Joint replacements of the hip and knee are foundational procedures for hospital orthopedic surgical service lines, as they are characteristically high in volume, reimbursed at favorable rates and clinically routine for the aging U.S. population. However, advances in medical technology, changes in Medicare reimbursement systems and evolving patient expectations have accelerated the migration of many joint replacements, as well as other surgical procedures, from inpatient hospital settings to lower-cost outpatient settings, including hospital outpatient departments (HOPDs) and ambulatory surgery centers (ASCs).
In the calendar year (CY) 2026 Outpatient Prospective Payment System (OPPS) proposed rule, the Centers for Medicare and Medicaid Services (CMS) proposed to eliminate the Medicare Inpatient Only (IPO) list over the next three years.1 The IPO list currently includes more than 1,700 procedure codes that Medicare reimburses only when performed in the inpatient setting, based on clinical complexity and patient safety. CMS proposed starting the IPO phaseout in 2026 by removing 285 procedures, most of which are musculoskeletal.
Both hip and knee replacements have already been removed from the IPO list, with total knee arthroplasty (TKA) in 2018 and total hip arthroplasty (THA) in 2020, providing a case study in how utilization shifts when inpatient-only procedures become eligible for outpatient delivery and reimbursement.2,3 This analysis uses data on inpatient Traditional Medicare and Medicare Advantage TKA and THA procedures to assess the potential impact of the proposed IPO list phase-out.
The Medicare IPO list was formed in 2000 to designate procedures that CMS would reimburse only when performed in inpatient settings, based on clinical complexity and safety criteria. The current IPO list includes 1,731 procedures.4 CMS evaluates several factors in maintaining the IPO list, including procedural complexity, the feasibility of outpatient recovery and potential risks associated with shifting care outside the hospital setting.
The IPO list has been a central focus of Medicare policy changes in recent years (Figure 1). The Trump Administration’s changes to the Medicare OPPS from 2018 to 2021 expanded outpatient procedure eligibility by removing TKA, THA, six spinal surgeries and certain anesthesia services from the IPO list. During the same period, Medicare ASC payment system changes added 267 surgical procedures to the ASC Covered Procedures List (CPL).5 In December 2020, the Trump Administration announced plans to phase out the IPO list over three years, citing advancements in surgical techniques and medical technology that have enabled many procedures to be safely performed in outpatient settings.6 CMS initially removed 298 musculoskeletal and spinal procedures from the list. However, under the Biden Administration in 2021, CMS reversed this decision, reinstating the IPO list and removing hundreds of procedures previously added to the ASC CPL.7 At the time, CMS expressed concerns that the removals had occurred too rapidly, without sufficient evaluation of each procedure’s alignment with established safety criteria.8 In the CY 2026 proposed OPPS rule, CMS again presented a plan to eliminate the IPO list over a three year period, beginning with removing 285 mostly musculoskeletal procedures for CY 2026.9
For CY 2026, CMS proposes to maintain its policy of temporarily exempting procedures removed from the IPO list from certain medical review activities associated with the two-midnight rule. During this exemption period, hospitals will not be subject to automatic claim denials, additional documentation requests or audits solely based on the inpatient versus outpatient status of the procedure.
Of the 285 procedures proposed for IPO list removal in 2026, CMS proposed to add 271 of these codes to the ASC-CPL. Additionally in the rule, CMS proposed to add another 275 procedures to the ASC-CPL, totaling 547 procedure codes.9
This study examines historical utilization patterns for inpatient THA and TKA procedures within Medicare to assess the likely downstream impact of removing other procedures from the IPO list and considers the broader implications for the future of inpatient surgical care.
All-payer claims were leveraged to analyze Traditional Medicare and Medicare Advantage inpatient TKA and THA procedure volume from 2016 through 2024.
After TKAs were removed from the IPO list in 2018, inpatient volume declined by 17.9% from 2017 to 2018 (Figure 2), with 2024 inpatient TKA volume 85.4% lower than 2017 volume. Similarly, inpatient volume for THAs declined by 35.8% in the year following their removal from the list in 2020, with 2024 inpatient THA volume 66.1% lower than 2019 volume. As additional surgical procedures are removed from the IPO list, the number of surgeries performed in ASCs and other outpatient settings is likely to increase.
CMS’s renewed proposal to eliminate the IPO list represents not only a regulatory policy shift but a broader inflection point in the delivery of surgical care. The migration of joint replacements to lower-cost outpatient settings reflects a broader trend in which procedures historically tied to hospital infrastructure (e.g., cataract surgeries, cardiovascular interventions and chemotherapy) have increasingly demonstrated feasibility in decentralized, ambulatory settings. The proposed removal of the IPO list beginning with 285 mostly musculoskeletal procedures in CY 2026 is the most critical development in this ongoing migration, signaling that a wider range of high-volume surgeries are likely to follow a similar trajectory, which will materially impact all healthcare stakeholders.
If finalized, the policy is expected to accelerate the shift of surgical care from inpatient to HOPDs and ASCs. While hospitals’ operational responses will vary based on local infrastructure and operational viability, the financial implications are broadly anticipated to include a decline in inpatient revenue. Medicare patient cost-sharing is not expected to increase under the proposal, due to existing protections that cap out-of-pocket costs in outpatient settings. Commercial payers and Medicare Advantage plans, drawing on the IPO list’s historical influence over site-of-service determinations, are also likely to encourage more aggressive shifts to outpatient care in response to the policy. In inpatient settings, Medicare reimburses approximately $18,000 for joint replacements, compared to $10,500 in ASCs, a meaningful difference for high-volume procedures like TKA and THA, for which aggregate annual volume approaches 800,000 procedures.
Beyond immediate payment and volume effects, the proposed elimination of the IPO list presents long-term structural implications. Many health systems rely on high-margin surgical volume to subsidize lower-reimbursed services. As surgical cases move into outpatient settings, those inpatient cross-subsidies will erode, straining hospital finances, particularly for rural and safety-net providers where outpatient infrastructure is less developed and inpatient services remain critical sources of revenue. Meanwhile, the emergence and proliferation of pharmaceutical alternatives, such as GLP-1s in obesity and metabolic management, introduces uncertainty into projected surgical procedural demand, potentially reducing the clinical necessity of certain surgeries and adding further pressure to procedure-dependent service lines.
While unit spending for payers will decrease, the increase in access to outpatient settings could influence utilization growth. Medical device manufacturers may be pressured to adjust pricing strategies as average reimbursement levels decline in outpatient settings. Patients, while potentially benefiting from improved convenience and access, could face fragmented care if systems lack integrated care pathways across inpatient and outpatient sites.
Health systems that have aggressively expanded their ambulatory network, whether through ASC ownership, joint ventures or site-of-care optimization strategies, over the past two decades are poised to gain significant market share against those who have not. This will be especially true if Congress and CMS continue to expand the reach of site-neutral payments to reduce systemwide costs. The implications for providers of the adoption of site-neutral payments coupled with the elimination of the IPO list are undoubtedly complex and potentially catastrophic.
The CY 2026 proposal comes amid enduring pressures: rising Medicare enrollment, disparate and increasing healthcare prices and renewed political momentum for site-neutral payment reforms. Although CMS has not finalized eliminating the IPO list in its entirety, the reintroduction of the phaseout under the Trump Administration, and the agency’s stated intent to solicit input on future removals, indicate that a full elimination remains likely. The future trajectory of the IPO list will depend on both policy decisions and the operational readiness of stakeholders to adapt to a more decentralized model of surgical care.