Spine surgery has historically operated under two sets of economics: one determined by the care delivered and another by the building in which it is delivered.
For 2026, Medicare’s ASC conversion factor is $56.322, compared with $91.415 for hospital outpatient departments, and hospitals receive roughly 60% more for similar services because of facility-fee differences.
That gap helped create a powerful gravitational force: Hospital ownership could make the same clinical encounter more valuable, giving health systems an incentive to acquire physician practices and direct services into hospital outpatient departments.
CMS is beginning to narrow the divide. The change is not yet broad enough to make spine surgery itself site neutral. Instead, CMS has been expanding physician-office-equivalent payment one category at a time at certain off-campus hospital departments. For spine surgeons, the significance lies not only in the services CMS has targeted, but in the direction of travel.
CMS is building site neutrality one service at a time
Under its finalized 2026 outpatient payment rule, CMS began paying physician-fee-schedule-equivalent rates for certain drug administration services performed at grandfathered off-campus hospital outpatient departments. CMS estimated that the drug administration policy would reduce outpatient spending by $290 million in 2026, including $220 million in Medicare savings and $70 million in lower beneficiary coinsurance.
The agency’s proposed 2027 outpatient rule would extend physician-office-equivalent payment to imaging without contrast, including X-rays and MRIs, performed at those off-campus departments. CMS projects the imaging proposal would reduce Medicare Part B spending by approximately $260 million during its first year, including $190 million in program savings and $70 million in lower beneficiary premiums. The agency also projects that beneficiary cost sharing would decline by about $70 million.
Rural sole community hospitals would be exempt from the proposed imaging policy. For spine practices, imaging is not a peripheral service. X-rays and MRIs are among the services specifically identified in CMS’ proposed expansion, placing site-neutral payment near the beginning of the spine-care pathway rather than only at the point of surgery.
CMS has not proposed applying physician-office rates to spine surgery itself. But the imaging proposal signals the government may continue expanding site-neutral treatment into additional outpatient service categories.
Spine procedures are moving to outpatient at the same time
Site-neutral payment is advancing as CMS simultaneously removes restrictions that have historically kept procedures in hospital settings. CMS’ finalized 2026 rule began a three-year phaseout of the inpatient-only list by removing 285 predominantly musculoskeletal procedures. The agency said the change allows Medicare to pay for those procedures in hospital outpatient departments when physicians determine outpatient treatment is clinically appropriate. CMS also added 289 procedures to the ASC covered procedure list after revising its eligibility criteria and added another 271 codes that had been removed from the inpatient-only list.
The combined 560-code expansion opened a significant group of musculoskeletal procedures to Medicare payment in ASCs. For 2027, CMS has proposed removing another 638 services from the inpatient-only list during the second year of the three-year phaseout. The rules do not require surgeons to move cases out of hospitals. CMS said the changes are intended to give physicians greater flexibility to determine the appropriate site of care.
“It will likely accelerate the migration of appropriate procedures into ASCs,” Peter Bravos, MD, chief medical officer of Sacramento, Calif.-based Sutter Health’s Surgery Center Division, told Becker’s.
Dr. Bravos said that as reimbursement differences narrow, care tends to move toward more efficient and patient-friendly settings. He also warned that compressing reimbursement across every setting could threaten the financial sustainability of some ASC service lines.
More ASC cases may not mean better ASC economics
ASCs appear positioned to receive more procedural volume as Medicare removes inpatient restrictions and reduces hospital-based payment advantages. But CMS’ payment policies continue to reimburse ASCs substantially below hospital outpatient departments.
That imbalance is central to the debate. Site neutrality can narrow the gap by lowering hospital payments without raising ASC reimbursement enough to cover the cost of absorbing more complex cases. CMS’ proposed 2027 rule illustrates the tension. Although CMS proposed an average 2.4% update for ASC rates in 2027, the proposal would reduce payment for four high-volume spine pain management procedures performed in ASCs.
