The Centers for Medicare & Medicaid Services (CMS) has been using prior authorization for selected Hospital Outpatient Department (OPD) services for several years as part of its broader effort to curb improper payments and unnecessary utilization. In late 2025, CMS expanded that approach into the Ambulatory Surgical Center (ASC) setting through a new Prior Authorization Demonstration for Certain ASC Services, which went into effect in January 2026 for certain states.

This article will discuss the CMS’s finalized framework, identify the participating states, and provide details of the operational guidance. ASCs and physicians practicing in affected states should understand how the program works, what services are included, and what happens if prior authorization is bypassed.

What Is the ASC Prior Authorization Demonstration?

The ASC Prior Authorization Demonstration is a five-year CMS initiative that requires participating ASCs to obtain prior authorization for selected procedures before services are rendered to Medicare Fee-for-Service beneficiaries.

The goal is not to create new medical necessity standards. Instead, CMS is shifting the timing of review earlier in the process so that compliance issues can be identified before claims are submitted and paid.

IF an ASC chooses not to submit a prior authorization request, the claim will be subject to prepayment medical review, increasing the risk of denial and delay.

When Does the Demonstration Apply?

CMS is implementing the program in two phases:

Phase One

ASCs in the following states may submit prior authorization requests starting on January 5, 2026, for dates of service on or after January 19, 2026:

• California
• Florida
• Tennessee
• Pennsylvania
• Maryland
• Georgia
• New York

Phase Two

ASCs in the following states may submit prior authorization requests starting on February 2, 2026, for dates of service on or after February 16, 2026:

• Texas
• Arizona
• Ohio

Only Medicare Fee-for-Service claims are affected. Medicare Advantage claims are excluded.

Which Services Are Covered?

The demonstration applies to five service categories that CMS has identified as having a higher risk of improper utilization:

1. Blepharoplasty and related eyelid procedures
2. Botulinum toxin (Botox) injections
3. Panniculectomy and related services
4. Rhinoplasty and related services
5. Vein ablation procedures

CMS has published a detailed list of affected HCPCS and CPT codes, which ASCs should review carefully (full list can be found here). Some codes have already been removed from the list as incidental or packaged services, and CMS has indicated that the list may continue to evolve.

How the Prior Authorization Process Works

Submitting a Prior Authorization Request (PAR)

• The PAR must be submitted before the services is performed.
• The request includes documentation ASCs already maintain to support medical necessity.
• Requests are submitted to the ASC’s local Medical Administrative Contractor (MAC).

Review Timeframes

• Standard Review: Decision issued within 7 calendar days.
• Expedited Review: Decision issued within 2 business days when delays could jeopardize patient health.

Possible Decisions

• Provisional Affirmation: The claim will likely meet Medicare coverage and payment requirements.
• Non-Affirmation: The documentation does not support coverage as submitted.
• Partial Affirmation: Some services approved, others denied.

What Happens If Prior Authorization Is Skipped?

Prior authorization under the demonstration is technically voluntary. However, bypassing it comes with consequences.

If an ASC submits a claim without a prior authorization decision:

• The claim will be stopped for prepayment medical review.
• The MAC will issue an Additional Documentation Request (ADR).
• Payment will be delayed and may ultimately be denied.

If a service receives a non-affirmation and the ASC proceeds anyway, the resulting claim will be denied. Associated facility services and related claims may also be impacted.

Why This Matters for ASCs and Physicians

From a compliance standpoint, this demonstration significantly changes risk exposure:

• Documentation problems surface before payment, not after.
• Non-affirmed claims offer no payment protection.
• Repeated non-affirmations may increase audit scrutiny.
• Associated services may be denied along with the primary procedure.

At the same time, an affirmed prior authorization decision provides some insultation from future audits and reduces downstream appeals.

Key Takeaways

• The ASC Prior Authorization Demonstration is actively rolling out in early 2026, not a future proposal.
• It applies only in selected states and only to Medicare Fee-for-Service claims.
• The program does not change medical necessity standards but shifts review earlier.
• ASCs should prepare workflows now to avoid payment delays and denials.
• Physicians should understand how these requirements affect scheduling, documentation, and patient counseling.

For ASCs and physicians operating in demonstration states, prior authorization is no longer optional as a practical matter. Understanding the rules now can prevent costly surprises later.