News to Note – February 2026

  • The Centers for Medicare and Medicaid Services (CMS) finally posted the Medicare Inpatient Only List and the new Addendum B.  Both of them, along with a list of all the surgeries removed from the 2025 Inpatient Only list, can be found on Dr. Ronald Hirsch’s inpatient only webpage – free to all – at www.ronaldhirsch.com. And of course, one of the most utilized resources by ACPA members is our collection of specially-formatted Medicare Inpatient Only lists which clearly identifies which are Inpatient only and which are not.
    • This marks the start of the second attempt by CMS to eliminate the Inpatient Only list. Unfortunately, they did very little to provide information on how to apply the case-by-case exception which supports Inpatient hospitalization of a patient following a non-Inpatient only surgery. Interestingly, UnitedHealthcare (UHC) appears to have stepped in and provided some guidance. 
      • They published a policy on medical conditions which warrant Inpatient hospitalization following an elective surgery. For example, the policy lists advanced liver disease, symptomatic lung disease, heart failure, and coronary artery disease as warranting Inpatient. It also lists an ASA score of III or greater. 
      • However, to quote CMS, “no presumptive weight should be assigned to the treating physician's medical opinion.” As we all know, just because a physician documents, “I expect two midnights” doesn’t mean Inpatient status is supported.  Likewise, just because a physician documents, “ASA III; admit as Inpatient,” this doesn’t necessarily mean Inpatient is appropriate. You still must look for supporting diagnoses to support the status.
      • This policy applies to UHC’s commercial and exchange plans and not its Medicare Advantage (MA) plans. But if you think about it, commercial patients are generally healthier and certainly younger than Medicare Advantage patients. So, if it fits for commercial patients, it certainly should work for MA patients. 
    • With the impending abolition of the Medicare Inpatient Only list, including a prohibition on denials of Inpatient status for surgeries removed from the list until CMS allows them, the question comes up of whether this applies to MA plans. Since that denial prohibition is actually part of the federal regulations at 42 CFR 412.3, subsection 2, it seems MA cannot deny such claims for improper status. This may simply lead them all to adopt Aetna’s tactic (further described below), so keep a close eye on the online policy addendums for your MA plans and alert your contracting team to an impending hit to revenue.
    • When CMS first attempted to eliminate the Inpatient Only list in 2021, one of the big complaints was that the payment rates for the surgeries performed as Outpatient was far below the actual costs. This time around, CMS took great care in assigning payment rates and even established a seventh Ambulatory Payment Classification (APC) for very high cost orthopedic, spine, and neurosurgery procedures. Hopefully, this should make the transition a bit less financially painful.
  • CMS greatly expanded the number of procedures that can be done at ambulatory surgery centers (ASCs) as of January 1. It’s important to understand that if a patient with Medicare who doesn’t also have a Medicare supplement plan – which accounts for about 11% of Medicare beneficiaries – has a procedure performed at an ASC, they will owe 20% of the approved payment. Unlike outpatient services performed at a hospital where there is a statutory limit in the patient’s financial obligation (equal to the part A deductible, which for 2026 is $1,736), there is no such limit for ASC procedures. That means for 252 procedures, patients without a Medicare supplement will pay more for their procedure if it’s done at an ASC than at a hospital with an out-of-pocket cost that averages about $3,000 but can go as high as almost $8,500. 
    • What was CMS’ response when Dr. Hirsch contacted them and pointed this out? They noted they have an online tool which patients can use to see an estimate of their costs. 
    • If a patient has an outpatient procedure performed at a hospital and experiences a delayed recovery or recovery complication, the patient can be kept longer in the hospital – even overnight or for multiple days – in Outpatient status (with or without Observation services) or Inpatient status for that additional care. But if something happens in an ASC, where they do not have the capability to provide such extended services, they will simply pick up a phone and call 911 for an ambulance transfer to the closest hospital, shifting the responsibility of patient care to the hospital and hospital-based physicians. 
  • The Medicare payment for observation services in 2026 has increased with the base payment escalating by a whopping $24.42. In addition, the payment for an Outpatient total joint replacement will increase by $250, a 1.9% increase which is less than the rate of inflation. 
