Will Medicare Beneficiaries pay more for a procedure no longer on the Inpatient-Only List?

Apr 13, 2021

By Jerilyn Morrissey, MD

There is still a lot of confusion regarding the impact on Medicare beneficiaries from eliminating the Inpatient-Only List. As recent as last week, an article from The Washington Post titled New cost-cutting Medicare rule may add costs to patients, discussed how this new policy change reduces payments to hospitals and increases costs for all Medicare beneficiaries.

For context, CMS’ Inpatient-Only (IPO) List “specifies those services for which the hospital will be paid only when provided in the inpatient setting because of the nature of the procedure, the underlying physical condition of the patient, or the need for at least 24 hours of postoperative recovery time or monitoring before the patient can be safely discharged.” (76 FR through 74353). Every year, CMS evaluates this List and adds or deletes procedures based on a set of well-established criteria. In fact, in recent years, a few procedures, namely hip and knee replacements were removed from the IPO List.

What is different this time?

CMS finalized a plan to permanently eliminate the IPO List by the end of 2023. The 3-year phased elimination process starts in 2021 with the removal of 266 spine and musculoskeletal procedures. According to CMS, this bold move makes Medicare payment available for more services in different settings, defers to physician judgment, and empowers patients to collaboratively choose the preferred site of service with their physician for these procedures.

Seems reasonable and well-intentioned, right?

So, will this change also come with a higher price tag for all Medicare beneficiaries undergoing IPO List procedures as The Washington Post article implies?

The answer is no. Not ALL Medicare beneficiaries will be impacted by this change or incur higher costs. However, SOME probably will.

So, how do you know who might be affected?

First, you have to understand that when a procedure is removed from the IPO List, it is not immediately and automatically always an outpatient or ambulatory procedure. There is no such thing as an Outpatient Only List.

Instead, the classification of either inpatient or outpatient is unique to each patient, and it is determined by the physician’s decision of how long a patient is expected to stay in the hospital for medical care.

CMS has given clear guidance to physicians and hospitals that a beneficiary undergoing a procedure not on the Inpatient-Only List should still be statused as an inpatient when the patient is expected to need hospital care across two midnights per the 2-Midnight Rule. As a result, patients who meet the two-midnight stay requirement for inpatient status should not see an increase in cost.

What about the patients who are expected to undergo the same procedures, but their clinical situation is such that they go home the same day or the next day?

These are the patients that could potentially see an impact on their out-of-pocket expenses.

So, how is the beneficiary bill different for the same service at the exact location dependent on whether he/she is considered an inpatient vs. an outpatient?

As you know, Medicare beneficiaries under inpatient status use their Part A benefits which means they are responsible for paying for 20 percent of physicians' charges and Medicare's hospital deductible, which, this year, is $1,484 for a stay of up to 60 days.

Medicare beneficiaries under outpatient status are using their Part B benefits which means they are responsible for paying 20 percent of the Medicare-approved rate for each service and 20 percent of physicians' charges.

The good news is that CMS considered this issue in the new policy and indicated that the beneficiaries’ cost for these procedures would be capped at the inpatient deductible for each service. The bad news is that it is not yet clear what will be considered an individual service in the bill. For example, beyond the operating room charges, will services like imaging, anesthesia, and post-operative physical therapy be considered individual services, each with its own cap, or will they be paid under a comprehensive service with one cap? The answer to that question, which may be different for different procedures, will determine if Medicare beneficiaries should expect more out-of-pocket expenses due to this policy change.

Like most changes, there are benefits, and there are disadvantages. This policy change is no different. For beneficiaries with more options regarding the site of service comes the potential for some of them to have higher costs.

For hospitals, the critical takeaway is that a procedure removed from the IPO List does not mean it is now "outpatient only." As such, it is imperative that hospitals have the right program in place to status patients appropriately.


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