CMS released the second set of procedures to be removed from the IPO list in the calendar year 2027 Outpatient Prospective Payment System (OPPS) Rule. CY 2027 is year two of a three-year transition period to phase out the IPO list by CY 2028. CMS proposes the removal of 637 procedures from the IPO list in CY 2027.
- 1,438 procedures and services remain on the IPO list in CY 2026.
- CMS proposes to remove 637 less-complex services (approximately half of the remaining IPO services) from the following clinical families: auditory, digestive, endocrine, female genital, hemic and lymphatic systems, integumentary, male genital, maternity care and delivery, mediastinum and diaphragm, respiratory, and urinary in CY 2027.
- CMS will maintain the remaining clinical families through CY 2028.
The absence of a procedure from the IPO should not be interpreted as only appropriate in the hospital outpatient setting (70 FR 68696). CMS has emphasized the 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 while considering the site of service and acting in that patient’s best interest (65 FR 18456). For procedures not included on the IPO, CMS will rely on the practitioner’s judgment to determine on a patient-by-patient basis whether or not a particular procedure is most appropriately performed in the inpatient setting (70 FR 68698).
- If CMS finalizes its proposal to remove these services for CY 2027, the remaining 801 procedures, which are more clinically complex in nature, would be removed from the IPO in the final transition year, CY 2028.
- The remaining procedures are from the neurological family, cardiovascular family, solid organ, intestinal, and islet cell transplants and related services.
- CMS agreed to wait to remove these more clinically complex and unique procedures, as well as certain invasive procedures involving craniectomy, craniotomy, and/or burr holes and cardiovascular procedures, until the last phase (90 FR 53788).
What does this mean for clinicians?
Today, if a procedure is on the IPO list, Medicare has already decided it warrants inpatient care. The ability to automatically bill these procedures as inpatient, regardless of the patient’s actual length of stay, disappears once the procedure is removed during the phase-out process.
Documentation becomes the deciding factor, not the procedure. For any procedure removed from the list, CMS expects the physician to make the inpatient-versus-outpatient call based on the individual patient. There’s no default answer anymore.
The two-midnight rule moves to center stage. Once a procedure comes off the IPO list, physicians need to document why they expect the patient will need two or more midnights of hospital care for Medicare beneficiaries, whether that’s driven by the complexity of the procedure itself or by something specific to the patient: comorbidities, risk factors, expected complications. Weak, incomplete, or missing documentation is exactly what invites a future medical necessity denial.
More cases will need Physician Advisor input in real time. As the IPO list disappears, more borderline cases will need a second clinical opinion to confirm inpatient status is appropriate, ideally before the claim goes out, not after a denial comes back.
This is a multi-year trend, not a one-time change. By CY 2028, the IPO list will go away entirely. Physicians and hospitals will be adjusting to this every year until that time, with the most complex procedures (cardiovascular, neurological, transplants) removed last.
What does this mean for hospitals?
The March 2026 Medicare Payment Advisory Commission Report to Congress on Medicare Payment Policy found, “about one-quarter of the decline in inpatient stays per capita since 2019 was from the shift of knee and hip replacements from inpatient to outpatient settings” following their removal from the inpatient-only list. To provide more perspective, in 2018, MS-DRG 470 (Major Joint Replacement without MCC) ranked first in both FFS Medicare volume and payments. Since then, it has fallen out of the top ten MS-DRGs with a 66% decline in inpatient volume.
The removal of hip replacements from the IPO list in 2018 provides a window into what hospitals can expect as procedures are removed until the complete elimination of the IPO list by January 1, 2028. The loss of the IPO list will further erode hospital margins without adequate documentation to support inpatient medical necessity. Although there will be an initial moratorium on medical necessity denials for these removed procedures for Medicare beneficiaries, private payers who base medical necessity decisions on the IPO list have no such mandate. Consequently, hospitals must act quickly to adjust to this significant change in medical necessity criteria for surgical cases.
More cases will need UR review. Hospitals are already spending more on administrative functions associated with the clinical revenue cycle due to rising denial rates. The IPO list phase-out will put more strain on limited utilization review staff by increasing the volume of cases. Additionally, because these cases automatically qualified for inpatient services based solely upon the planned procedure, the industry lacks adequate tools to support this shift in review priorities. This uncertainty is likely to increase denial volumes immediately for payers who voluntarily made status determinations using the IPO list.
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