News to Note – August 2026

  • Under the Medicare bundled payment programs, the Centers for Medicare and Medicaid Services (CMS) often issues waivers of the requirement for a three-day Inpatient hospitalization to access the Part A skilled nursing facility (SNF) benefit. This includes the new Transforming Episode Accountability Model (TEAM) program and the Comprehensive Care for Joint Replacement (CJR), which ended in 2024 but is also proposed to resume nationwide in 2027 as the Accountable Care Organizations (ACOs) model. 
    • What if a patient in TEAM or the Comprehensive Care for Joint Replacement Expanded model (CJR-X) has joint replacement surgery as an Outpatient and is discharged home but then realizes they cannot manage their care at home, so they return to the hospital?  Can they still go to a SNF with the waiver, or does the waiver only apply if they are discharged from the index stay directly to a SNF? We know that a three-day Inpatient hospitalization qualifies a patient for Medicare Part A-covered SNF care for 30 days after discharge, but does the same apply under the waiver programs? Yes, this patient would have 30 days from the date of the hospital discharge to be admitted to a SNF and have it covered by Medicare Part A, but there are some caveats. 
      • First, SNFs are only covered under the waiver if they are rated three stars or higher. 
      • Second, hospitals still must offer the patient a proper choice of SNF; they are welcome to choose a SNF with one or two stars, but they would have to pay to go there, because Medicare Part A will not cover it. 
      • Third, the SNF care must be related to the surgical procedure.
      • Finally, the SNF must be made aware that the patient is part of the program so that it can place code A9 on their claim in the Treatment Authorization field. 
    • If your hospital participates in TEAM now or will be involved in CJR-X starting next year, your plan for patients going home should include contingency measures for what to do if they don’t do well at home. Patients should know who to call to help arrange admission to a SNF without having to return to the hospital. This planning won’t just avoid unnecessary costs but will also add to the patient’s perception of the quality of their care, which is measured by CMS and affects the hospital payment. 
  • The 2027 Outpatient Prospective Payment System (OPPS) Proposed Rule includes a proposal to remove an additional 637 procedures from the Inpatient-Only (IPO) List as the second phase of its three-year elimination strategy. The eliminations last year were relatively tame, affecting mainly orthopedic and spine procedures.  This time, however, they are including gastrointestinal, gynecologic, urinary, thoracic procedures, colon resection, nephrectomy, pancreatectomy, liver resection, esophagectomy, lung resection, and much more. CMS stated several times in the ruling that they are leaving only the most clinically complex services for removal in 2028.
    • If finalized, nearly half of the remaining IPO procedures will become eligible for either Inpatient or Outpatient payment, based on medical necessity, rather than a predetermined designation. The proposal includes procedures across multiple clinical families, but CMS intentionally delayed removal of neurological procedures, cardiovascular procedures, and transplant-related services until 2028.  
    • According to CMS, many of the services proposed for removal already have clinical characteristics and resource utilization similar to those of procedures currently paid under the OPPS. In contrast, CMS noted that neurological, cardiovascular, transplant, and other highly specialized procedures will require additional review because of their greater clinical complexity and may necessitate revisions to existing APC or Comprehensive APC (C-APC) payment methodologies before they can appropriately transition to outpatient payment.
    • CMS reiterated its policy that once a procedure is removed from the IPO, it becomes eligible for payment in either the Inpatient or hospital Outpatient setting. The appropriate setting continues to depend on whether the service is reasonable and necessary, based on the individual patient’s clinical circumstances and existing Medicare coverage policies. While the procedure itself may no longer automatically classify the case as an Inpatient hospitalization, physicians must continue to determine the appropriate status based on the patient’s overall condition, expected length of the hospital stay, comorbidities, procedural risk, and anticipated postoperative care needs.
    • For the hospitals that have been sitting back and deferring to Outpatient, it’s going to be financially painful to continue that in 2027.  As an example, the DRG for an Inpatient colon resection pays a community hospital about $14,000 but the planned 2027 Outpatient payment rate for that surgery is about $4,000. There likely aren’t that many hospitals that can take that kind of financial hit repeatedly and stay in business. If your utilization review team is not embedded in the pre-op area now, it’s time to start planning. 
  • Last month, Commence Health, one of the Quality Improvement Organizations (QIOs), released their annual report for 2025. Here are a few highlights:
    • They reviewed over 57,000 hospital discharge appeals and sided with the hospital in over 85% of cases. 
    • On the post-acute side, they reviewed over 36,000 appeals from Medicare patients about termination of SNF care and over 250,000 appeals from Medicare Advantage (MA) patients. We all have heard that MA plans watch SNF utilization very carefully; this certainly supports that. They agreed with the patient in about 40% of the cases.
    • They received 293 appeals for HINN 1 – the pre-admission notice of non-coverage – and sided with the hospital in 75% of the cases.
    • They received 32 HINN 10 requests, agreeing with discharge in 60% of the cases.
    • Finally, they received 144 appeals of the change from Inpatient to Outpatient via the Medicare Change of Status Notice but sadly, provided no data on the success of those appeals. 
    • Commence also received over 15,000 requests for immediate advocacy and over 962,000 total calls from Medicare beneficiaries. 
  • CMS recently finalized changes to strengthen its oversight of Accrediting Organizations (AOs), reaffirming that organizations granted deeming authority must consistently evaluate hospitals’ adherence to the Medicare Conditions of Participation (CoPs). While the announcement may initially appear to be directed solely toward AOs, its implications may extend much further. 
    • For hospitals, this rule represents an opportunity to reexamine how regulatory compliance is interpreted, operationalized, and ultimately measured across the healthcare industry. The CMS rule reinforces that this responsibility is a public trust and emphasizes the need for increased oversight and more consistent survey performance among AOs. The intent seems straightforward: hospitals participating in Medicare should be evaluated against the same federal requirements, regardless of which AO conducts the survey.
    • The CoPs do not change because a hospital selects one AO instead of another. But, when certain regulatory requirements receive more emphasis during one type of survey than another, organizations naturally devote additional education, auditing, and operational resources to those areas. Over time, this can create meaningful differences in how hospitals implement mechanisms for adhering to identical federal regulations. Organizations should build sustainable compliance programs grounded directly in the CoPs and then supported by the interpretive guidelines. 
  • You are not imagining things if you noticed that the Quarter 4 2025 Program for Evaluating Payment Patterns Electronic Report (PEPPER) states that the national 80th percentile for one-day Inpatient hospitalizations in the last 10 quarters was about 10%. But then, in that same table in the next PEPPER for Quarter 1 2026, that same 80th percentile for the previous 10 quarters is indicated at about 15%. When Dr. Ronald Hirsch asked CMS about this, they responded that there had been a “methodology refinement.” 
  • Humana recently published a policy change stating that it will start denying payment under its readmission program for patients who return and are placed into Outpatient status with Observation services, in addition to patients who are readmitted as Inpatient. They also note that they will review whether the return was related or preventable, but if you start seeing such denials, ensure they have been reviewed per their policy.