  • CMS released another proposed rule for Medicare Advantage (MA) plans. One noteworthy topic includes a proposal to remove measures related to the timeliness of appeal decisions, complaints about customer service, and complaints about the health plans themselves from the Star rating system. Even though these might be removed, it’s still important to urge your MA patients to file complaints with CMS when their plan deprives them of medically necessary care. 
  • Starting February 1, Blue Cross of North Carolina initiated a new policy for Inpatient status approval for elective procedures which simply states they will no longer approve Inpatient status in advance of an elective surgery and that, “the level of care will be determined based on the member’s clinical condition following the procedure.”
    • Unlike Aetna’s policy which is legal, this policy is a blatant violation of the federal regulations governing MA coverage of basic benefits. Blue Cross of North Carolina is not only disregarding the Medicare Inpatient Only list – which doesn’t require a specific clinical condition for a surgery to be compliantly billed as Inpatient – but it also doesn’t acknowledge the case-by-case exception that allows Inpatient hospitalization prior to surgery based on the physician’s determination that Inpatient hospitalization is warranted prior to surgery due to potential risk or complexity.
    • As if to legitimize it, Blue Cross of North Carolina goes on to state, “This change aligns with CMS guidelines and supports appropriate site-of-service utilization. Providers should continue to follow standard authorization processes for the procedure itself.” Yet, within their prior authorization policy, the list of surgeries requiring prior authorization is very limited and common surgeries such as joint replacement, spine procedures, cardiac surgery, and gastrointestinal procedures require no prior authorization. 
    • The same policy states all scheduled Inpatient hospitalizations DO require prior authorization. So, if the doctor wants to perform a multi-level cervical spine fusion as Inpatient in a high-risk patient, prior authorization for the surgery itself is not needed, but prior authorization for the Inpatient hospitalization IS needed. And, at the same time, the plan won’t allow prior authorization for Inpatient hospitalization in advance of a surgery. Furthermore, if everything goes well, it seems they will assess the clinical condition of the patient after surgery and likely deny the Inpatient hospitalization because the outcome was favorable.
    • The plan has indicated additional guidance will be available in the coming weeks so perhaps they will ultimately outline a compliant procedure. Hospitals in North Carolina should closely watch how this unfolds and provide Blue Cross feedback, hopefully before implementation, before other Blue Cross plans copy this tactic.
  • Nina Youngstrom, who writes the Report on Medicare Compliance, actually got a response from CMS about the Medicare Outpatient Observation Notice (MOON) which expired on November 30without a replacement version. She was told the new MOON should be released early this year and until that time, the old form should be used. Once the new version is released, there will be a 60-day grace period to allow transition to the new form. 
  • In case you missed it, the Q3 2025 PEPPER is now available for download but only to your hospital’s authorized officials.  
    • The good news – we’ll be getting them with data that’s more current than we used to see.  
    • The bad news – it appears there will be no significant changes to the report. There are two, tiny changes to a couple Diagnosis Related Groups (DRGs) for the “Surgical CC/MCC” measure, but that is it. 
  • Back in the day, primary care providers and office managers would sit down with paper provider manuals from all the insurance companies and create spreadsheets with the contracted specialists for each one. If their patient needed to see a cardiologist, they could be sure they sent them to one in the patient’s insurance network. But this rarely happens in the hospital. 
    • If a hospitalist wants their hospitalized patient to see a cardiologist in the outpatient setting following discharge and the patient has never seen one before, the hospitalist will likely either call the cardiologist on call or the one they think is best suited for the patient based on their issue.  Generally, this all happens without the hospitalist or anyone else checking to see if that doctor is contracted with the patient’s payer. 
    • This isn’t a problem in hospitals which employ all of the physicians associated with them because if the hospital is in-network, the doctors will all be in-network, too. But that’s not universal. 
    • Anthem announced it will be reducing payment to the hospital for care, provided in both outpatient and inpatient settings, by 10% if the patient receives care from a non-contracted provider unless it was approved by the payer or there are no contracted providers in the area. 
    • It’s actually a patient-centered effort to refer patients to in-network physicians. When a hospitalized patient seen by an out-of-network physician during their stay is discharged and tries to see that doctor in the office for follow-up, they will face obstacles in making the appointment and likely won’t end up not getting their necessary care which then can then evolve into a readmission. Amongst all our tasks, developing processes to ensure patients are seen by in-network doctors is probably low on the list but the financial implications of this new payer policy may move it up the list very soon, so be aware and ready to act. 
