CMS Makes Hip, Knee, and Ankle Replacement Bundled Payments Mandatory Nationwide: Inside the FY 2027 Hospital Payment Rule

CMS Makes Hip, Knee, and Ankle Replacement Bundled Payments Mandatory Nationwide: Inside the FY 2027 Hospital Payment Rule

HealthBridge US | Policy Desk

Published July 31, 2026

The Centers for Medicare & Medicaid Services (CMS) announced on July 31, 2026 that it is expanding one of Medicare's longest-running bundled payment experiments into a mandatory, nationwide program. Beginning January 1, 2028, most hospitals paid under Medicare's Inpatient Prospective Payment System (IPPS) will be required to participate in the Comprehensive Care for Joint Replacement Expanded (CJR-X) Model, a mandatory episode-based payment program covering hip, knee, and ankle replacement surgery.

The CJR-X announcement is the headline feature of a much larger release: the Fiscal Year 2027 Hospital Inpatient Prospective Payment System and Long-Term Care Hospital Prospective Payment System Final Rule, officially designated CMS-1849-F, which CMS issued on July 31, 2026. Beyond the joint replacement model, the rule also sets the annual Medicare payment rate update for roughly 3,100 acute care hospitals and long-term care hospitals nationwide, finalizes new nondiscrimination requirements for medical residency programs, updates organ acquisition reimbursement rules, and overhauls a long list of hospital quality reporting measures.

HealthBridge US breaks down what CMS finalized, what it means for hospitals, and what it means for the millions of Medicare beneficiaries who have joint replacement surgery every year — drawing exclusively on CMS, Federal Register, and HHS/ONC government sources.

Quick-Read Summary

CMS is expanding the Comprehensive Care for Joint Replacement (CJR) Model, which ran from April 2016 through December 2024 and produced measurable Medicare savings, into a new mandatory nationwide model called CJR-X. Most IPPS hospitals will have to participate starting January 1, 2028, with exemptions for hospitals in the Transforming Episode Accountability Model (TEAM), hospitals located in Maryland, and hospitals not paid under both the IPPS and Outpatient Prospective Payment System (OPPS). Separately, the same final rule sets a 2.3% payment rate increase for both IPPS hospitals and long-term care hospitals (LTCHs) for FY 2027, driven by a 3.2% market basket increase reduced by a 0.9 percentage point productivity adjustment. CMS projects the IPPS rate changes will increase hospital payments by roughly $2.1 billion, with an additional $779 million in new-technology add-on payments. The rule also finalizes new nondiscrimination requirements for medical residency and health education programs, updates organ acquisition and reasonable cost reimbursement policy, and makes extensive changes across six hospital quality and value-based payment programs — adding, removing, and modifying dozens of individual quality measures over the next several fiscal years. Finally, the Office of the National Coordinator for Health Information Technology (ONC) used this same rule to finalize a set of FHIR-based health IT interoperability standards for prior authorization and payer data exchange.

What CMS Announced

CMS's July 31, 2026 press release framed the CJR-X expansion around care coordination and patient outcomes: the model is designed to "improve care coordination for hip, knee, and ankle replacements, ensuring providers work together from pre-surgery education through post-op recovery to promote a seamless patient care experience and optimal health outcomes," according to CMS. CMS Administrator Dr. Mehmet Oz said the expansion would "help match financial incentives in Medicare with improved health outcomes, safeguard taxpayer resources, and ensure patients experience a positive, comprehensive care journey throughout the surgical process." CMS Innovation Center Director Abe Sutton added that CJR-X "gives more patients the opportunity for a better care experience when undergoing joint replacement surgery, because hospitals are given the right financial incentives to enhance care coordination, reduce unnecessary services, such as preventable readmissions and emergency visits, and prioritize patient outcomes with post-acute care providers supporting recovery."

CMS describes CJR-X as "the first expanded mandatory test of an episode-based payment model," a notable framing since it signals CMS's continued institutional preference for episode-based, value-based payment approaches over traditional fee-for-service reimbursement in orthopedic surgery — an area Medicare has targeted for bundled payment experiments since the original CJR Model launched in 2016.

