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Highlights
- Ambulatory surgical centers (ASCs) continue to face a rapidly evolving regulatory landscape at both the state and federal levels.
- Multiple states have enacted or advanced significant ASC legislative and regulatory changes, and the Centers for Medicare & Medicaid Services (CMS) issued reporting updates that will directly impact ASC operations.
- This Holland & Knight alert summarizes these and other key developments at the state and federal levels and highlights the important operational and financial implications for ASC owners, operators and investors.
Over the past 18 months, multiple states – including New Jersey, Massachusetts, North Carolina, Georgia, Iowa and Tennessee – have enacted or advanced significant legislative and regulatory changes affecting ambulatory surgical center (ASC) assessments, licensure and certificate of need (CON) requirements. At the federal level, the Centers for Medicare & Medicaid Services (CMS) issued payment and quality reporting updates that will directly impact ASC operations, reimbursement and compliance obligations in 2025 and beyond.
State Changes
Taxes and Assessments
New Jersey: Gov. Phil Murphy signed AB 5809, the Healthcare Finance Enhancement Act, on June 30, 2025, which, among other things, significantly expanded the universe of New Jersey ASCs subject to annual assessments and changed the economics of such assessments.
Effective July 1, 2025, AB 5809:
- reduced the annual assessment rate that ASCs pay on gross receipts from 2.95 percent to 2.5 percent
- applied the assessments to ASCs that earn less than $300,000 in gross receipts (previously exempt)
- removed the annual cap on the amount of assessments ASCs paid (previously $350,000)
Additionally, beginning in 2026, one-room surgical practices that were previously exempt from assessment will no longer be exempt (further expanding the universe of subject facilities).
Collectively, the changes under AB 5809 will impact most ASCs operating in New Jersey. Certain ASCs may benefit from the reduced assessment rate and pay lower annual assessments than in prior years. However, high-volume ASCs may end up paying more than they have in prior years due to the removal of the cap, notwithstanding the reduced annual rate. Additionally, many more ASCs in New Jersey will now be subject to the annual assessment, and one-room surgical practices will be added to the list of subject facilities in 2026.
CON and Licensing
Massachusetts: In January 2025, Gov. Maura Healey signed the Act Enhancing the Health Care Market Review Process (H.5159), which substantially expanded the Department of Public Health's (DPH) authority to monitor healthcare transactions and healthcare providers in the Commonwealth, with a particular emphasis on transactions and activities involving private equity investment. Though ASCs have been subject to the transaction and data reporting obligations modified by H.5159 since 2015, current and prospective owners and operators should be aware that H.5159 broadened the transaction reporting framework to include nearly all types of transactions, although clarifying regulations are still pending. Additionally, for the first time, post-transaction monitoring that lasts up to five years after a closing has been implemented.
H.5159 authorized DPH to regulate office-based surgery centers and require such centers to obtain a state license if they perform any liposuction procedures or other surgical procedures using anything more than minimal sedation. (See Holland & Knight's previous alert, "Massachusetts to Require License for Office-Based Surgical Centers" Feb. 6, 2025.) DPH is required to issue clarifying regulations and the specific licensure requirements and process by Oct. 1, 2025. Physician practices in Massachusetts that have previously performed certain outpatient surgical services in-office and been exempt from ASC licensure should be mindful of this change and be prepared for the DPH regulations and guidance anticipated by Oct. 1.
North Carolina: In 2023, the North Carolina legislature passed an Act to Provide North Carolina Citizens with Greater Access to Healthcare Options (H76), the state's Medicaid expansion bill, which also contained significant changes to the state's CON requirements for ASCs, effective Nov. 1, 2025. Specifically, certain new ASCs, referred to as "qualified urban ambulatory surgical facilities," will be exempt from CON review if such ASCs are located in a county with more than 125,000 people and their self-pay and Medicaid revenue amounts to at least 4 percent of the ASCs' total earned annual revenue. These ASCs will need to report their revenue to the Department of Health each year and thereby attest to their eligibility for the exemption.
Debate on the necessity of and, more recently, constitutionality of North Carolina's CON regime continued in late 2024 and into 2025.
A challenge to the constitutionality of North Carolina's CON regime brought by a North Carolina eye surgeon has been winding its way through the state court system. Most recently, in October 2024, the North Carolina Supreme Court unanimously ruled the case was both an "as applied" challenge and "facial" challenge, which means a lower court three-judge panel will now decide, at trial, whether the CON regime is constitutional as it applies to the entire state of North Carolina (and not just to the plaintiff). A trial date has not been set.
Separately, in March 2025, the North Carolina Senate introduced and advanced S370, which would repeal the state's CON regime if passed and signed into law. S370 was referred to the House Committee on Rules, Calendar and Operations in April 2025 and hasn't advanced since that time.
