Skilled nursing facility operators and industry advocates are raising concerns about CMS’s proposal to phase out the Medicare Inpatient-Only (IPO) list, warning that the change could significantly reduce Medicare-covered SNF admissions. The proposal, included in the CY2026 Hospital Outpatient Prospective Payment System rule, would remove 285 procedures from inpatient-only status over three years beginning January 2026.
The Three-Day Stay Rule Connection
Medicare covers post-acute SNF care only for beneficiaries who have a preceding inpatient hospital stay of at least three consecutive days—the so-called “three-day stay rule.” When procedures move from inpatient-only status to being payable in outpatient settings, hospitals may shift them to outpatient departments, eliminating the qualifying inpatient stay for subsequent SNF coverage.
Industry analysis suggests that 20-50% of SNF admissions follow musculoskeletal procedures—the primary category targeted in the IPO phase-out. If a significant portion of these procedures shifts to outpatient settings, affected patients would either forgo SNF rehabilitation, pay out-of-pocket, or seek coverage through Medicare Advantage plans that may have different post-acute policies.
CMS Response
CMS has stated that the IPO list elimination reflects advances in surgical techniques and post-operative care that make outpatient settings safe and appropriate for many procedures. The agency noted that hospitals will retain discretion to perform procedures on an inpatient basis when clinically appropriate, preserving the pathway to SNF coverage for patients who need it.
CMS also pointed to the SNF 3-Day Rule Waiver available to some Medicare Advantage plans and Accountable Care Organizations as an alternative pathway that does not require a qualifying hospital stay.
Industry Advocacy
The American Health Care Association has submitted detailed comments opposing the rapid phase-out timeline, requesting either preservation of the IPO list for procedures commonly followed by SNF care or modification of the three-day stay rule to accommodate the changing care landscape. AHCA estimates the change could reduce SNF Medicare revenue by $800 million to $1.2 billion annually.