Understanding CJR-X: How the Model Actually Works

From CJR to CJR-X

CJR-X is not an entirely new concept — it is an expansion of the original Comprehensive Care for Joint Replacement (CJR) Model, which the CMS Innovation Center tested from April 2016 through December 2024. According to CMS, that earlier model "produced strong evidence of cost savings while maintaining quality of care," and CMS is now building on that evidence base by taking the model nationwide and making participation mandatory rather than limited to a defined set of test markets.

CJR-X is designed to improve care for Original Medicare (traditional fee-for-service Medicare) patients undergoing lower extremity joint replacement (LEJR) procedures — hip, knee, and ankle replacements — performed in either inpatient hospital settings or hospital outpatient settings, according to CMS's CJR-X model page. That inclusion of outpatient procedures is a meaningful expansion from the original CJR Model, reflecting the broader shift of joint replacement surgery away from inpatient stays toward outpatient and same-day surgical settings over the past decade.

The Episode Definition and Target Price

At the core of CJR-X is an episode-based payment structure. Under this approach, a participating hospital is held accountable for the total Medicare spending associated with a defined "episode" of care tied to a joint replacement procedure. That episode begins with the surgical procedure itself and extends 90 days following discharge from the inpatient hospitalization or the outpatient procedure.

With limited exceptions, the episode captures essentially all related items and services paid under Medicare Part A and Part B for a CJR-X patient during that window — not just the surgery and hospital stay, but also post-discharge physical therapy, home health visits, skilled nursing facility stays if needed, follow-up physician visits, and any complications or readmissions tied to the joint replacement. CMS compares each hospital's actual total episode spending against a predetermined target price. Depending on how a hospital performs against that target — and depending on the hospital's quality performance — the hospital may receive an additional reconciliation payment from Medicare, or it may be required to repay a portion of episode spending back to Medicare.

Quality Is Tied to the Payment, Not Just the Cost

Critically, CJR-X does not reward hospitals purely for spending less. Consistent with the design of the original CJR Model, CMS adjusts each hospital's target price and reconciliation payment based on a composite quality score — a summary measure reflecting a hospital's performance and improvement on quality measures tied specifically to lower extremity joint replacement care. This structure is intended to prevent the model from creating an incentive to stint on necessary care simply to hit a lower cost target; a hospital that cuts costs but delivers worse outcomes does not come out ahead financially under the model's reconciliation formula.

Who Has to Participate

CMS says most hospitals paid under the IPPS will be required to participate in CJR-X. Because the model is mandatory rather than voluntary — a deliberate design choice CMS has used before with bundled payment models, including the original CJR Model and the more recent Transforming Episode Accountability Model (TEAM) — the pool of participating hospitals will be far larger and more geographically comprehensive than a voluntary program would produce, which CMS argues is necessary to generate reliable evidence about the model's effects at scale and to standardize incentives across the hospital sector rather than concentrating savings and quality gains only among hospitals that opt in.

Who Is Exempt

Certain categories of hospitals are exempt from mandatory CJR-X participation, according to CMS. These include hospitals already participating in the Transforming Episode Accountability Model (TEAM) — a separate, newer CMS Innovation Center bundled payment model covering different surgical and medical episodes — hospitals located in Maryland, which operates under a distinct all-payer hospital rate-setting arrangement (the Maryland Total Cost of Care Model) that generally exempts the state from standard national Medicare payment models, and hospitals that are not paid under both the IPPS and the Outpatient Prospective Payment System (OPPS), a category that generally includes critical access hospitals and rural emergency hospitals, since those facility types are reimbursed under different payment methodologies entirely.

What Doesn't Change for Patients

CMS was explicit in its announcement that CJR-X does not change how patients access care: patients across the country will still choose their own doctors and will not face added complexity in how they receive care. In other words, CJR-X operates as a back-end payment and accountability mechanism between CMS and hospitals — it does not restrict patient choice of surgeon, hospital, or post-acute provider, and it does not require patients to navigate a different referral or authorization process to have joint replacement surgery.

