Before your next outpatient surgery, there’s a new Medicare rule that could decide how fast care happens. And if you’re a hospital, how quickly you’ll be reimbursed.

Hi there, and welcome to Health Law with Tara Ravi, your friendly guide to the world of healthcare law. Here we make healthcare law human, approachable, and a little more exciting than you might expect. We’ll break down regulations, policy, and operational decisions that shape the care people actually receive and uncover insights you can really use. Quick heads up, although I’m a healthcare partner at Bradley, the views expressed here are my own and not the firm’s or any of its clients, and they’re not intended as legal advice. But I promise to make this fun, insightful, and practical. Whether you’re a healthcare executive, attorney, clinician, or just someone who wants to understand the system better, you’re in the right place. This is Health Law with Tara Ravi.

Hi there, and welcome back to Health Law with Tara Ravi, where we talk about how healthcare law really works in plain English. If you’ve listened before, you know this show is about connecting the dots between policy, law, and the care we actually receive. Today we’re digging into a topic that may sound procedural, but it really has consequences for patients, physicians, and the business side of healthcare.

The new prior authorization rules for ambulatory surgical centers, or ASCs for short. This isn’t just another regulatory tweak. It’s A five-year CMS demonstration project that will test how prior authorization could work for outpatient surgeries at a national level. For now, it’s not nationwide. CMS is limiting the demonstration to 10 states. Big ones, California, Florida, Texas, Arizona, Ohio, Tennessee, Pennsylvania, Maryland, Georgia, and New York.

So if your ASC is in one of those regions, these roles will hit your operations first and likely will serve as the model for everyone else down the road. One note is that the Southeast inclusion in this demonstration is deliberate. States like Georgia and Florida have some of the nation’s fastest ASC growth. Often through hospital physician joint ventures CMS will closely observe whether these markets can meet documentation standards while maintaining timely access to care.

For health systems, this is an opportunity to build scalable workflows now and the results could shape how every hospital and surgery center gets paid for years to come, and not just by Medicare.

Okay, so what’s changing? Let’s start with what’s happening. Beginning in December 2025, CMS will require certain outpatient procedures performed in ASCs to undergo prior authorization. And we all know what that means. Prior authorization, it means we need to get approval first from your payer before the surgery can happen or the procedure. And right now, this is framed as a limited pilot, specific services, specific codes, but we know these projects often set the stage for something broader.

What’s unique here is that the services selected for review are mostly cosmetic or elective procedures, like eyelid surgery or nose surgery. These are procedures that already raise questions around medical necessity, whether something really needs to get done. CMS chose them intentionally by testing the process on procedures where necessity is easily challenged. The agency can see pretty quickly how contractors review, approve, or deny claims, and what happens to those appeals?

But here’s the catch. Even though it starts small, the administrative lift will be anything but. For ASCs and physicians, this means new workflows, documentation requirements, and a need for tighter coordination with payers and billing teams. Why does it matter? So why would anyone outside of an ASC care about this? Because prior authorization is a control lever. It determines how money flows through the healthcare system, and once it expands, it rarely contracts.

If CMS can prove that this pilot reduces improper payments or unnecessary procedures, we can expect similar requirements to appear in other specialties, orthopedics, cardiology, pain management, ones that typically be on the more expensive side. And in other words, what starts as a cosmetic procedure can quickly become comprehensive.

For patients, this can mean delays in care or confusion about coverage. For hospitals and ASCs, it could affect scheduling, cash flow, even staffing. Imagine having to hold open an OR time for patients whose authorization is still pending. This is why I say these policies are never just about paperwork. They ripple through every part of care delivery, clinical operations, patient satisfaction, revenue integrity. What are some of the lessons from past related to prior authorization? Well, this isn’t the first time we’ve seen a wave of prepayment review activity.

Back between 2009 and 2013, right when I graduated from law school, CMS rolled out several similar initiatives. Recovery audit contractors, comprehensive error rate testing, prepayment medical review pilots, they were all very scary terms, and you didn’t want to receive letters with these names on it. Those programs were tough. Appeals piled up. Payment delays stretched for months, and many providers argued that prepayment review created a due process problem. When a claim is denied before payment, there’s nothing to appeal until it’s resubmitted, and that can trap providers in a loop and significantly delay your ability to get a procedure or care.

