Regulatory Bulletins

Bulletin 03 – The Removal of Total Hip Arthroplasty from the Inpatient Only List

The Removal of Total Hip Arthroplasty from the Inpatient Only List

The Medicare Inpatient-Only (IPO) list includes procedures that are typically provided only in the inpatient setting and paid under the Hospital Inpatient Prospective Payment System (IPPS)1. Each year, the Centers for Medicare & Medicaid Services (CMS) reviews the IPO list to determine if a procedure should be removed from the list and assigned to an APC group payment. CMS has established five criteria that are part of this methodology.


  • “Most outpatient departments are equipped to provide the services to the Medicare population.
  • The simplest procedure described by the code may be performed in most outpatient departments.
  • The procedure is related to codes that we have already removed from the IPO list.
  • A determination is made that the procedure is being performed in numerous hospitals on an outpatient basis.
  • A determination is made that the procedure can be appropriately and safely performed in an ASC and is on the list of approved ASC procedures or has been proposed by us for addition to the ASC list.”[1] (84 FR 61352)

In the CY 2020 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Final Rule (CMS-1717-FC), CMS determined that Total Hip Arthroplasty (THA), assigned CPT code 27130, met criterion 2 (the simplest procedure described by the code may be performed in most outpatient departments) and criterion 3 (the procedure is related to codes that CMS has already removed from the IPO list) and, as such, appropriately selected patients could have this procedure performed on an outpatient basis. Beginning on January 1, 2020, the THA procedure described by CPT code 27130 is removed from the Inpatient Only (IPO) List and assigned to C-APC 5115 with status indicator “J1”.

Similar to the removal of Total Knee Arthroplasty (TKA) in 2018, CMS re-iterated that:

“…the removal of any procedure from the IPO list does not require the procedure to be performed only on an outpatient basis. That is, when a procedure is removed from the IPO, it simply means that Medicare will pay for it in either the hospital inpatient or outpatient setting; it does not mean that the procedure must be performed on an outpatient basis.” [Bold added by author] (84 FR 61354)

When a procedure is taken off the IPO list, it can be performed as either an inpatient or an outpatient procedure. CMS defers to physician judgment for the most appropriate procedure setting for each individual patient.

“…we continue to believe that the decision regarding the most appropriate care setting for a given surgical procedure is a complex medical judgment made by the physician based on the beneficiary’s individual clinical needs and preferences and on the general coverage rules requiring that any procedure be reasonable and necessary.” [Bold added by author] (84 FR 61354)

To guide physicians and hospitals in decisions regarding patient status, CMS refers to the 2-Midnight Rule for guidance on when an inpatient admission is appropriate for payment under Medicare Part A (inpatient hospital services).

“Under the 2-Midnight Rule, an inpatient admission is generally appropriate for Medicare Part A payment if the physician (or other qualified practitioner) admits the patient as an inpatient based upon the expectation that the patient will need hospital care that crosses at least 2 midnights.”[2] [Bold added by author] (80 FR 70305)

When applying the 2-Midnight Rule guidance to beneficiaries undergoing THA, if the beneficiary is expected to require hospital services across only 1 or less midnights, the initial status order should be written for outpatient services. If the beneficiary is not discharged after the first midnight, case/utilization review should be performed. CMS repeatedly and specifically stated that it will not endorse or create ‘level of care’ or other admission status criteria for purposes of making the admission status (inpatient/outpatient) decision:

“While we continue to expect providers who perform outpatient THA on Medicare beneficiaries to use comprehensive patient selection criteria to identify appropriate candidates for the procedure, we believe that the surgeons, clinical staff, and medical specialty societies who perform outpatient THA and possess specialized clinical knowledge and experience are most suited to create such guidelines. Therefore, we do not expect to create or endorse specific guidelines or content for the establishment of providers’ patient selection protocols.” [Bold added by author] (84 FR 61354)

Instead, hospital case/utilization review after the first midnight should focus on valid medical reasons, within standards of care, for a beneficiary remaining in the hospital across a second midnight as documented by the treating physician(s). Medical record documentation supportive of the provision of hospital services across a second midnight may include, but is not limited to, issues such as: lack of a safe discharge disposition; blood loss anemia; pulmonary recovery; recovery of bowel function; ability to tolerate a diet; ability to safely perform activities of daily living; safe ambulation; adequate pain control; instability of comorbid conditions; etc.

