In September, JAMA Health Forum published something surprisingly basic: a look at what ambulatory surgery centers actually earn.
That information should not be unusual.
It is.
Hospitals submit Medicare cost reports. Ambulatory surgery centers do not. Federal policymakers regulate ASC payment, quality, ownership, and which procedures may be performed there, yet the federal government does not collect the same facility-level cost-report data that would let researchers see ASC finances as clearly as hospital finances.
Pennsylvania created a partial exception because its ASCs disclose annual financial and operational information to the state.
Elizabeth Plummer, Kahler Doyle, and Ge Bai used those reports to examine 257 centers with complete 2024 data.
The results complicate almost every easy story we tell about outpatient medicine.
I spent 20 years in private gastroenterology practice and more than 10 years as a hospital-based gastroenterologist. I have worked inside both private-practice and health-system medicine. I have not owned an ambulatory surgery center.
What follows is therefore not an owner's defense of the ASC model. It is an attempt to separate what the data show from what they do not—and to ask why payment policy does not always follow the economics.
The result that should have started a larger argument
Of the 257 Pennsylvania ASCs, 53 were nonprofit and 204 were for-profit.
The nonprofit facilities represented 20.6 percent of the centers.
They accounted for:
32.2 percent of patient visits,
35.8 percent of net patient revenue, and
51.5 percent of total net income.
Their median profit margin was 37.8 percent.
The median margin among for-profit ASCs was 16.4 percent.
Median net income per visit was $592 at nonprofit centers and $197 at for-profit centers.
Median net patient revenue per visit was $1,721 versus $1,297.
And despite their tax-exempt status, median uncompensated care at the nonprofit facilities was 0.5 percent of revenue.
That last number should be interpreted carefully. Uncompensated care is not the same thing as total community benefit, and tax exemption is not conditioned on a fixed charity-care percentage.
Still, the combination is difficult to ignore: the tax-exempt group earned the highest reported margins while providing very little uncompensated care at the facility level.
What the paper does not prove
This is one state.
It is one year.
The study is descriptive.
The authors did not adjust for procedure mix or patient case mix.
The nonprofit facilities were much more likely to be multispecialty. Orthopedics appeared in 58.5 percent of nonprofit centers and 29.4 percent of for-profit facilities.
That matters because an orthopedic ASC and an endoscopy center are not economically interchangeable.
The authors also caution that financial reporting by system-affiliated facilities may carry additional measurement error.
So the study cannot tell us that tax exemption causes high margins.
It cannot tell us that nonprofit facilities charge more for the same case.
It cannot tell us that Pennsylvania represents the country.
And it cannot tell us how parent-company overhead allocations or physician compensation affect a reported facility margin.
Those limitations define the argument.
The study does not establish the mechanism.
It establishes the phenomenon.
System ownership is not the whole explanation
Nearly every nonprofit ASC in the sample—94.3 percent—was affiliated with a health system.
Only 27 percent of the for-profit ASCs were.
That raises an obvious alternative explanation: perhaps the real story is health-system ownership rather than nonprofit status.
The authors tested that possibility in a limited way.
They separated the for-profit facilities into system-affiliated and independent groups. The profit-margin distributions of those two for-profit groups were not statistically distinguishable.
The nonprofit margin distribution remained shifted higher than both.
That does not prove that tax status creates the difference. But it weakens the simplest version of the system-ownership explanation.
The nonprofit facilities were also not obviously leaner operations.
Median full-time staffing was 27 employees compared with 13.5 at for-profit centers.
A facility with twice the labor and twice the margin is not winning merely because it eliminated half the staff.
The mechanism remains unresolved.
That makes price worth examining.
The same colonoscopy does not have the same price
Commercial insurance gives us a clean illustration.
A 2023 JAMA Health Forum study used federally required insurer price-transparency files to compare commercial facility fees for three common colonoscopy codes.
For diagnostic colonoscopy, the nationwide mean facility fee was:
$1,530 at hospitals,
$989 at ASCs.
For colonoscopy with biopsy:
$1,760 at hospitals,
$1,034 at ASCs.
For colonoscopy with polyp removal:
$1,761 at hospitals,
$1,030 at ASCs.
After adjustment, hospital facility fees remained roughly 54 to 61 percent higher.
But again, the average hides the more important finding.