We don’t know yet how this new ASC demonstration will handle appeals, but it’s something to watch closely. If the process isn’t designed for real-time clinical operations, it risks being unworkable in practice. So, what can you do to prepare? Let’s shift to the practical. What can providers do now?

First, map your affected codes and procedures. Even if your ASC isn’t performing cosmetic surgeries, understand what’s on the pilot list and where your service lines might intersect.

Second, integrate your documentation. Prior authorization hinges on supporting evidence, photos, clinical notes, consent forms. Build those elements into your EHR templates now so you’re not chasing them later.

Third, engage your physicians early. Many surgeons haven’t had to deal with prior authorizations in an ASC setting. Educate them on what will be required and assign a point person, maybe in the business office or nursing leadership, to coordinate submissions.

Fourth, watch your denial data. If this pilot expands, payers will look at approval rates and documentation trends to decide where to tighten review. And we know AI is readily available waiting to review. Track your metrics so you can make the case for efficiency and accuracy.

And finally, don’t silo this to billing or revenue cycle. Prior authorization affects organization, scheduling, patient communication, operations, revenue cycle, and clinical leadership need to be all at the same table.

Zooming out, what is CMS testing here? It isn’t just a billing edit, it’s a behavioral signal. The agency wants to see whether requiring pre-approval curbs what it views as low-value or unnecessary care, but it also wants to measure how providers respond.

Do surgeries shift back to hospitals because this just becomes administratively burdensome? Do patients postpone procedures? Does documentation get better or just longer? In many ways, this demonstration is an early experiment in value-based outpatient care. It’s about accountability for outcomes and justification of medical necessity before the first incision is made. And for ASCs, which have traditionally operated on speed and efficiency, this could force a cultural shift. You can’t be efficient if your payment model isn’t.

What does success look like in this model? If you’re an ASC leader, success over the next year will mean three things. Workflow readiness. Can your staff complete authorizations accurately without disrupting the schedule? Physician engagement. Are your surgeons providing the right documentation and understanding why it matters? Compliance awareness. Are you tracking what’s required? Logging communications with contractors, building an appeals record if needed. That foundation for staying compliant while maintaining cash flow. That’s the foundation for staying compliant while maintaining cash flow.

What comes next? Here’s where we could go. If CMS sees measurable results, fewer denials, cleaner documentation, and stable access for patients, the model will expand. The next logical step would be orthopedic and spine procedures where prior authorization is already common among commercial payers. Hospitals and ASCs that prepare now will have a head start. Those that wait could be scrambling to retrofit workflows later.

So, my advice is simple. Treat this pilot as a dress rehearsal for what’s coming system-wide. Why does this matter beyond policy? Let’s bring this back to patients for a moment. Every time we add an authorization step, we add friction. And in healthcare, friction often means delay, frustration. For a patient waiting on a procedure, whether it’s medically necessary or elective, that delay can be stressful and confusing. The goal, ideally, is balance, preventing unnecessary procedures without creating barriers to care. But that balance depends on design, and design depends on feedback from providers who are actually doing the work. And that’s why your participation in this pilot and your feedback to CMS and local contractors will matter.

My final thoughts, healthcare law can feel abstract until it touches your workflow. Prior authorization might seem administrative, but it’s a window into how CMS is thinking about accountability, efficiency, and cost control in the next phase of outpatient care. This is particularly important because we’ve seen trends to drive surgical procedures out from the hospital and into the outpatient setting. As this demonstration unfolds, keep an eye on what CMS measures and how it defines success, air quotes that you can’t see. Those definitions will guide payment policy for years to come. And for those of you in hospital leadership or legal roles, this is your moment to get ahead. Build internal systems that make compliance not just achievable, but efficient.

Thanks so much for listening to Health Law with Tara Ravi. I hope you’ll find new ideas, helpful insights, or even a little inspiration along the way. If you like this episode, hit subscribe so you never miss a conversation and share it with colleagues, friends, or anyone passionate about their health care. Everything we’ve talked about, episodes, insights, and conversations, is waiting for you at tararavi.com.

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