Year two of the inpatient-only phase-out proposes 637 more services — and skips musculoskeletal
The first year of the phase-out moved musculoskeletal work. Year two moves digestive, urinary, respiratory and genitourinary work instead — a different set of service lines, and a different set of centers with something to comment on before August 31.
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- CMS proposes removing 637 services from the Medicare inpatient-only list for CY2027 — the second year of a three-year phase-out that began with 285 mostly musculoskeletal services in CY2026.
- The eleven clinical families named for CY2027 are auditory, digestive, endocrine, female genital, hemic and lymphatic, integumentary, male genital, maternity care and delivery, mediastinum and diaphragm, respiratory, and urinary. Musculoskeletal is not on the list.
- Coming off the inpatient-only list is not the same as being payable in an ASC — a service also has to be added to the ASC covered procedures list, a separate determination in the same rule.
- The rule proposes 618 codes for the ASC covered list, drawn from stakeholder recommendations or the CY2027 inpatient-only removals; it does not state how many of the 637 fall into that 618.
- Comments on CMS-1850-P close August 31, 2026.
CMS proposes to remove 637 services from Medicare’s inpatient-only list for 2027, and the list of what they are matters more than the count. The CY2027 OPPS/ASC proposed rule names eleven clinical families: “auditory, digestive, endocrine, female genital, hemic and lymphatic systems, integumentary, male genital, maternity care and delivery, mediastinum and diaphragm, respiratory and urinary.”
Musculoskeletal is not one of them. That is the whole story for anyone who built a 2027 plan on the phase-out’s first year.
What year one did, and what year two proposes
The CY2026 final rule started the clock: “For CY 2026, we are phasing out the IPO list over 3 years, beginning with the removal of 285 mostly musculoskeletal services for CY 2026.” Year one was orthopedics — the spine and joint codes that have driven ASC service-line expansion for three years running.
Year two is proposed as a different animal. The CY2027 rule says CMS is “continuing to phase out the IPO list by proposing to remove 637 services” from those eleven families. Read the families as service lines and the shift is unmistakable: digestive is GI and endoscopy, urinary is urology, respiratory is pulmonary and thoracic, auditory is otology, integumentary is skin and soft tissue. Cardiovascular, nervous-system and eye families are absent from the CY2027 list as well as musculoskeletal.
That the second year is more than twice the size of the first — 637 proposed against 285 finalized, or 922 across the two years if the proposal holds — is the less interesting fact. A phase-out has to clear the list eventually, and the third year lands in CY2028. What a center can act on is the composition.
That composition was confirmed as deliberate sequencing this morning. The HHS regulatory agenda published August 14 describes the CY2027 rule as proposing ASC payment changes “including implementing the second year of the three-year phase-out of the inpatient only list requirement.” The agenda adds no numbers, and its entry for the rule carries no projected final-action date. It is useful only as confirmation that CMS is working a staged plan rather than clearing codes opportunistically.
Off the inpatient-only list is not the same as paid in an ASC
This is the distinction that turns 637 into a number an operator can use, and it is where the arithmetic gets misread.
The inpatient-only list governs the hospital side: it names services Medicare pays for only when furnished to an inpatient. Taking a service off that list opens the outpatient setting. It does not, by itself, make the service payable in an ambulatory surgery center. That requires a second decision — adding the code to the ASC covered procedures list — and the rule treats it as exactly that.
The CY2027 rule’s own sentence sets out the relationship: “For CY 2027, we propose to continue to expand the ASC covered procedures list (CPL) by adding 618 codes to the ASC CPL that were recommended by stakeholders or are proposed for removal from the IPO list for CY 2027.” Two sources feed the 618 — stakeholder recommendations and the CY2027 inpatient-only removals — and the rule does not say how the 618 splits between them. The overlap between the 637 and the 618 is not a number we can report, because CMS has not published it in the text. Anyone quoting the two figures as if 637 services are heading for ASCs is doing arithmetic the rule does not support.
Year one shows the two lists moving together but recorded separately. The CY2026 final rule removed 285 services from the inpatient-only list and states that CMS was “adding 276 procedures to the ASC CPL based on these criteria changes and adding an additional 271 codes to the ASC CPL that we are finalizing for removal from the IPO list for CY 2026.” Note the units: 285 services on one side, 271 codes on the other. The rule does not equate them, so the residual between the two is not a number to compute — but the structure is clear enough. Inpatient-only removal is one determination, ASC coverage is another, and CMS books them in separate sentences with separate counts.
What to do before August 31
The comment window on CMS-1850-P closes August 31 — seventeen days out — and it is the only point of leverage before these lists harden. Three things are worth doing with the proposal in hand.
Check your families against the eleven, not against last year’s. A multispecialty center that spent 2026 modeling orthopedic additions has a different reading exercise this year than a GI or urology center does. The families named for 2027 tell you whether you are in the frame at all.
Confirm each code you care about twice. A service you find among the 637 inpatient-only removals is not a service you can schedule. Verify separately whether the code appears among the 618 proposed ASC covered-list additions. Those are two different lists in the same rule, and only the second one pays you.
Price the ones that clear both. Being covered is not the same as being viable: the 24-hour recovery constraint, implant and device costs, and the anesthesia profile decide whether a newly covered code is a service line or a rounding error. The CY2027 update is proposed at 2.4% for centers meeting ASCQR requirements, and that is the rate any new volume gets paid at.
The final rule follows the annual cycle, typically in November. Between now and then, the only number that changes is the one operators argue about in the comment file.