The Medicare inpatient-only list

Medicare pays hospitals for outpatient department services under one payment system and for admitted patients under another. The inpatient-only list sits at the boundary: it enumerates services that are excluded from the outpatient system, which is why the list is codified inside a section titled hospital services excluded from payment under the hospital outpatient prospective payment system (opens in a new tab). Everything the list does follows from that placement. It is a statement about which payment system applies, not a statement about where a procedure may be performed.

CMS has been explicit about this since the list was created, and restated it in the CY2027 proposed rule: designation of a service as inpatient only does not preclude the service from being furnished in a hospital outpatient setting, but means Medicare will not make payment for the service if it is furnished to a beneficiary in that setting. The consequence for a hospital is financial rather than clinical — the service can be provided, and it will not be paid.

Hospital outpatient prospective payment system

The system Medicare uses to pay hospitals for outpatient department services. The inpatient-only list is a list of services excluded from it, which is what makes the admission the only route to payment.

Ambulatory payment classification

The payment group a service is assigned to under that system. When CMS removes a service from the inpatient-only list it assigns the service to one of these groups, which is how an outpatient rate comes to exist for a procedure that previously had none.

Addendum E

The file published with each year's hospital outpatient payment rule listing every code Medicare will pay only as an inpatient service for that calendar year. It is the list.

The list is not published as a standalone reference and it is not in the Code of Federal Regulations. The regulation authorizes it; the annual hospital outpatient payment rule carries it. Two files in that rule answer the two questions a practice actually asks.

• Addendum E — the complete list of codes describing services Medicare will pay for only as inpatient services in that calendar year. This is where the question is this procedure still inpatient-only? is answered. Both the CY2026 final rule and the CY2027 proposed rule identify it in those words.
• Addendum B — the outpatient payment file by code. Services removed from the list appear here with their new status indicators and payment-group assignments, which is where the question what is it paid as now that it has come off? is answered.

Within Addendum B the inpatient-only treatment is carried by a status indicator rather than by a separate flag. Addendum D1 of the same rule holds the status-indicator meanings, and CMS describes assigning a code to status indicator C where the procedure is only performed in the inpatient setting. In the CY2027 proposed rule CMS also published the proposed removals as a separate public use file on its website, alongside the addendum.

The operative text is one sentence. 42 CFR 419.22(n) provides that, effective beginning on 1 January 2026, the Secretary shall eliminate the list of services and procedures designated as requiring inpatient care through a three-year transition, with the list eliminated in its entirety by 1 January 2029. That is the codified date, and it is the date to use.

This is the second attempt at eliminating the list, and the first one was reversed. The CY2021 rule adopted a three-year transition and removed 298 codes, including 266 musculoskeletal-related services. The CY2022 rule halted the elimination, returned most of those services to the list, and struck the transition language out of 419.22(n) — which is why the sentence quoted above had to be written into the regulation a second time. A practice deciding how much process to build around the current phase-out is entitled to weigh that history; the specialty that went through both is covered in the orthopedics billing guide.

Until the CY2026 rule, 42 CFR 419.23 codified five criteria CMS applied when deciding whether a service could come off the list. They were:

1. Most outpatient departments are equipped to provide the service or procedure to the Medicare population.
2. The simplest service or procedure described by the code may be performed in most outpatient departments.
3. The service or procedure is related to codes CMS has already removed from the list.
4. CMS determines that the service or procedure is being performed in numerous hospitals on an outpatient basis.
5. CMS determines that the service or procedure can be appropriately and safely performed in an ambulatory surgical center, and it is specified as a covered ambulatory surgical procedure or CMS has proposed to specify it as one.

CMS repealed that section in the CY2026 rule as a conforming change, reasoning that a list scheduled for complete elimination needs no criteria for removing individual procedures from it. The repeal is not merely announced: 42 CFR 419.23 is absent from the current Code of Federal Regulations, and subpart B of part 419 now runs from 419.20 to 419.22 with nothing after it.

What replaced the criteria is a schedule rather than a test — but not an opaque one. In the CY2027 proposed rule CMS named the clinical families it proposes to remove next and the families it expects to remove last, which is a different kind of forward visibility than the criteria offered: not whether a given procedure qualifies, but roughly when its family is due. Practices in the deferred families now have a published expectation to plan against, which they did not have in January 2026.

Removal does not move the procedure to the outpatient department. It makes both settings payable and shifts the decision — and four consequences follow that a billing operation should know are there. Each is treated in full elsewhere; this is the map.

1. 01

   The admission needs a reason it did not need before

   While a procedure is on the list, 42 CFR 412.3(d)(2) makes the inpatient admission generally appropriate for Part A payment regardless of the expected duration of care. Once it is off, the admission has to stand on the admitting physician's documented expectation or on case-by-case clinical judgment under the other paragraphs of 412.3(d). The orthopedics billing guide works through that decision, and the claim it lands on is the institutional one described in Medicare Part A billing.
2. 02

   A review exemption with no calendar end

   Claims for services removed from the list on or after 1 January 2021 are exempt from certain medical review activities until the Secretary determines the service is more commonly performed in the outpatient setting than the inpatient setting. It ends on a data finding, not on a date, and it is narrower than it sounds — contractors may still review, still educate, and still deny where the service itself is not reasonable and necessary. What the exemption covers, and who conducts the reviews it covers, is set out in the types of Medicare audits.
3. 03

   Skilled nursing coverage is unaffected by the removal

   Commenters raised the three-day prior inpatient stay that Medicare requires by statute before it will cover skilled nursing facility care. CMS's answer was that removal from the list does not require a procedure to be performed as an outpatient — it allows payment in either setting — and that the three-day requirement is unchanged. The statutory gate is the same; what has changed is that the admission producing the qualifying days now has to be justified on its own terms.
4. 04

   Beneficiary cost-sharing is capped per service

   Outpatient cost-sharing for an individual service is capped at that year's Part A inpatient hospital deductible. CMS expects most removed procedures to fall into comprehensive payment groups, in which the whole hospital claim is paid as one service and produces one copayment rather than one per line. That is an expectation about how the payment groups behave, not a guarantee about any particular claim.

One boundary is worth stating plainly, because it is the most common way this rule is over-applied. The inpatient-only list is a Medicare fee-for-service construct. A Medicare Advantage organization or a commercial plan sets its own site-of-service and level-of-care policy, so the same procedure can be payable as an outpatient under fee-for-service and still require an inpatient authorization from a plan — see Medicare Advantage billing. Coverage limits that turn on medical necessity rather than on setting are a separate mechanism again, described in national and local coverage determinations, and the rest of the program's payment machinery is mapped across the Medicare billing knowledge base.