The ratio depended dramatically on the insurer.
For Anthem, hospital facility fees were 3.34 to 3.67 times the corresponding ASC fee.
For Cigna, 1.23 to 1.52 times.
For UnitedHealthcare, just 1.04 to 1.08 times.
That variation is hard to explain as a clinical phenomenon.
The patient does not become three times more complicated because the payer's logo changes.
This is a negotiated-price phenomenon.
Medicare has built the same differential into its payment systems
Medicare has separate payment systems for hospital outpatient departments, ASCs, and physician offices.
Those systems produce materially different payments for services that can be performed in more than one setting.
MedPAC's 2026 payment analysis makes the policy issue explicit.
For some services, the hospital outpatient rate remains substantially above the ASC rate even when most Medicare beneficiaries already receive the service in an ASC.
Historically, Medicare accepted much of that differential as a consequence of separate payment systems.
That position is changing.
Site-neutral payment has moved from theory into CMS policy
CMS has already implemented several forms of site-neutral payment.
The first major dividing line came from the Bipartisan Budget Act of 2015.
Many off-campus hospital departments that began billing after the statutory cutoff no longer receive full OPPS payment. Their services are generally paid using a PFS-equivalent methodology.
But Congress grandfathered many existing off-campus provider-based departments.
CMS subsequently used its own volume-control authority to go further.
Beginning in 2019 and fully phased in by 2020, CMS reduced payment for clinic visits at those grandfathered off-campus hospital departments to a PFS-equivalent amount—about 40 percent of the OPPS rate.
For 2026, CMS extended that policy to drug-administration services furnished at those same excepted off-campus departments.
And CMS is not stopping there.
What CMS has proposed for 2027
In its proposed 2027 outpatient rule, CMS would add imaging without contrast to the services receiving the lower PFS-equivalent payment when performed at excepted off-campus hospital departments.
CMS estimates the proposal would reduce Medicare Part B expenditures by about $260 million in its first year, including lower beneficiary premiums and cost sharing.
The proposal is targeted. It does not make all outpatient hospital payments identical to physician-office or ASC payments.
But it extends the same principle:
Medicare should not necessarily pay the full hospital outpatient rate merely because a service is billed through a hospital-owned outpatient department.
That distinction matters because it shows the direction of travel.
The question CMS is now asking is much bigger
The most consequential material is not actually the 2027 imaging proposal.
It is a request for information CMS issued in its 2026 rulemaking.
CMS said that payment differences can create financial incentives for services to shift from physician offices and ASCs into hospital outpatient departments even when medical necessity does not require the shift.
The agency asked whether it should create a systematic process to identify those services.
Then CMS asked whether OPPS payment for certain services should be limited to the payment under the ASC system or the Physician Fee Schedule depending on where the service is performed most frequently.
That is a very different concept from simply cutting a few off-campus clinic fees.
CMS specifically asked:
If a service is predominantly performed in an ASC, should the hospital outpatient department receive the ASC payment amount?
If it is predominantly performed in a physician office, should the hospital rate be limited to a PFS-equivalent amount?
CMS used routine cataract surgery to illustrate the issue. About 82 percent of those procedures for Medicare beneficiaries occur in ASCs, while ASC payment rates are generally roughly 55 percent of OPPS rates.
There is currently no general OPPS policy that caps hospital payment at the ASC rate simply because a procedure is predominantly performed in an ASC.
CMS is asking whether there should be.
That is not a finalized rule.
It is, however, a significant policy signal.
MedPAC has already modeled what that system would look like
MedPAC has taken the concept further.
Its site-neutral framework groups ambulatory services according to where Medicare patients most commonly receive them.
If ASCs have the highest volume for a service, MedPAC models aligning the hospital outpatient payment rate—both on-campus and off-campus—with the ASC payment rate.
If physician offices dominate, the hospital payment can instead be aligned with an office-based benchmark.
That distinction is critical.
This is not simply a campaign against hospitals.
It is an attempt to establish an efficient-site price.
The hospital would still be free to perform the service.
It simply would not automatically receive a higher facility payment for doing something that Medicare beneficiaries predominantly receive in a lower-cost setting.
MedPAC has also discussed ways to protect legitimate hospital functions within such a system, including budget-neutral redistribution toward services such as emergency care and potential adjustments when aligned services are furnished as part of an emergency encounter.
