS must determine how much Medicare will pay. When performed on an inpatient basis, Medicare’s base payment rate for excision procedures on the tongue (CPT 41140) ranges from nearly $11,000 to almost $29,000 (depending on complications and comorbidities) in 2026, while the corresponding outpatient payment rate is roughly $6,000.^d

It is hard to imagine a teaching or disproportionate share hospital permitting the procedure to be done on an outpatient basis, incurring the heightened clinical risk and not only receiving the lower outpatient payment amount, but also losing the teaching and/or disproportionate share payment adjustments Medicare makes in the inpatient setting. The potential for future payment distortions looms as well: As former IPO procedures filter into the OPPS, because of budget-neutrality, these procedures will affect not only payments for their own APCs, but also payments across the board.

Time to rethink CMS’s responsibility for patient safety?

In identifying protections to prevent Medicare beneficiaries from adverse consequences of eliminating the IPO list, CMS relies almost exclusively on non-Medicare guardrails, including state and local laws, physician judgment, medical malpractice laws and hospital conditions of participation.^e Medicare seems to be absolved of most responsibility for the safety of care provided to Medicare beneficiaries stemming from the IPO list elimination.

In short, eliminating the IPO list seems like a solution in search of a problem, and CMS should think hard about continuing down its current path. If the policy goal was to accelerate the safe migration of services from inpatient to outpatient settings, and thus reduce Medicare spending, CMS could more effectively promote this goal through tailored payment policies informed by rigorous clinical input. And that would necessarily include building a monitoring infrastructure and patient safety guardrails to ensure that Medicare protects its beneficiaries from adverse consequences of large-scale shifts in site of service for formerly IPO list procedures.

In the meantime, when I get around to having that liver transplant I’ve been thinking about, I’ll pack an overnight bag. 

The views expressed in this column are those of the author, and not of any affiliated institution, current or past.

Footnote

a. Congress.gov, “HR 1314 – Bipartisan Budget Act of 2015,” public law 114-74, sec. 603, Nov. 2, 2014.
b. CMS, “Medicare Program: Hospital outpatient prospective payment and ambulatory surgical center payment systems; and quality reporting programs,”
Federal Register, July 7, 2026.
c.  In the 2021 rulemaking cycle, CMS had finalized a three-year phase out of the IPO list, but the policy was overturned by the Biden administration effective in 2022.
d. Payment rates derived from data files for the FY2026 IPPS final rule and CY2026 OPPS final rule.
e. Medicare prescribes hospital conditions of participation, but these do not address the level of detail triggered in making site-of-service determinations.