CMS slashes inpatient-only procedures, threatening nursing home coverage

The federal government is moving forward with a long-planned effort to eliminate a list of medical procedures limited to inpatient facilities, per a 2026 hospital payment rule finalized Friday.

The Centers for Medicare & Medicaid Services said it will remove 285 procedures labeled inpatient-only, or IPO, many of them for acute care surgeries that have historically driven patients to nursing homes for follow-up care. Importantly, the agency’s Hospital Outpatient Prospective Payment rule made no blanket provision for skilled nursing coverage for patients opting for outpatient alternatives that don’t include a requisite three-day stay.

But the agency insisted that more vulnerable patients may not be ideal for expanded outpatient options and that it would rely on the “practitioner’s judgment” to determine on a patient-by-patient basis whether a particular procedure would be best performed in an inpatient setting.

“Its expectation is for more complex, frail older adults — those who require higher levels of support following surgery, such as skilled nursing facility care — to continue receiving these procedures in an inpatient setting for an appropriate duration,” said Nicole Fallon, vice president of integrated services and managed care for LeadingAge. “This ensures that these individuals remain eligible for SNF services when clinically necessary.”

LeadingAge had previously said that the targeted codes drive 20% to 50% of SNF admissions for its members. When they are done on an outpatient basis, the very same procedures won’t come with the three-day stay that triggers coverage of skilled nursing care.

And Fallon warned Monday that asking a hospital and surgeon to assess a patient’s surgery risks may not always capture what’s best for the patient after surgery.

“While this is an important safeguard, the policy does not explicitly require surgeons to consider the types of post-acute care services a patient may need after surgery or whether they have appropriate home support,” she told McKnight’s Long-Term Care News in an email. “Surgeons, for instance, may not be familiar with Medicare’s eligibility requirements for SNF care, which could lead to unintended consequences. For example, a surgeon might determine that an outpatient procedure is clinically safe — without realizing that this decision could make the patient ineligible for SNF services.”

‘Greater predictability, accountability, affordability’

CMS said the 2026 reductions, which become effective Jan. 1, will be the first stage of a three-year process to phase out the entire list as medicine evolves to allow “more procedures to be performed on an outpatient basis with a shorter recovery time.” The agency’s fact sheet noted that the changes give doctors “greater flexibility to determine the most clinically appropriate setting for care” and that outpatient procedures could lower out-of-pocket expenses for beneficiaries.

“We continue to advance Medicare payment reform by advancing policies that help prevent services from unnecessarily being performed in hospitals when they can be safely provided in less-intensive settings …” Chris Klomp, CMS deputy administrator and director of the Center for Medicare, said in a press release announcing the rule Friday. “These comprehensive changes deliver greater predictability, accountability, and affordability in hospital care.”

LeadingAge had warned in formal comments to CMS that even if procedures may be less-intensive, “it does not mean that these patients do not continue to need skilled care and the more intensive rehabilitation therapies that a SNF setting offers.”

CMS acknowledged such concerns from “numerous commenters” in its final rule published in the Federal Register but pointed out that removal of procedures from the IPO list does not require the procedures be performed on an outpatient basis.

“We would expect that those Medicare beneficiaries identified as appropriate candidates to receive a surgical procedure in the outpatient setting would not be expected to require SNF care following surgery,” CMS responded. “Instead, we expect that these beneficiaries would be appropriate for discharge to home (with outpatient therapy) or home health care.”

Some patients receiving the affected 285 procedures in an inpatient setting might not have qualified for SNF care regardless, given that they may have been admitted for less than three days.

That’s another reason Fallon said lawmakers must address the often-confusing three-day stay rule and its implications for access to care.

“Healthcare delivery is evolving, and technology has enabled less invasive procedures. If acute care is changing, then post-acute care policy must evolve as well,” she said. “The three-day inpatient hospital stay requirement for SNF coverage is outdated and does not reflect current care delivery or beneficiary needs.”

John Kane, senior vice president of reimbursement for the American Health Care Association, also called for the rule’s reexamination in light of the new IPO policy.

“Regardless of their inpatient or observation designation, seniors must be able to access post-acute care in a skilled nursing facility when they need it without fear of considerable out-of-pocket costs. We will continue to advocate for policies that eliminate the antiquated policy of the three-day stay, and prevent any Medicare beneficiaries from falling through the cracks.”