Dive Brief:

• CMS finalized its proposal to restore Medicare's inpatient-only list and move nearly 300 procedures back to inpatient coverage, reversing a Trump-era plan to phase out the list entirely over a three-year period.
• After proposing the reversal in July, the agency went forward with its decision late Tuesday as part of the Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System final 2022 calendar year rule. In the final rule, CMS also codified past criteria for determining when procedures should be removed from the IPO list going forward.
• The decision comes after the medical device industry overwhelmingly backed reversing the Trump-era plan. Medtronic, Johnson & Johnson, Stryker and Zimmer Biomet were among those in public comments claiming that removing the IPO list jeopardized patient safety. Interestingly, support for moving procedures back to inpatient-only coverage comes as the industry is also embracing the migration of procedures out of hospitals into outpatient settings like ambulatory surgery centers.

Dive Insight:

The IPO list outlines procedures Medicare will pay for only if they are conducted in an inpatient setting. The list was put in place to help ensure patient safety and factors in criteria like the complexity of the surgery and patient ability to recover.

Last December, the Trump-era CMS finalized the elimination of the IPO list over a three-year period, claiming that advancements in technology and surgical techniques have allowed many procedures to be done just as safely regardless of facility. The agency also argued changes in the final rule would help lower overall healthcare costs and out-of-pocket costs for Medicare beneficiaries.

The phase-out began Jan. 1 with the immediate removal of 298 procedures. However, CMS under the Biden administration then proposed a reversal of the elimination in July.

CMS acknowledged in the proposed rule that "the unprecedented removal of the 298 codes from the IPO list transpired quickly" and the procedures "were not assessed against our longstanding criteria for removal" because the elimination of the entire IPO list was planned. The agency wrote that while physicians should help determine if a procedure location is safe for their patients, CMS can make safety determinations for the broader Medicare population.

Those points were also highlighted by medtechs in public comments.

Stryker opposed the elimination of the IPO list "given that there was no data to support the appropriateness of performing the full range of these procedures in the outpatient setting."

Even though the orthopaedics leader supported restoring the IPO list, Stryker also stressed that physicians should be consulted about "whether there are additional procedures that can safely and effectively be performed in the hospital outpatient setting considering advances in medical technology and surgical techniques."

Medtronic noted in its public comment that CMS found none of the 298 procedures taken off the list in 2021 met the previous criteria used to determine whether procedures should be removed or not.

"We believe this serves as solid evidence that continuing down the path of eliminating the IPO list in its entirety, rather than removing individual procedures or groups of clinically similar procedures on an incremental basis, would present safety and quality risks to Medicare beneficiaries," Medtronic stated.

Along with reinstating the IPO list, CMS is re-adding the majority of the 298 procedures last year's rule took off as the first stage of the phase-out. The only procedures that will not return to the IPO list are lumbar spine fusion, shoulder joint reconstruction, ankle reconstruction and the corresponding anesthesia codes.

CMS finalized codifying criteria traditionally used to determine if a procedure is removed, including whether most outpatient facilities are equipped to do the procedure for the Medicare population, whether the procedure can be safely conducted in outpatient settings and whether similar procedures have been removed in the past. This move was broadly supported by medical device makers in public comments.

The agency also finalized removing 255 of the 267 procedures that were added to the ASC covered procedure list as part of last year's final rule, which most companies and industry lobby AdvaMed supported.

Years of procedure migration

The industry's support of restoring the IPO list and moving procedures back to hospitals comes while medtechs are also embracing the emergence of ASCs. Procedures have been migrating out of hospitals for years, and companies like Stryker, Zimmer and J&J have invested and retooled their companies to work with ASCs and outpatient facilities.

Defenders of outpatient care contend that the services cut overall healthcare costs while maintaining the same standards of patient safety.

The issue of cost brings several challenges for medtechs as they begin to focus on ASCs and outpatient facilities: procedures are reimbursed at lower rates than inpatient facilities and ASCs are much smaller than hospitals, meaning they cannot buy or hold the same amount of inventory.

Tim Czartoski, U.S. president of J&J's orthopaedics unit Depuy Synthes, said ASC volumes have been a "huge growth area" due to several intersecting factors such as the opening up of payment policies by private insurers and Medicare, as well as improvements in pain management and technology that allow for procedures to be done more efficiently and safely.

This migration was accelerated during the pandemic because hospitals were forced to shut down non-emergency care as facilities were filling up with COVID-19 patients and new protocols were put into place.

About 24% of all procedures are currently being done in ASCs and some in the industry believe that as much as half of all procedures could eventually make the move out of traditional hospital facilities, according to Czartoski. 

Although, the speed at which procedures will migrate is up for debate.

"It's hard to peg. There's a lot of opinions that we will get to 50% as an industry in the next couple of years," Czartoski said. "I'm not going to say exactly what that's going to be. But there's certainly a lot of data out there that suggests that."

The shift to ASCs and outpatient settings has been particularly popular for orthopaedic surgeries, fueled by CMS recently covering total knee replacement and total hip replacement procedures in outpatient facilities.

Jefferies analysts projected that outpatient centers will account for approximately 57% of hip and knee replacement volumes by 2028, up from about 23% last year. The analysts wrote in an October report that the growth will be primarily due to the "significant cost benefit that outpatient joint surgeries bring."

J&J did note in its public comment that reimbursement levels should be examined before a procedure is moved off the IPO list.

"Clinical practice will continue to evolve and enable more procedures to migrate out of the inpatient setting," the company noted in its public comment. "But to avoid the potential for financial incentives to influence the choice of setting, care should be taken to establish appropriate payments."

The movement of orthoapedics is likely to continue as CMS left certain spine, ankle and shoulder procedures off the restoration of the IPO list.