The Evidence Base: Did the Original CJR Model Actually Save Money?

CMS's justification for taking CJR-X mandatory nationwide rests heavily on the performance record of the original CJR Model. CMS's July 31, 2026 press release states that the model "saved Medicare more than $100 million while maintaining quality of care for patients" over its full run from April 2016 through December 2024. CMS's own performance year evaluation reports, published through the CMS Innovation Center, provide more granular detail behind that topline figure: the model's Performance Year 7 evaluation found $112.7 million in savings to Medicare across more than 98,000 knee and hip replacement patients treated at 323 hospitals during the 2021–2023 performance period, and Performance Year 6 alone generated $54.2 million in net Medicare savings. CMS has also published an "Innovation Insight" analysis specifically addressing how the CJR Model generated savings to Medicare, available on the CMS Innovation Center website. Taken together, this multi-year evaluation record — spanning eight-plus years of live testing — is the evidentiary foundation CMS is citing to justify converting the model from a limited-market pilot into a mandatory, nationwide requirement.

The FY 2027 Payment Rate Update: What Every Hospital Needs to Know

Separate from the CJR-X expansion, the same final rule sets the annual Medicare payment rate update that every IPPS hospital and LTCH depends on for FY 2027, which begins October 1, 2026.

How the IPPS and LTCH PPS Work

CMS pays most acute care hospitals for inpatient stays under the IPPS, and pays long-term care hospitals under the separate LTCH PPS, according to CMS's official fact sheet for this rule. Both systems set base payment rates prospectively — meaning the rate is determined in advance based on a patient's diagnosis, the services or treatment provided, and the severity of illness, rather than on a hospital's actual itemized costs after the fact. Under IPPS, cases are classified into Medicare Severity Diagnosis-Related Groups (MS-DRGs); under LTCH PPS, cases are classified into Medicare Severity Long-Term Care Diagnosis-Related Groups (MS-LTC-DRGs). A hospital receives a single payment per case based on the classification assigned at discharge, subject to various adjustments.

Federal law requires CMS to update these payment rates annually to account for changes in the price of goods and services hospitals purchase to treat Medicare patients — an index known as the hospital "market basket" — along with other statutorily required adjustments.

The 2.3% Rate Increase

For FY 2027, CMS finalized a 2.3% increase to IPPS payment rates. That figure reflects a projected FY 2027 hospital market basket percentage increase of 3.2%, reduced by a 0.9 percentage point productivity adjustment required by law. To earn the full rate update, IPPS-participating hospitals must successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and demonstrate meaningful use of certified electronic health record technology.

CMS projects that, combined with other finalized changes, the FY 2027 IPPS rate update will increase overall hospital payments by approximately $2.1 billion. On top of that, CMS estimates additional payments for inpatient cases involving new medical technologies will increase by approximately $779 million in FY 2027, driven primarily by new approvals for the New Technology Add-on Payment (NTAP) program, which gives hospitals supplemental payments for using qualifying breakthrough medical technologies whose costs aren't yet fully reflected in standard MS-DRG payment rates.

CMS also flagged a looming statutory cliff: additional payments for Medicare-Dependent Hospitals (MDHs) and the temporary low-volume hospital payment adjustment are scheduled to expire December 31, 2026, under current law. CMS noted that Congress has extended these payment provisions in the past, and estimated that if extended through the end of FY 2027, MDH and low-volume hospitals would receive approximately $0.3 billion in additional payments for the year — a reminder that some hospital-specific payment protections depend on continued congressional action, not permanent statutory authority.