That is the sophisticated version of site neutrality.
Do not hide the hospital subsidy inside every outpatient service.
Identify the hospital functions society actually wants to support and pay for them explicitly.
Colonoscopy is an unusually clean example
Routine colonoscopy seems almost designed for this debate.
It is performed in physician offices, ASCs, and hospital outpatient departments.
ASCs already perform enormous volumes of GI endoscopy.
The procedure is standardized.
The patient population can be risk-stratified.
And observational evidence does not show worse short-term outcomes merely because an appropriately selected patient underwent endoscopy in an ASC.
A Massachusetts propensity-matched study found a lower seven-day hospital-visit rate after screening colonoscopy performed in ASCs compared with hospital outpatient departments: relative risk 0.88.
The same direction was seen after nonscreening colonoscopy and upper endoscopy.
That does not prove that every patient belongs in an ASC.
Some do not.
A medically complex patient who needs hospital capability should be in a hospital.
The policy question is why the facility payment for the routine patient should be substantially higher merely because the procedure occurs under OPPS.
That is essentially the question CMS is now asking.
This changes the economics of hospital acquisition
Site-neutral payment also matters because payment policy changes acquisition incentives.
When a hospital can acquire an outpatient practice or facility and then obtain a higher Medicare facility payment for services that were previously performed in a lower-paid setting, ownership can change the price without changing the clinical work.
That phenomenon is one of the reasons CMS explicitly refers to services moving into hospital outpatient departments because of financial incentives rather than medical necessity.
Commercial-market research points in the same direction.
Hospital affiliation and private-equity acquisition in gastroenterology have both been associated with higher negotiated prices.
Those studies measure different outcomes and should not be conflated, but they point toward the same broader problem:
Consolidation changes bargaining power.
Medicare payment policy should not magnify that effect unnecessarily.
That matters for the Pennsylvania margins
Return now to the Pennsylvania study.
Medicare represented a median 23.6 percent of nonprofit ASC revenue, compared with 31.9 percent at for-profit centers.
The nonprofit group therefore had greater exposure to other payers, including commercially negotiated contracts.
We know those commercial rates can vary dramatically based on who is negotiating them.
The nonprofit facilities had twice the median staffing and still more than twice the margin.
And system affiliation alone did not reproduce the nonprofit result among for-profit centers.
That leaves several possible explanations: case mix, payer mix, negotiated price, accounting, overhead allocation, or some combination.
We do not know which dominates.
But CMS's site-neutral discussion makes one part of the question increasingly important:
What happens to these margins when payment no longer rises simply because a service is attached to a hospital billing structure?
The hospital argument deserves to be taken seriously
Hospitals have a legitimate objection.
They are not simply large ASCs.
Hospitals maintain emergency departments, ICUs, trauma coverage, inpatient beds, laboratories, imaging, blood banks, transfer capacity, and clinical services available whether or not anyone uses them that hour.
Some hospitals also carry disproportionate responsibility for Medicaid, uninsured patients, teaching, research, and highly complex cases.
A payment system that indiscriminately strips revenue away could destabilize institutions communities actually need.
That is a serious concern.
But it leads to a different policy question.
If society wants to subsidize hospital standby capacity, why hide that subsidy inside a colonoscopy facility fee?
MedPAC's approach points toward a better answer: align the price of services that can safely move across settings, then direct hospital support toward the functions that are genuinely hospital-specific.
That is much cleaner policy.
Then there is the tax exemption
The Pennsylvania paper becomes more provocative because the highest-margin group was nonprofit.
A national analysis estimated that nonprofit hospitals received $37.4 billion in combined federal, state, and local tax benefits in 2021.
The legal bargain is more complicated than “provide free care or pay taxes.”
Under the federal community-benefit standard, a charitable hospital is evaluated across a range of activities and obligations. There is no single federal rule requiring a fixed percentage of revenue to be spent on charity care.
Section 501(r) adds requirements for hospital organizations, including community health needs assessments and financial-assistance policies.
But its statutory reach matters.
The IRS explains that Section 501(r) applies to organizations operating facilities required under state law to be licensed or recognized as hospitals. A separately organized outpatient facility may qualify as part of a charitable system without necessarily being a “hospital facility” subject to precisely the same facility-level requirements.