Payment for transforaminal epidural steroid injections would fall from $485.51 to $466.96, while payment for lumbar or sacral facet injections would decline by the same amount. Lumbar or sacral radiofrequency ablation would decline from $948.66 to $908.27, and interlaminar lumbar or sacral epidural injections would fall from $387.46 to $372.75.
“The reimbursement bar has been lowered once again,” George Galvan, MD, neurosurgeon and CEO of Texas Neurological Spine in San Antonio, told Becker’s. Dr. Galvan said site neutrality, combined with the inpatient-only list phaseout, would drive hospital cases into ASCs and office-based settings. He also said the policy could slow hospital acquisitions of physician practices and encourage more hospital-ASC joint ventures.
The result is a difficult proposition for spine centers: More cases could become eligible for outpatient care, while reimbursement for some common procedures continues to decline.
Hospital employment could feel the pressure
For hospital-employed spine surgeons, site-neutral payments could affect compensation and service-line investment by reducing the facility revenue that supports hospital-based practices.
“Enacting site-neutral payments have the potential to completely upend orthopedic practices,” Adam Bruggeman, MD, CEO of Texas Spine Care Center in San Antonio, told Becker’s. Dr. Bruggeman said hospitals with insufficient clinical margins could reconsider employed and contracted physician agreements. He also cited noncompete clauses, certificate-of-need laws and restrictions on physician-owned hospitals as barriers for surgeons seeking independent alternatives.
Pierce Nunley, MD, of the Spine Institute of Louisiana in Shreveport, said site neutrality could reduce hospital reimbursement and shareholder distributions while increasing ASC volume.
“The key opportunity lies in strategically transitioning appropriate cases to the ASC while preserving hospital capabilities for complex, high-acuity cases,” Dr. Nunley said.
Independence or more consolidation?
Some physician leaders said site neutrality could narrow the financial advantage of hospital ownership.
“These policies help level the playing field between hospital systems and independent physician groups,” Paul Lynch, MD, founder and CEO of US Pain Care in Scottsdale, Ariz., told Becker’s.
Others warn that lowering hospital payments without adequately supporting physician practices and ASCs could accelerate consolidation.
“This imbalance seems to be the objective: a not-so-subtle way of pressuring physicians into consolidation,” Jeffrey Carlson, MD, president of Orthopaedic & Spine Center in Newport News, Va., told Becker’s. Dr. Carlson also said declining hospital outpatient rates and the elimination of the inpatient-only list could push hospitals toward more ASC partnerships.
The outcome may depend on where payment rates settle. Reducing the hospital premium could strengthen independent groups, but pushing every setting toward inadequate rates could make consolidation more likely.
Hospitals say care settings are not interchangeable
The American Hospital Association has argued that hospital outpatient departments treat Medicare patients who are often sicker and more medically complex than those seen in physician offices.
AHA Senior Vice President Ashley Thompson said CMS’ policies “ignore the important differences between hospital outpatient departments and other sites of care.”
CMS’ proposed exemption for rural sole community hospitals suggests the agency recognizes that site-neutral policies may affect markets differently. For spine surgeons, the debate ultimately comes back to patient selection. Greater outpatient eligibility does not make every patient an ASC candidate, particularly those requiring complex reconstruction, extensive medical support or postoperative rescue capacity.
What spine surgeons should watch
CMS finalized site-neutral payments for certain off-campus drug administration services in 2026, proposed expanding the policy to imaging in 2027 and continued removing procedural barriers to outpatient care.
Hospital-employed surgeons should understand how much their compensation and program infrastructure depend on facility revenue. Independent practices and ASC owners must determine whether greater outpatient volume will come with reimbursement sufficient to cover implants, anesthesia, staffing and postoperative care.
Site neutrality will not tell spine surgeons where to operate. Rather, it will remove some of the financial incentives that have long influenced that decision.
At the Becker’s 32nd Annual Meeting: The Business and Operations of ASCs, taking place October 29-31 in Chicago, ASC leaders, surgeons and healthcare executives will explore strategies to drive growth, enhance operational performance, navigate reimbursement challenges and prepare for the future of ambulatory surgery. Apply for complimentary registration now.