LTCH Payment Rates

For long-term care hospitals, CMS finalized the same 2.3% annual update to the LTCH standard payment rate for FY 2027 — again reflecting a 3.2% projected LTCH-specific market basket increase reduced by the 0.9 percentage point productivity adjustment. CMS expects LTCH PPS payments for discharges paid at the LTCH standard rate to increase by approximately 2.2%, or $54 million, driven primarily by that annual update. CMS also finalized a proposal to maintain the LTCH PPS outlier payment threshold — the spending level above which a case qualifies for supplemental outlier payments — at its FY 2026 value, which CMS estimates will keep outlier payments at approximately 8% of total LTCH payments, consistent with statutory requirements.

Graduate Medical Education: New Nondiscrimination Requirements

The final rule extends nondiscrimination protections into how hospitals run their medical residency training programs. Building on protections CMS finalized in the calendar year 2026 Outpatient Prospective Payment System (OPPS) Final Rule, CMS is finalizing a requirement that approved medical residency training programs must not discriminate — or promote or encourage discrimination — on the basis of race, color, national origin, sex, age, disability, or religion, including through the use of those characteristics, or intentional proxies for them, as selection criteria for employment, program participation, resource allocation, or similar activities, opportunities, or benefits. CMS is applying similar requirements to approved nursing and allied health education programs and their accrediting bodies.

For teaching hospitals and Graduate Medical Education (GME) offices, this means residency selection criteria, program participation policies, and resource allocation decisions will need to be reviewed to ensure they don't rely on protected characteristics or intentional proxies for those characteristics.

Organ Acquisition and Reimbursement Appeals Policy

As part of what CMS describes as broader efforts to strengthen Medicare cost reimbursement and appeals policies to improve payment accuracy and reduce inappropriate spending, this final rule makes several changes affecting Independent Organ Procurement Organizations (IOPOs) and Histocompatibility Laboratories (HCLs):

CMS finalized a proposal requiring Medicare to reconcile organ acquisition costs for non-renal organs for IOPOs and HCLs, though with a modification delaying implementation by two years — the policy will now apply to cost reporting periods beginning on or after October 1, 2028, rather than an earlier start date. CMS also finalized proposals clarifying and codifying certain longstanding policies regarding allowable costs under Medicare's reasonable cost principles across all provider types, including rules around public education activities for Organ Procurement Organizations, and finalized clarification and codification of Medicare's longstanding policies for allocating overhead costs across all provider types. Finally, the rule codifies the CMS Administrator's discretionary review authority over reimbursement appeals brought by IOPOs and HCLs.

Hospital Quality and Value-Based Payment Programs: A Multi-Year Overhaul

The FY 2027 IPPS/LTCH PPS final rule makes extensive changes across six separate hospital quality and value-based purchasing programs. Because many of these changes phase in gradually — some as early as the FY 2028 payment determination, others not until FY 2032 — hospital quality teams have a multi-year runway to prepare, but the volume of changes is substantial.

Hospital Inpatient Quality Reporting (IQR) Program

The Hospital IQR Program is a pay-for-reporting program: hospitals that fail to submit required quality data, or fail to meet all program requirements, face a one-fourth reduction in their Annual Payment Update under the IPPS.

CMS finalized the adoption of three new measures under the IQR Program: the Excess Days in Acute Care After Hospitalization for Diabetes measure, beginning with the FY 2029 payment determination; the Hospital Harm–Postoperative Venous Thromboembolism electronic clinical quality measure (eCQM), beginning with the FY 2030 payment determination; and the Advance Care Planning eCQM, also beginning with the FY 2030 payment determination.

CMS is simultaneously removing three existing measures beginning with the FY 2030 payment determination: the Venous Thromboembolism Prophylaxis eCQM, the Intensive Care Unit Venous Thromboembolism Prophylaxis eCQM, and the Discharged on Antithrombotic Therapy eCQM.

CMS also finalized modifications, beginning with the FY 2028 payment determination, to three existing Excess Days in Acute Care measures — for Acute Myocardial Infarction, Heart Failure, and Pneumonia hospitalizations. The modifications add Medicare Advantage patient data to the measure calculations and shorten the performance period from three years to two years.