That means it is unsafe to assume every ASC owned by a nonprofit health system is governed identically to the hospital itself.
And that is exactly why the financial reporting should be clearer.
Four reforms worth considering
1. Require ASC financial reporting
Hospitals submit Medicare cost reports.
ASCs do not.
That is why a single-state study is currently our best empirical view of ASC profitability.
CMS should require standardized ASC financial reporting sufficient to evaluate revenue, operating costs, payer mix, staffing, related-party transactions, and margins.
2. Build the systematic site-neutral policy CMS is now considering
CMS should continue beyond piecemeal cuts to selected off-campus services.
When a service is predominantly performed safely in an ASC, the ASC payment amount should be the presumptive Medicare facility benchmark.
When it is predominantly furnished in a physician office, the office-based rate should inform the benchmark.
Higher hospital payment should require a clinical or policy reason, not merely a hospital billing designation.
That is close to the framework CMS itself placed into its 2026 request for information.
3. Protect the hospital functions that actually require protection
Site-neutral payment should not pretend hospitals have no unique costs.
Emergency readiness, trauma care, intensive care, safety-net obligations, and other hospital-specific functions can be supported explicitly.
MedPAC's discussion of redistributing savings within OPPS and protecting emergency services points in this direction.
The objective should be to stop using inflated routine outpatient payments as an indirect hospital subsidy.
4. Make tax-exempt outpatient facilities report their public benefit
If a nonprofit system operates an ASC with a 30 or 40 percent margin, the public should be able to see how the facility's tax treatment and earnings support the charitable mission of the parent organization.
That does not mean every ASC must provide the same uncompensated care as an emergency department.
It does mean the subsidy should be traceable.
CMS has not reached the end point yet
It would be incorrect to say that Medicare has already equalized hospital outpatient and ASC facility fees.
It has not.
The 2026 drug-administration policy applies to a specific class of off-campus hospital departments.
The 2027 imaging policy is still proposed.
And CMS's idea of capping OPPS payment at the ASC rate for ASC-dominant services remains a future-policy question rather than a final rule.
But those distinctions should not obscure what has changed.
CMS has formally identified site-of-service payment differences as a possible cause of unnecessary migration of services into higher-paid hospital settings.
It has already reduced payment for selected services.
It is proposing to add more.
And it has explicitly asked whether the next step should be to let the lower-cost setting establish the payment amount.
For an outpatient market in which the most profitable Pennsylvania facilities turned out to be tax-exempt nonprofits, that discussion could not be more timely.
The Pennsylvania study does not tell us what the national answer will be.
It tells us that we should finally collect enough data to find out.
And CMS is increasingly asking the complementary question:
If the clinical work is the same, why should the facility fee depend so heavily on who owns the building?
Brian K. Hudes, MD, is a practicing gastroenterologist and writes The Renaissance Physician. Disclosure: he is the founder and CEO of AiMOS Systems Corporation and has a commercial interest in health care technology and clinical artificial intelligence.
Selected sources
Plummer E, Doyle K, Bai G. Profitability of Nonprofit and For-Profit Ambulatory Surgery Centers. JAMA Health Forum. 2026;7(9):e263332.
Wang Y, Wang Y, Plummer E, Chernew ME, Anderson G, Bai G. Facility Fees for Colonoscopy Procedures at Hospitals and Ambulatory Surgery Centers. JAMA Health Forum. 2023;4(12):e234025.
Centers for Medicare & Medicaid Services. CY 2026 OPPS/ASC Final Rule.
Centers for Medicare & Medicaid Services. CY 2026 OPPS/ASC Final Rule, Request for Information: Adjusting Payment Under the OPPS for Services Predominantly Performed in the ASC or Physician Office Settings.
Centers for Medicare & Medicaid Services. CY 2027 OPPS/ASC Proposed Rule.
Medicare Payment Advisory Commission. March 2026 Report to the Congress: Medicare Payment Policy.
Lin et al. Differences in patient outcomes after outpatient GI endoscopy across settings: a statewide matched cohort study. Gastrointestinal Endoscopy. 2022;95(6).
Plummer E, Socal MP, Bai G. Estimation of Tax Benefit of US Nonprofit Hospitals. JAMA. 2024;332(20):1732-1740.
Internal Revenue Service. Revenue Ruling 69-545 and IRC §501(r) guidance.