  • Another large payer recently announced they hired an AI company to perform PRE-payment audits of claims to validate billed DRGs. It would seem one can’t validate a DRG without validating the accuracy of the diagnoses submitted, so this should involve submitting medical records.
    • The interesting part of this announcement is they’ll also be using their current processes and vendors to audit DRGs AFTER payment.  There’s no indication that a claim audited and approved PRE-payment won’t also be audited POST-payment.  Or, for that matter, that the pre-payment auditor will be required to forward the records they received to the post-payment auditor.  
    • You may want to talk to your Health Information Management (HIM) colleagues about watching for the same records being requested multiple times and ensuring your contract allows such activity. 
  • A  recent study on AI use for clinical decision-making was not encouraging. Using 31 AI systems and 100 clinical cases, 22% of the recommendations from AI would have caused clinical harm with 75% due to omission of necessary care. As an example, for a healthy female with a simple UTI, some AI recommended a CT scan and others recommended no therapy at all. So do proceed with caution.
  • Many hospitals use the Medicare Appointment of Representative forms to file appeals of Inpatient hospitalization denials on behalf of the patient. Recently, one hospital did this but after filing the appeal, they received a call from the insurance company that the patient had withdrawn their appeal. No reason was given, the hospital was just notified. Likely the only way this could have happened is if the insurer contacted the patient and convinced them to withdraw the appeal. Did they explain to the patient that Inpatient hospitalization costs more out-of-pocket so appealing would lead to them owing more money? Are more insurers going to start doing this? It is certainly something to watch for. 
  • Remember Aetna’s new policy? They’ll initially approve all Inpatient hospitalizations for MA patients but then only pay the Inpatient rate if the hospitalization was five days or more, or if MCG Inpatient criteria are met. Cases not meeting either of these qualifiers will be paid at a lower rate, even if initially authorized and approved as Inpatient. 
    • CMS has reviewed this policy and they have no problems with it because it meets the Two-Midnight Rule. When you ask for Inpatient hospitalization approval, they are giving it. How much you get paid for that hospitalization is a contractual issue. And since patients receive their Inpatient rights, CMS is fine with it.
    • Because the policy is contractual, this should be addressed by your hospital finance team to change the terms of the contract. Until then, when that Inpatient approval with a lower severity payment notice comes in, you should do several things. 
      • If they issued the denial notice before the fifth day but the patient remains hospitalized for necessary care on day five or longer, inform them of that. They should retract the notice. 
      • If five hospital days have not passed, provide them with updated clinical information. Consider bombarding them with clinical information every single day. They likely will run their own criteria on the first day, approve Inpatient, but then record that MCG Inpatient criteria were not met so payment would be at the lower rate. On day two and three, the patient likely has new clinical findings but Aetna has no way of knowing that. So, send updated clinicals!
      • Remind them MCG criteria specify a patient who has passed two medically necessary midnights of hospital care meets Inpatient criteria. 
      • Finally, every time you have an Inpatient hospitalization paid at the lower rate, send a copy to your finance team. This is their issue to fix.
  • An issue with a National Coverage Determination (NCD) came up recently as a hospital had a patient with severe, asymptomatic aortic stenosis who was planned to undergo a transcatheter aortic valve replacement (TAVR). 
    • The Sapien valve is FDA-approved for use in patients who don’t yet have symptoms. Medical literature supports its placement before symptoms develop. But the NCD still requires the patient to be symptomatic. 
    • NCDs are binding and there is no room for obtaining coverage if all the criteria are not met. This was a very difficult situation for the doctors and the hospital. They of course wanted to do the right thing for the patient but they would either have to do it for free, or require the patient to pay $80,000 or more for the procedure.
    • Luckily, CMS reopened the NCD to consider adding asymptomatic patients and removing the requirement to report data to a registry. Unfortunately, the timeline suggests no decision will be forthcoming for nine months. 
    • If your hospital performs TAVRs, talk to your cardiologists before they go giving away costly procedures. The NCD comment period is closed so for now, all they can do is wait and hope their asymptomatic patients remain that way.