Separately, CMS is adopting five modified mortality measures beginning with the FY 2028 payment determination — covering 30-day, all-cause, risk-standardized mortality following hospitalization for Acute Myocardial Infarction, Heart Failure, Pneumonia, Chronic Obstructive Pulmonary Disease, and Coronary Artery Bypass Graft Surgery — again adding Medicare Advantage data and shortening the performance period, before eventually moving the modified versions of these measures into the Hospital Value-Based Purchasing Program.

CMS explained the rationale behind adding Medicare Advantage data across these measures: with Medicare Advantage enrollment now exceeding half of all Medicare beneficiaries, incorporating MA data into claims-based measure calculations better reflects overall patient care coordination across a broader population and improves measure reliability, while shortening the reporting period allows measure results to reflect more recent hospital performance.

Finally, CMS finalized changes to data reporting and submission requirements for certain eCQMs and structural measures: mandatory reporting for the Malnutrition Care Score eCQM begins with the FY 2030 payment determination; a new mandatory reporting policy will require hospital harm eCQMs to become mandatory after two years of voluntary reporting, beginning with the FY 2030 payment determination, with data publicly reported first on the Provider Data Catalog for the first year of mandatory reporting before moving to the Care Compare tool (including Hospital Star Ratings) in the second year; and the Maternal Morbidity Structural measure will be updated beginning with the FY 2028 payment determination to identify which perinatal quality collaborative a hospital participates in.

Hospital Readmissions Reduction Program

The Hospital Readmissions Reduction Program reduces payments to hospitals with excess readmissions, as a way of incentivizing quality improvement and better care coordination. CMS finalized the adoption of a new Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate Following Sepsis Hospitalization measure, with modifications. Hospitals will receive two years of confidential "early look" reports — covering the FY 2028 and FY 2029 program years — showing estimated payment adjustments under the new sepsis readmission measure before it is actually used in payment reduction calculations, which begins with the FY 2030 program year.

Hospital-Acquired Condition (HAC) Reduction Program

The HAC Reduction Program financially penalizes hospitals in the worst-performing quartile for hospital-acquired conditions, reducing their overall Medicare fee-for-service payments by 1%. CMS is not making any changes to this program in the FY 2027 final rule.

Hospital Value-Based Purchasing (VBP) Program

The Hospital VBP Program is budget-neutral: CMS reduces participating hospitals' base operating DRG payments by 2% each fiscal year and redistributes the entire withheld amount back to hospitals as value-based incentive payments tied to performance. CMS finalized modifications to five condition- and procedure-specific mortality measures beginning with the FY 2032 program year — covering Acute Myocardial Infarction, Heart Failure, Pneumonia, Chronic Obstructive Pulmonary Disease, and Coronary Artery Bypass Graft Surgery/Acute Ischemic Stroke — again adding Medicare Advantage data and shortening the performance period, consistent with the parallel changes made in the IQR Program.

PPS-Exempt Cancer Hospital (PCH) Quality Reporting Program

The PCH Quality Reporting Program applies to the eleven cancer hospitals that are statutorily exempt from the IPPS; CMS collects and publishes their performance on applicable quality measures. CMS finalized the adoption of the Advance Care Planning eCQM and the Malnutrition Care Score eCQM for PCHs, with a modification offering an initial voluntary reporting period for the FY 2030 program year before mandatory reporting begins with the FY 2031 program year. CMS also finalized removal of the COVID-19 Vaccination Coverage Among Healthcare Personnel measure beginning with the FY 2028 program year, and finalized reporting and submission requirements for eCQMs in the PCH setting.

Long-Term Care Hospital Quality Reporting Program (LTCH QRP)

The LTCH QRP is a pay-for-reporting program requiring LTCHs to submit quality data to CMS; LTCHs that don't meet reporting requirements face a 2-percentage-point reduction to their Annual Payment Update, and measures adopted into the program are publicly reported on the Care Compare tool. CMS finalized removal of two measures — the COVID-19 Vaccination Coverage Among Healthcare Personnel measure and the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date measure — both beginning with the FY 2028 LTCH QRP, along with a revision to the data submission deadline. CMS also summarized public comments received on a potential future measure concept: advance care planning for the LTCH QRP, which was not finalized in this rule but could appear in future rulemaking.

