By Surabhi Dangi-Garimella, Ph.D.

Among the policies that previous Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma finalized before leaving office was to phase out Medicare’s Inpatient Only (IPO) list by 2024 so more procedures will be available as outpatient care while reducing how much Medicare pays for the procedure. So, who will bear a bigger share of the cost? The patient.

About 1,740 surgical procedures and services are on the IPO list to be phased out by the end of 2023. According to the CY 2021 Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System Final Rule, nearly 300 musculoskeletal-related procedures will be eligible as an outpatient service immediately, if deemed safe to do so by a physician. CMS claims that this rule change will increase operational flexibility for hospitals and ambulatory surgical centers, reduce provider burden, and lower patient expenses.

However, since CMS has not provided an alternative venue where the procedures can be performed, patients will continue visiting the same hospitals to receive their care but will be billed at an outpatient rate. This means CMS would pay less for the same procedure because it reimburses hospitals at a lower rate for outpatient services, and the Medicare enrollee will bear a higher percentage of the cost. Dr. James Huddleston, an orthopedic surgeon at the Stanford University Medical Center, told Kaiser Health News (KHN) that this would be a money-saving policy change for Medicare. “The oldest trick in the book is to say the patients don’t need to be cared for in an expensive hospital setting.”

While CMS added a list of services that will be covered when conducted at ambulatory surgery centers in 2021, these do not match the procedures on the IPO list. A major operational change like this needs a pilot because the surgical procedures on the list are complicated and need post-surgery monitoring, said Dr. Catherine MacLean, chief value medical officer at New York City’s Hospital for Special Surgery, when speaking with KHN. And lest we forget, this is a population that suffers from multiple comorbidities.

Outpatient billing is quite different from inpatient billing. When admitted to the hospital (inpatients), Medicare patients are responsible for:

  • Their annual hospital deductible ($1,484 for up to 60 days)
  • A coinsurance ($0 for up to 60 days, $371/day from 61-90 days, $742/day after 90 days)
  • 20% of physician fees

This is typically a bundle or a package payment. On the other hand, Medicare patients are responsible for 20% of the amount approved by Medicare for each outpatient service that they receive, in addition to 20% of the physician fees. While the copayment is capped at $1,484 for each service, the total copayment may exceed what the patient ends up paying as a bundled copayment when they receive inpatient care. Additionally, outpatients may find “facility fees” (20% after Medicare pays its share) and “excess charges” (up to 15% above the Medicare-approved amount).

Doctors could decide that a procedure that’s on the list requires in-patient care, but there’s no guarantee that CMS will cover it at an inpatient rate. Since this policy change was developed by the Trump government, there is a likelihood that the current administration may withdraw it, but there’s no word on it yet.

Surabhi Dangi-Garimella, Ph.D. is a biologist with academic research experience, who brought her skills and knowledge to the health care communications world. She provides writing and strategic support to non-profit groups via her consultancy, SDG AdvoHealth, LLC.