If the beneficiary is initially expected to require medically necessary hospital services across 2 or more midnights, the initial status order for inpatient admission should be placed with the reasons for the expected length of stay documented in the chart. In addition to those reasons listed in the previous paragraph, medical record documentation that is supportive of a 2 midnight expectation include, but are not limited to: comorbid conditions expected to result in prolonged post-procedure recovery (e.g., obesity, age, Charlson score, high ASA score) and post-discharge needs (e.g., skilled hospital services, acute rehabilitation, home care):

“…patients with a relatively low anesthesia risk and without significant comorbidities who have family members at home who can assist them may likely be (but are not necessarily) good candidates for an outpatient THA procedure. These patients may be determined to be able to tolerate outpatient rehabilitation either in an outpatient facility or at home postsurgery. While on the other hand, patients that require a revision of a prior hip replacement, and/or has other complicating clinical conditions, including multiple co-morbidities such as obesity, diabetes, heart disease, may not be strong candidates for outpatient THA.” (84 FR 61355)


“…elective THA, necessitated, for example, by osteoarthritis, for a generally healthy patient with at-home support is different than THA for a hip fracture that is performed on either an emergent or scheduled basis. While the former may be appropriate for outpatient THA if the physician believes that the patient may be safely discharged on the same or next day, the latter may be more appropriate for hospital inpatient admission.” (84 FR 61355)

In some instances, errors in admission status (inpatient/outpatient) orders may occur. These errors need to be identified and corrected through a hospital ‘self-audit’ process. When an inpatient order is written for a beneficiary who is discharged after only 1 midnight, an evaluation needs to be done to establish whether the patient:

  • Never had a reasonable expectation of hospital services across 2 midnights;
  • Had a reasonable expectation of hospital services across 2 midnights but experienced recovery sooner than expected; or
  • Had a known CMS exception (death, AMA, acute transfer, hospice, etc.)

In the absence of a clinically reasonable and documented initial expectation of hospital services across 2 midnights, or the presence of a 2 midnight expectation with a subsequent CMS approved exception, a Part B Provider Liable rebill process will correct the error post discharge, pre-billing.

To facilitate provider compliance with the policies related to the removal of THA from the IPO list, CMS established a 2-year exemption from Beneficiary and Family Centered Care-Quality Improvement Organization (BFCC-QIO) referrals to Recovery Audit Contractors (RACs) and RAC reviews for site-of-service for THA beginning on January 1, 2020 to provide an “adequate amount of time to allow providers to gain experience with application of the 2-midnight rule to these procedures” and “to update their billing systems and gain experience with respect to newly removed procedures eligible to be paid under either the IPPS or the OPPS…” (84 FR 61364)

This policy, however, “does not exempt procedures that are removed from the IPO list from the initial medical reviews of claims for short-stay inpatient admissions conducted by BFCC–QIOs.” (84 FR 61365)

“…BFCC–QIOs will continue to conduct initial medical reviews for both the medical necessity of the services, and the medical necessity of the site-of-service. BFCC–QIOs will continue to be permitted and expected to deny claims if the service itself is determined not to be reasonable and medically necessary. BFCC–QIOs will not make referrals to RACs for noncompliance with the 2-midnight rule for procedures that are removed from the IPO list within the first two years of their removal, RACs will not conduct reviews for ‘‘patient status’’ (that is, site-of-service) for procedures that are removed from the IPO list within the first two years of their removal, and claims with procedures that are removed from the IPO list that are identified as noncompliant with the 2-midnight rule will not be denied with respect to the site-of-service under Medicare Part A within the first 2 years of their removal beginning on January 1, 2020.” (84 FR 61365)