Medicare Promoting Interoperability Program

This program encourages eligible hospitals and critical access hospitals to adopt, implement, upgrade, and demonstrate meaningful use of certified electronic health record technology (CEHRT). CMS finalized several changes: removing and revising certification criteria in alignment with proposals from the Office of the National Coordinator for Health IT (ONC) in its Health Data, Technology, and Interoperability: Assistant Secretary for Technology Policy (ASTP)/ONC Deregulatory Actions to Unleash Prosperity proposed rule (HTI-5); removing ONC Direct Review and ONC-Authorized Certification Body (ONC-ACB) Surveillance attestations beginning with the EHR reporting period in calendar year 2026; delaying removal of the Support Electronic Referral Loops by Sending and Support Electronic Referral Loops by Receiving and Reconciling Health Information measures by an additional year, now beginning with the CY 2029 EHR reporting period; modifying the Electronic Prior Authorization measure to become an optional bonus measure for the CY 2027 EHR reporting period before becoming mandatory beginning with the CY 2028 EHR reporting period; adding the Unique Device Identifiers for Implantable Medical Devices measure to the Public Health and Clinical Data Exchange objective beginning with the CY 2027 EHR reporting period; and adopting/removing the same eCQMs described above in alignment with the IQR Program, beginning with the FY 2030 payment determination.

ONC's Role: New Health IT Interoperability Standards

CMS partnered with the HHS Office of the National Coordinator for Health Information Technology (ONC) to finalize a set of health IT standards through this same rule, on behalf of HHS. According to ONC, these provisions were originally proposed as part of the 2026 CMS Interoperability Standards and Prior Authorization for Drugs proposed rule (CMS-0062-F), and the FY 2027 IPPS final rule is where ONC formally adopted them.

The standards ONC finalized support FHIR® (Fast Healthcare Interoperability Resources) API interoperability across four specific use cases: electronic prior authorization transactions, exchange of administrative and clinical data between payers and providers, sharing of payer drug formularies, and sharing of information about payer provider directories.

Specifically, ONC finalized adoption of the following HL7 FHIR implementation guides, on behalf of HHS: the Da Vinci Coverage Requirements Discovery Implementation Guide (Version 2.2.1 – STU 2.2), the Da Vinci Documentation Templates and Rules Implementation Guide (Version 2.2.0 – STU 2.2), the Da Vinci Prior Authorization Support (PAS) FHIR Implementation Guide (Version 2.2.1 – STU 2.2), the CARIN Consumer Directed Payer Data Exchange Implementation Guide, also known as the CARIN IG for Blue Button® (Version 2.2.0 – STU 2.2), the Da Vinci Payer Data Exchange (PDex) US Drug Formulary Implementation Guide (Version 2.1.0 – STU 2.1), the Da Vinci PDex Plan Net Implementation Guide (Version 1.2.0 – STU 1.2), and the Da Vinci Clinical Data Exchange (CDex) Implementation Guide (Version 2.1.0 – STU 2.1).

Where ONC had previously adopted earlier versions of any of these standards in the HTI-4 final rule (released in July 2025 as part of the FY 2026 IPPS final rule, CMS-1833-F), ONC has finalized replacing those earlier versions with the updated versions listed above, effective on the same date as the FY 2027 IPPS final rule itself: October 1, 2026. These standards are referenced in proposed payer API requirements under the broader 2026 CMS Interoperability Standards and Prior Authorization for Drugs proposed rule, and in ONC health IT certification criteria specific to electronic prior authorization — meaning health IT developers building certified EHR and payer API products will need to track both this rule and the related interoperability rulemaking closely.

Timeline: What Takes Effect When

July 31, 2026 — CMS issues the FY 2027 IPPS/LTCH PPS final rule (CMS-1849-F).