Georgia: In 2024, Georgia enacted HB 1339, implementing several important changes to the state's CON regime that will likely impact ASC stakeholder and operator strategy for years to come. First, HB 1339 eliminated all capital expenditure thresholds that previously required CON review. Now, Georgia hospitals and existing healthcare facilities can proceed with large/high-value equipment acquisitions or replacements, facility renovations or expansions, service line relocations or other capital expenditures without going through the CON process, which will likely make it easier and faster for these facilities to expand their outpatient surgical services.
HB 1339 also modified Georgia's existing exemption for single-specialty ASCs. This exemption is available to an ASC that is either owned by a single physician or practice in the specialty and generates less than $2.5 million in capital expenditures or is the sole single-specialty ASC in the county and has no more than two operating rooms. The modification permits non-owner physicians to perform procedures at the ASC as long as such physicians perform surgeries in the same specialty as the owner-physician(s). Previously, single-specialty ASCs were exempt from Georgia's CON requirements only if the physician-owner(s) were the providers performing the procedures at the ASC.
Furthermore, under HB 1339, certain joint venture (JV) ASCs between hospitals and physicians are now exempt from Georgia CON requirements if the capital expenditures are under $5 million and the hospital JV partner is in the same county as the physicians.
Importantly, HB 1339 also expressly clarified that Georgia's CON regime does not prohibit ASCs from entering into third-party management arrangements for practice management or administrative services (i.e., certain MSO arrangements), many of which are favored investment vehicles for private equity entities.
Iowa: In 2024, Iowa exempted certain ASCs from its CON requirements and authorized a broad study of the effectiveness of its CON regime. In July 2024, Iowa enacted SF 2160 (An Act Related to Ambulatory Surgical Centers), which exempted cosmetic, reconstructive or plastic surgery services provided at a licensed ASC from the requirements and obligations of the CON framework. Additionally, in May 2024, S.B. 2385 initiated a statewide study on the effectiveness of Iowa's current CON process. The findings and report from the study, along with a recommendation of a less-restrictive process, are due to the governor and Iowa General Assembly by Dec. 31, 2025.
Tennessee: The CON requirement for ASCs will be lifted by December 2027. Following the repeal of the CON requirement, non-hospital-affiliated ASCs must participate in the state's Medicaid program (TennCare) and provide a comparable level of care to TennCare enrollees and charity cases as hospital-based ASCs. (See Holland & Knight's previous alert, "Tennessee Passes Legislation to Modify the State's Certificate of Need Rules," May 23, 2024.)
Federal Changes
ASC Payment Updates: CMS increased ASC payment rates by a net 2.9 percent for calendar year (CY) 2025. This reflects a 3.4 percent market basket update offset by a 0.5 percent productivity adjustment. ASCs that do not meet the quality reporting requirements described below face a 2 percent payment penalty. CMS anticipates a similar, though slightly lower, increase for CY 2026, consisting of a 2.4 percent payment rate increase, reflecting a 3.2 percent market basket update offset by a productivity adjustment of 0.8 percent. (See Holland & Knight's previous alert, "CMS Releases CY 2026 Outpatient Prospective, ASC Payment System Proposed Rule" July 21, 2025.) CMS will likely issue the Final Rule for 2026 in November 2025, and Holland & Knight will continue to monitor both comments to the Proposed Rule and the substance of the Final Rule once it is issued.
Quality Reporting Requirements. CMS is phasing in new quality reporting requirements for the ASC Quality Reporting (ASCQR) Program:
- Facility Commitment to Health Equity (FCHE). Mandatory reporting of this process measure began for the CY 2025 reporting period and requires, in pertinent part, ASCs to attest to their commitment to health equity by answering certain "yes/no" questions within the CMS Hospital Quality Reporting System.
- Screening for Social Drivers of Health (SDOH). Voluntary reporting of this structure measure begins in 2025 and becomes mandatory in 2026.
Expanded Procedure List. In 2025, CMS added 32 new and 33 previously nonpayable medical and dental procedures to the ASC Covered Procedures List.
Prior Authorization Demonstration. Beginning on Dec. 15, 2025, CMS will roll out a five-year voluntary prior authorization demonstration in 10 states (Arizona, California, Florida, Georgia, Maryland, Ohio, Pennsylvania, New York, Tennessee and Texas) for certain ASC procedures, including rhinoplasty, botox injections, panniculectomy, blepharoplasty and vein ablation. ASCs can submit prior authorization requests beginning on Dec. 1, 2025, for dates of service on or after Dec. 15, 2025.
Non-Opioid Payment. Effective Jan. 1, 2025, CMS finalized a payment policy that permits separate payments for certain non-opioid treatments and devices used for pain relief in ASCs in accordance with the Non-Opioid Pain Relief (NOPAIN) provisions of the Consolidated Appropriations Act of 2023.
The changes described above regarding Medicare reimbursement and quality reporting requirements may also affect ASC accreditations, particularly if, for example, an accreditation is based on Medicare deemed status.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
