Orthopedic surgery is moving out of the hospital faster than any payment system was built to handle, and the fight over who gets paid what for that shift is now the defining question for ASCs heading into 2026.
The migration itself is no longer in dispute. By late 2023, outpatient orthopedic volume was 33 times higher than inpatient volume, and CMS has spent the past year clearing the regulatory path for even more. In its 2026 Hospital Outpatient Prospective Payment System and ASC rule, the agency added 573 codes to the ASC Covered Procedures List and began phasing out the Medicare inpatient-only list, a three-year unwind that removes 285 mostly musculoskeletal procedures, 266 of them in 2026 alone.
That is a structural change, not a routine update. For decades, the inpatient-only list dictated where complex spine and joint cases could be performed. Its removal hands surgeons and patients the site-of-service decision that payers used to make for them.
“I believe that more decision making needs to happen between the provider and the patient,” Wael Barsoum, MD, president and chief transformation officer at Healthcare Outcomes Performance Co., told Becker’s, pointing to a track record of moving total knee and total shoulder replacements outpatient while readmissions fell.
The gap that defines the fight
Here is the problem the volume story obscures: the money has not followed the cases.
For 2026, the ASC conversion factor is $56.322, compared with $91.415 for hospital outpatient departments. Hospitals still collect roughly 60% higher Medicare payments for similar services because of facility-fee differences. So as CMS shifts cases to the lowest-cost setting, it is also steering them toward the setting it reimburses least.
CMS finalized only a 2.6% ASC payment increase for 2026, and that gap is exactly what site-neutral payment is meant to close. But orthopedic leaders reading the 2026 proposals see the correction landing on hospitals, not on themselves: they expect hospital payments to fall rather than ASC rates to rise.
That is the crux of the fight. Site-neutral policy narrows the disparity by pulling the ceiling down, which erodes the economics of hospital-employed physician models and accelerates consolidation, without necessarily improving the arithmetic for the independent surgery center absorbing the cases.
The squeeze underneath
The reimbursement pressure is not confined to Medicare facility rates. On the professional side, CMS raised the physician fee schedule conversion factor for 2026, a one-time correction that included a 2.5% bump from HR 1. AMA leaders warned the increase still does not keep pace with the cost of running a practice.
Anesthesia is a sharper pressure point. UnitedHealthcare has implemented a 15% pay cut for independently practicing CRNAs in select states, following an 8.2% decline in CMS anesthesia reimbursement from 2019 to 2024. As orthopedic ASCs take on higher-acuity spine and joint cases that require longer anesthesia time, falling anesthesia pay collides with a workforce shortage that leaders already rank as their top operational concern.
Then there is utilization management. CMS launched its Wasteful and Inappropriate Service Reduction model Jan. 1 in Arizona, Washington, New Jersey, Texas, Ohio and Oklahoma, applying AI-supported prior authorization to services including cervical spinal fusion and epidural steroid injections. Traditional Medicare, long free of prior authorization, is now testing it on the exact procedures orthopedic ASCs are being encouraged to take on.
What executives should watch
For hospital and health system leaders, the near-term risk is margin compression on an outpatient book of business they may have assumed was protected. Site-neutral pressure lands hardest on employed physician models and hospital outpatient departments, the settings health systems have spent a decade acquiring.
For ASC operators and physician owners, the opportunity is real but conditional. The centers positioned to capture the migration, rather than watch it happen, are the ones renegotiating commercial contracts around the newly covered procedures and building payer partnerships that pay for total episode value rather than line-item facility fees.
“Outpatient spine surgery is not inpatient care moved to a cheaper setting,” Michael Lewis, MD, chair of anesthesiology and pain management at Detroit-based Henry Ford Health and Michigan State University in East Lansing, told Becker’s, arguing that payers who evaluate ASC programs through an inpatient lens miss the downstream savings entirely.
The stakes are compounding. Commercial healthcare costs are projected to rise up to 8.5% in 2026, which gives payers every incentive to keep steering volume to ASCs, and every incentive to hold the line on what they pay once the cases arrive.
“Being a surgeon is the only deflationary profession in the world these days,” Brian Blackwood, MD, of Boulder, Colo.-based Boulder Centre for Orthopedics & Spine, told Becker’s, predicting continued cuts will push practices to sell or merge.
The reshaping is already underway. Whether it strengthens orthopedic ASCs or simply hands them more work at rates that do not cover the cost will be decided in the reimbursement fight now playing out in CMS rulemaking and payer contracts, not in the operating room.
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.