October 1, 2026 — The FY 2027 IPPS and LTCH PPS rate updates take effect (2.3% for both); the ONC-finalized FHIR interoperability standards take effect; CY 2027 EHR reporting period changes tied to fiscal-year payment determinations begin their applicable cycles.

CY 2027 EHR reporting period — Electronic Prior Authorization measure becomes an optional bonus measure under the Medicare Promoting Interoperability Program; Unique Device Identifiers for Implantable Medical Devices measure is added.

FY 2028 payment determination / program year — Several IQR measure modifications take effect (Excess Days in Acute Care measures, mortality measures); Hospital VBP early-look reports begin for the sepsis readmission measure; PCH QRP removes the COVID-19 Vaccination Coverage Among Healthcare Personnel measure; LTCH QRP removes two COVID-19 vaccination measures; Maternal Morbidity Structural measure update takes effect.

CY 2028 EHR reporting period — Electronic Prior Authorization measure becomes mandatory under the Medicare Promoting Interoperability Program.

January 1, 2028 — CJR-X becomes mandatory nationwide for most IPPS hospitals.

FY 2029 payment determination — Excess Days in Acute Care After Hospitalization for Diabetes measure is added to the IQR Program.

CY 2029 EHR reporting period — Delayed removal of the electronic referral loop measures under the Medicare Promoting Interoperability Program.

FY 2030 payment determination / program year — New Hospital Harm–Postoperative Venous Thromboembolism and Advance Care Planning eCQMs added to the IQR Program (and aligned Promoting Interoperability Program); three legacy VTE/antithrombotic eCQMs removed; Malnutrition Care Score eCQM becomes mandatory; hospital harm eCQMs become mandatory after their voluntary reporting period; Sepsis readmission measure begins affecting Hospital Readmissions Reduction Program payment calculations; PCH QRP begins voluntary reporting for Advance Care Planning and Malnutrition Care Score eCQMs.

FY 2031 program year — Mandatory reporting of Advance Care Planning and Malnutrition Care Score eCQMs begins for PPS-Exempt Cancer Hospitals.

FY 2032 program year — Modified mortality measures move into the Hospital Value-Based Purchasing Program.

October 1, 2028 — Reconciliation of organ acquisition costs for non-renal organs begins for IOPO and HCL cost reporting periods starting on or after this date.

What This Means for Hospitals: An Action Checklist

Hospital leadership, finance, and quality teams have a lot to absorb from this rule, and the CJR-X mandate in particular requires early operational planning given its January 1, 2028 start date. Hospital administrators should determine now whether their facility falls into an exempt category — TEAM participation, Maryland location, or non-dual IPPS/OPPS payment status — since most IPPS hospitals will not be exempt and should assume mandatory CJR-X participation is coming. Orthopedic service line leaders and care coordination teams should begin mapping the full 90-day post-surgical episode for hip, knee, and ankle replacement patients now, including physical therapy, home health, skilled nursing, and follow-up physician visit pathways, since total episode spending — not just the surgical DRG payment — will determine financial performance under the model. Finance teams should study the publicly available CJR Model performance year evaluation reports on the CMS Innovation Center website to understand how target price and quality-adjusted reconciliation worked under the predecessor model, since CJR-X is expected to follow a similar structure. Quality and compliance teams should track the extensive measure additions, removals, and modifications across the IQR, Readmissions Reduction, Value-Based Purchasing, PCH QRP, LTCH QRP, and Promoting Interoperability programs against the fiscal-year effective dates listed above, since several measures require data collection well before their formal payment-determination year. GME offices should review residency, nursing, and allied health program selection criteria and resource allocation policies against the new nondiscrimination requirements. Health IT and EHR vendor management teams should confirm certified EHR technology roadmaps account for the FHIR implementation guide version updates ONC finalized, particularly ahead of the CY 2027 optional and CY 2028 mandatory Electronic Prior Authorization measure deadlines.

