By Pete Mercer
Why a modest payment update by CMS may mask deeper reimbursement cuts and mounting financial pressures for independent surgery centers.
Earlier this year, the Centers for Medicare and Medicaid Services (CMS) released a proposed payment rule for the Calendar Year 2027 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System, suggesting a 2.4% average payment increase for ambulatory surgery centers and hospital outpatient departments.
Repertoire spoke to Mandy Hawkins, senior advisor for Avanza + MedHQ and CEO of Three Hawks Advisors, about the recent proposed payment rule from CMS, what it means, and how it could impact ASCs across the country.
What the proposed rule means
According to Hawkins, CMS is moving in the right direction regarding policy, but the payment side of the proposal is not as encouraging. She said, “The proposal removes 637 codes from the inpatient-only list, a list that will be eliminated by Jan. 1, 2029, and adds 618 codes to the ASC covered procedure list and extends the use of the hospital market basket for another year. The industry is hoping that CMS extends it longer than one year. The proposed rule also signals that CMS believes the physician, the anesthesia provider, and the patient should decide the site of service.”
On the payment side of things, CMS proposed a 2.4% update, but the results vary by CPT code and specialty. Out of the top 100 codes that are used for reimbursement, only 15 of them are proposed to see an increase over the rates from 2026. While a 2.4% update sounds positive, Hawkins said the math tells a different story because the ASC weight scalar drops from 0.872 to a proposed 0.809. CMS applies the ASC-specific scalar on top of that. Because the scalar excludes device costs, which have grown from 5.4% of ASC spend in 2016 to 32.4% in 2026, non-device procedures bear the full burden of cuts. “This is why 85 of our top 100 codes face a cut,” she said.
Hawkins added, “In 2026, ASCs received roughly 50% of the hospital outpatient rate for those codes. In 2027, that falls to roughly 44%. We would be paid less than half of what a hospital receives for identical work while meeting comparable federal and state requirements and reporting under the same Medicare quality program.”
Reimbursement in today’s environment
Looking at this reimbursement through the lens of today’s financial environment reveals some interesting limitations to the proposed rule. Costs are continuing to climb across the healthcare spectrum, so it’s more important than ever for healthcare entities to find ways to reduce spending.
“As noted,” Hawkins said, “of our top 100 codes by volume, 85 are proposed for a decrease. For most facilities, this is not a positive update at all. It also comes at a time when costs are moving in the opposite direction.”
Ambulatory essentials like anesthesia, implants, and devices are seeing cost increases, while provider shortages are still a significant obstacle for outpatient and inpatient facilities alike. Because ASCs are operating on tighter budgets than most hospitals, the 2.4% increase doesn’t really meet the needs of most ambulatory facilities.
“Most ASCs are small businesses,” Hawkins said. “More than half have two or fewer operating rooms, buying the same implants as a health system without any of its purchasing power, and hiring from the same labor pool with a smaller budget.”
Hawkins did point out an improvement in reimbursement for device-intensive codes, where certain procedure reimbursements are proposed to increase by several thousand dollars per procedure. These are not among the highest-volume procedures, which are moving in the opposite direction.
“What concerns me most, and should concern policymakers, is not clinical care; it’s the reimbursement model. Single-specialty independent centers in ophthalmology, GI, and pain are absorbing real reductions in 2027 for reasons that have nothing to do with the cost or quality of the care they deliver. If enough of those facilities can no longer remain viable, a payment system problem will become a patient access problem.”
Shifting from hospitals to ASCs
As more procedures become available at outpatient facilities, will this shifting dynamic and the proposed reimbursement rule push more patients towards ASCs over hospitals? Hospitals have viewed ASCs as competitors in the past, but that relationship has changed.
As Medicare and commercial payers are leaning towards lower-cost settings, cases are leaving hospitals anyway. The hospitals that can partner with an ASC can recapture some of that revenue instead of losing it altogether to outpatient facilities.
“At 44% of the hospital reimbursement rate, with no evidence of a growing difference in capital or operating costs between the two settings to justify the gap, the payment differential clearly strengthens the hospital’s position,” Hawkins said.
She argues that this is why we are seeing more joint ventures where health systems offer physicians equity in the ASC, giving them skin in the game that they would not have at a traditional hospital. Independent surgeons can also take their cases to physician-owned or corporate ASCs instead of a hospital. This doesn’t mean that independent ASCs are going anywhere, though.
“Surgeons who choose independence do so because it works. They retain control over clinical protocols, supply purchasing, and staffing. Long-term equity in a well-run center delivers autonomy and meaningful distributions without administrative bureaucracy. The real question for the next few years is not whether independent ASCs survive, but whether Medicare’s payment math leaves them enough margin to keep reinvesting in their facilities.”
Before the final ruling
As of this writing, CMS has not published a final rule for the Calendar Year 2027 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System. Before issuing its final rule, Hawkins suggests that CMS calculate a single outpatient weight scalar based on combined ASC and hospital outpatient department volume and apply one budget neutrality calculation across both payment systems.
In the next three to five years, the scope of ASCs will continue to expand as the IPO is eliminated and procedure selection shifts towards clinical discretion. For Hawkins, payment alignment is the big question.
“If CMS resolves the scaling problem, these will be very good years for surgery centers. If it does not, we will keep receiving the expanding list of procedures we cannot afford to perform and the savings that CMS is continuing to count on will not translate to reality.”
For ASC leaders, Hawkins advises them to pull the highest-volume codes and compare current rates against the proposed rates so they plan around their real number rather than the 2.4% rate update. Any device-intensive cases should be evaluated, and any payer contracts and implant and supply agreements should be revisited. Building data collection workflows for quality reporting now will put them in a better position moving forward.
She said, “I encourage everyone in the ASC community to get involved. ASCs operate in a heavily regulated environment where dedicated advocacy directly influences reimbursement levels, administrative burden and patient access. Supporting the Ambulatory Surgery Center Association and its advocacy efforts is essential to the financial viability, regulatory flexibility, and continued growth of surgery centers nationwide.”
Key Takeaways
- CMS’s proposed 2.4% payment update for 2027 masks potential reimbursement cuts, with 85 of the 100 highest-volume ASC procedure codes facing proposed decreases.
- Rising costs for anesthesia, implants, devices and labor are putting additional financial pressure on independent ASCs, many of which lack the purchasing power of larger health systems.
- Expanding the list of procedures eligible for ASCs creates growth opportunities, but reimbursement disparities could threaten the financial viability of independent centers and ultimately affect patient access.
- ASC leaders should analyze proposed rates for their highest-volume procedures, review payer contracts and supply agreements, and support industry advocacy efforts before CMS finalizes the rule.