CMS clarified that these procedures are still included in the initial medical reviews of claims for short-stay inpatient admissions conducted by BFCC–QIOs. However, the BFCC–QIOs will not consider these procedures in:

“…determining whether a provider exhibits persistent noncompliance with the 2-midnight rule for purposes of referral to the RAC nor will these procedures be reviewed by RACs for ‘‘patient status.’’ During this 2-year period, BFCC–QIOs will have the opportunity to review such claims in order to provide education for practitioners and providers regarding compliance with the 2-midnight rule, but claims identified as noncompliant will not be denied with respect to the site-of-service under Medicare Part A.” (84 FR 61364)

CMS has not, at this time, provided specific guidance to the BFCC-QIOs regarding how the 2-year exemption should be considered in the calculation of error rates. It is also not clear whether the BFCC-QIOs will have the opportunity to look back and issue denials of reimbursement for THA claims from January 1, 2020 through December 31, 2022, after the expiration of the exemption period. Finally, CMS has made no commentary regarding the ability of other intermediaries, such as MACs, to audit and deny reimbursement for THA claims during the exemption period. Updates to this Bulletin will be provided as additional guidance is provided by CMS to providers and intermediaries.

Partial hip arthroplasty (PHA), CPT code 27125 (Hemiarthroplasty, hip, partial (for example femoral stem prosthesis, bipolar arthroplasty), remains on the Inpatient-Only List without change.

Operational Recommendation:

Create a process for scheduled surgical procedures that is part of the established pre-operative clinical evaluation process:

  • Physicians are already accustomed to discussing expected length of stay with their patients during the pre-procedure evaluation process
  • The initial status order (inpatient vs. outpatient) should be formally documented as part of the pre-procedure evaluation documentation
  • Although in the past, inpatient admission status was supported simply by the performance of a procedure on the IPO list, any inpatient admission status order should now be accompanied by a documented expectation of the need for at least 2 midnights of medically necessary hospital services, and a reasonable explanation supporting this expectation
  • The expected discharge disposition should be formally documented
  • The post-procedure plan of care should be formally documented

Admission status determination and documentation should be evaluated utilizing 2-Midnight Rule guidance:

  • Traditional utilization review screening criteria and ‘level of care’ review are not endorsed by CMS for purposes of determining admission status
  • Continue to work with all treating physicians involved in the care of THA patients to ensure medical record documentation supports the admission status determination over the duration of hospitalization


Has your organization determined the impact of THA coming off the IP-Only list? Versalus Health is offering a complimentary assessment to measure the effect of this regulatory change. The assessment will help you understand which procedures should remain inpatient, which procedures are likely to be outpatient, and the revenue integrity and compliance implications of this change. If you are interested in this assessment, please email us at or visit our website at


[1] Medicare Program: Changes to Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Revisions of Organ Procurement Organizations Conditions of Coverage; Prior Authorization Process and Requirements for Certain Covered Outpatient Department Services; Potential Changes to the Laboratory Date of Service Policy; Changes to Grandfathered Children’s Hospitals-Within-Hospitals; Notice of Closure of Two Teaching Hospitals and Opportunity To Apply for Available Slots. [2020 OPPS Final Rule (CMS–1717–FC)]. 84 Fed. Reg. 218 (November 12, 2019)

[2] Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Short Inpatient Hospital Stays; Transition for Certain Medicare-Dependent, Small Rural Hospitals Under the Hospital Inpatient Prospective Payment System; Provider Administrative Appeals and Judicial Review. [2016 OPPS Final Rule (CMS 1633-FC; CMS 1607-F2)]. 80 Fed. Reg. 219 (November 13, 2015)

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