What This Means for Patients

For Medicare beneficiaries considering or scheduled for hip, knee, or ankle replacement surgery, CMS has stated plainly that CJR-X does not change how care is accessed: patients keep their choice of doctor and hospital, and the model operates as a financial and quality accountability structure between CMS and hospitals rather than a change to referral or authorization processes. The practical benefit CMS is aiming for is better-coordinated care across the full recovery period — from pre-surgery education through the 90 days following discharge — since hospitals now have a direct financial stake in ensuring physical therapy, follow-up care, and recovery support are well-coordinated rather than fragmented, and in avoiding preventable complications, readmissions, and emergency department visits during recovery.

Frequently Asked Questions

What is CJR-X? CJR-X (Comprehensive Care for Joint Replacement Expanded) is a mandatory, nationwide Medicare episode-based payment model covering hip, knee, and ankle replacement surgery performed in inpatient and hospital outpatient settings, finalized as part of the FY 2027 IPPS/LTCH PPS final rule.

When does CJR-X start? CJR-X becomes mandatory nationwide beginning January 1, 2028, according to CMS.

Which hospitals have to participate in CJR-X? Most hospitals paid under Medicare's Inpatient Prospective Payment System (IPPS) will be required to participate. Hospitals participating in the Transforming Episode Accountability Model (TEAM), hospitals located in Maryland, and hospitals not paid under both the IPPS and OPPS are exempt.

What does the CJR-X episode of care include? The episode begins with the joint replacement procedure and extends 90 days after discharge, covering essentially all related Medicare Part A and Part B items and services, including the hospital stay, physical therapy, and follow-up care.

Will CJR-X change which doctor or hospital I can use for joint replacement surgery? No. CMS states that patients will still choose their own doctors and will not face added complexity in how they receive care.

Did the original CJR Model actually save Medicare money? Yes. CMS reports the CJR Model saved Medicare more than $100 million over its full run from April 2016 through December 2024 while maintaining quality of care, with $112.7 million in savings documented in the Performance Year 7 evaluation (2021–2023) alone.

What is the FY 2027 Medicare payment rate increase for hospitals? CMS finalized a 2.3% payment rate increase for both IPPS hospitals and long-term care hospitals (LTCHs) for FY 2027, reflecting a 3.2% market basket increase reduced by a 0.9 percentage point productivity adjustment.

How much will total Medicare hospital payments increase under this rule? CMS estimates the FY 2027 IPPS changes will increase hospital payments by approximately $2.1 billion, plus an additional $779 million in new medical technology add-on payments.

What is the official designation of this rule? CMS-1849-F, the FY 2027 Hospital Inpatient Prospective Payment System and Long-Term Care Hospital Prospective Payment System Final Rule, published in the Federal Register at document number 2026-15833.

What health IT standards did ONC finalize in this rule? ONC finalized several HL7 FHIR implementation guide standards supporting electronic prior authorization, payer-provider data exchange, drug formulary sharing, and provider directory sharing, effective October 1, 2026.

References and Sources

This article is based exclusively on official U.S. government sources:

• CMS News: CMS Announces Nationwide Expansion of Proven Joint Replacement Program — CMS.gov

• FY 2027 Hospital Inpatient Prospective Payment System and Long-Term Care Hospital Prospective Payment System Final Rule (CMS-1849-F) — CMS.gov Newsroom Fact Sheet

• CJR-X (Comprehensive Care for Joint Replacement Expanded) Model — CMS.gov, CMS Innovation Center

• Comprehensive Care for Joint Replacement (CJR) Model — CMS.gov, CMS Innovation Center

• Innovation Insight: Comprehensive Care for Joint Replacement (CJR) Model Generates Savings to Medicare — CMS.gov

• Transforming Episode Accountability Model (TEAM) — CMS.gov, CMS Innovation Center

• FY 2027 IPPS/LTCH PPS Final Rule, Federal Register Document 2026-15833 — Federal Register

• ONC Finalizes the Adoption of Certain Health IT Standards in the FY2027 CMS IPPS Final Rule — HealthIT.gov, Office of the National Coordinator for Health Information Technology

Reporting: HealthBridge US Policy Desk