OBLs vs. ASCs: A Retrospective Payment Policy History with a Promising Future for OBLs Following the CY 2026 ASC Payment Systems Final Rule

The landscape for office-based labs ("OBLs") continues to evolve rapidly, creating significant opportunities for interventional radiologists ("IRs") and other procedural specialists. While recent updates to the Ambulatory Surgical Center ("ASC") Covered Procedures List might seem to favor ASCs, these changes represent a strategic opportunity for OBLs. 

In this article we will explore the history of Medicare payment policies that differentiated between office and facility-based procedures and explain why the latest rules create a promising future for growth in the OBL sector, particularly as to those procedures that relate to interventional radiology services. 

The performance of procedures in an office setting is a longstanding practice, shaped by the evolving legal framework primarily from the Centers for Medicare & Medicaid Services ("CMS"), which also governs surgeries performed in other settings, particularly ASCs, and seeks to balance access, safety, and cost containment.

Regulatory Background of the Office-Based Procedures

Historical Divisions and Policy Rationale

Initially, ASC lists were constructed to only include procedures not typically performed in the office setting. CMS decided that “if a procedure was performed . . . in a physician's office 50 percent of the time or more, it would be excluded from the ASC list,” echoing legislative intent that office-suitable procedures should remain out of the higher-cost ASC environment. This approach was designed to prevent cost escalation from unnecessary migration of office-based procedures to costlier facilities. 

Shift Toward Inclusion and Exclusionary Models

By the mid-2000s, as outpatient care grew and technological advances improved procedural safety in ambulatory and office environments, the trend towards performing surgery on an outpatient basis (both ambulatory and office-based) grew steadily. Ultimately, reflecting these trends and MedPAC recommendations, a new “exclusionary” approach emerged. Rather than specifying only those procedures eligible for ASC payment, CMS, in the final rule released on August 2, 2007, shifted to covering all procedures in an ASC except those procedures that pose a significant safety risk or would be expected to require an overnight stay. 

Office-based procedures were no longer categorically excluded; instead, the list expanded to embrace them, paired with new payment policies to neutralize incentives to shift services unnecessarily toward facilities, by imposing cap payment for office-based procedures performed in ASCs. CMS mapped and updated the office-based status on a regular basis, using the most recent data along with interim clinical and stakeholder input for new or low-volume codes. Temporary office-based status was designated for new codes until adequate claims data are available to assess their predominant sites of service, whereupon if CMS confirms their office-based nature, the procedures are permanently assigned to the list of office-based procedures subject to the ASC payment limitation.

The comprehensive lists of approved ASC and office-based procedures—including notations for temporary office-based status—are published in illustrative addenda (such as Addenda AA-CC in the final rule for CY 2007 Update to the ASC Covered Procedures List with specific payment indicators (“P2,” “P3,” “R2,” etc.) and an asterisk for provisional office-based assignments.

By CY 2008, the system was operationalized: review cycles allowed for regular addition and reclassification, always linking office-based status to actual practice and utilization trends. The office-based designation was intentionally durable – CMS reasoned that procedures safely performed predominantly in the office rarely migrate back to facility-only settings without substantive clinical change. 

Recent Expansions and 2025 Rulemaking

Reflecting these broader inclusion standards, CMS added 547 new procedures (plus 13 more from public comments) to the ASC Covered Procedures List for CY 2026 – a significant leap in procedural flexibility. Among the additions to the CY 2026 ASC Covered Procedures List, there are numerous procedures that IRs commonly perform. The expansions span multiple IR-heavy service lines and include percutaneous, image-guided, and endovascular work that aligns with typical IR practice patterns. In concert, the inpatient only list is being phased out over three (3) years, with many removed codes migrating to ASC and, potentially, office-based eligibility as claims data and safety profiles allow.

Office-Based List: Ongoing Expansion and Data-Driven Assignment

Parallel to ASC list expansion, CMS continues its meticulous process of assigning (or removing) office-based status. Each year, procedures are reviewed for volume and utilization. New codes may be temporarily flagged as office-based pending adequate claims volume, after which permanent assignment is made if the >50% office setting threshold is met. In the final rule for CY 2026, for example, previously temporary designations were made permanent based on new data, while others were removed from the office-based list as utilization or clinical patterns shifted. This dynamic ensures the office-based list remains current and accurately reflects actual practice.

Implications for Payment, Operations, and Strategy

The expansion of the office-based list – alongside the payment cap for office-based procedures performed in ASCs and the durable, evidence-based assignment process – creates challenges, and more importantly, opportunities, for providers, especially OBLs and procedural specialists such as IRs. The regulatory framework encourages migration of appropriate procedures to the lower-cost office environment, aligning facility payments with the office rate and reducing cost differentials that might otherwise incentivize unnecessary migration of office-based procedures to costlier settings. 

OBLs, which are distinct from ASCs in regulatory requirements and reimbursement structures, are well-positioned to capitalize on this trend by providing high-volume, minimally invasive procedures in a cost-effective setting. The ability to perform a wider array of procedures in an office-based setting, coupled with favorable Medicare reimbursement (e.g., higher nonfacility practice expense rate), makes OBLs an increasingly attractive and profitable option for IRs and other proceduralists.

State-Level Nuances

While federal policies govern the ASC and office-based lists, states may overlay accreditation, facility licensure, and additional safety requirements for office-based procedures. For example, Washington state has amended its office-based surgery rules multiple times since their adoption in 2010, with a proposed 2025 rule that may further impact facility licensure, scope of practice, and reporting requirements. 

Providers considering OBL operations should monitor these state-level developments and consult legal counsel to ensure compliance. State departments of health, for instance, often set facility standards and may maintain specific lists of procedures that are permissible in an office setting. Concurrently, state medical boards regulate the scope of practice for physicians, determining which procedures a licensed physician can safely and legally perform within an office environment. These dual layers of state oversight are critical for ensuring patient safety and defining the operational boundaries for OBLs.

Strategic Advantages of OBLs for Physicians, Especially IRs

The OBL model offers distinct advantages over ASC (and hospital) settings, representing a promising opportunity, particularly for IRs and other specialists performing minimally invasive procedures. Key benefits include:

• Favorable Medicare reimbursement rates for many procedures, often exceeding those available in the ASC setting for certain high-volume services.
• Greater operational flexibility, including the ability to control scheduling, staffing, and supply chain management.
• Lower overhead and administrative burden compared to hospital-based practice.
• Enhanced patient experience, with streamlined check-in, reduced wait times, and a more personalized care environment.
• The opportunity to expand procedural offerings as CMS continues to broaden the list of office-based procedures.

CMS’s lists of ASC and office-based procedures have evolved from stringent separation and conservative inclusion to a much more expansive, flexible, and data-driven model. The contemporary process blends clinical evidence, safety criteria, physician judgment, and annual claims review to enable steady growth of office-based procedural options. Expansion to the office-based list is grounded in actual practice patterns and subject to a deliberate payment cap that ensures procedural migration is rooted in clinical need, not financial incentive. These regulatory trends create opportunities for efficient outpatient care delivery – most notably in interventional radiology, minor surgery, and pain management – while requiring active engagement and strategic adaptation by OBL operators and other proceduralists. 

Reed Smith will continue to monitor federal and state regulatory changes and provide updates as new information becomes available. If you have any questions about OBL operations, compliance, or strategic planning, please do not hesitate to reach out to the authors or the health care lawyers at Reed Smith.