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April 22, 2026 – On April 10, 2026, the Centers for Medicare & Medicaid Services (CMS) issued the fiscal year 2027 Inpatient Prospective Payment System (IPPS) proposed rule – the major annual rule impacting Medicare inpatient payments. This 1,500+ page rule proposes a plethora of policies, but one that particularly stands out is a proposed new model called the Comprehensive Care for Joint Replacement Expansion (CJR-X) model. This model is monumental for a number of reasons—and to help me discuss its significance, I’m bringing in my colleague, Devin Stone.
CJR-X, if finalized, would be the first CMS Innovation Center expanded model implemented by this administration. Section 1115A of the Social Security Act provides the secretary of the US Department of Health and Human Services (HHS) the authority, through rulemaking, to expand the duration and scope of a model (including implementation on a nationwide basis) that was initially tested by the CMS Innovation Center. The secretary is allowed to expand a model if, after taking into account the evaluation of the initial model, the secretary determines that an expansion would likely reduce spending without reducing the quality of care, or would improve the quality of patient care without increasing spending. The CMS chief actuary must also certify that the expansion would reduce (or would not result in any increase in) spending, and the secretary must determine that the expansion would not deny or limit coverage or provision of benefits.
Before now, only a few CMS Innovation Center models have met the criteria for expansion, including the Pioneer Accountable Care Organization model (features of the model were included in the national Medicare Shared Savings Program) and the Medicare Diabetes Prevention Program. In the IPPS rule, CMS states that the original Comprehensive Care for Joint Replacement (CJR) model’s seventh annual evaluation report found that the model had produced $112.7 million in net savings to Medicare across performance years six and seven while maintaining quality of care. This provided the evidence the HHS secretary needed to determine that the model met the criteria for expansion.
The original CJR model ran from April 1, 2016, through December 31, 2024. Hospitals located in select metropolitan statistical areas were required to participate (i.e., CJR was a “mandatory” model). If a patient was hospitalized at a participating hospital for joint replacement as described by MS-DRGs 469, 470, 521, or 522, or in later performance years received total knee arthroplasty or total hip arthroplasty in the outpatient hospital setting, that event would trigger a 90-day episode of care. At the end of each performance year, CMS would reconcile actual Medicare Parts A and B spending (minus some exceptions) during those episodes of care against a risk-adjusted benchmark. The hospital would either owe money to CMS or receive a bonus payment if it performed better than the discounted risk-adjusted benchmark.
The CJR-X model would also be a mandatory model, but it would be national, applying to most hospitals across the country. The CJR-X model is proposed to begin October 1, 2027, with no proposed end date. While hospitals receiving IPPS and Outpatient Prospective Payment System payments would be required to participate, the following hospitals would be exempt:
CJR-X episodes would be initiated for Medicare fee-for-service beneficiaries when they have an inpatient or outpatient hospital stay for lower-extremity joint replacement (LEJR), as defined by MS-DRGs 469, 470, 521, and 522 for inpatient stays, and by HCPCS 27130 (total hip arthroplasty) and 27447 (total knee arthroplasty) for outpatient hospital stays. CMS proposes to exclude ankle replacements performed in the outpatient setting but may consider including total ankle arthroplasty when performed in the outpatient setting through future rulemaking.
Episodes would last 90 days post-discharge and include all Medicare Parts A and B expenditures with some proposed exclusions:
Beneficiaries must be in traditional Medicare and have both Part A and Part B coverage.
CMS proposes to calculate benchmark episode prices using three years of historical baseline data (October 1, 2023, through September 30, 2026), which would be trended forward to the first performance year (October 1, 2027, through September 30, 2028) using a prospective trend factor that represents expected changes in overall spending patterns. This three-year baseline would be rolled forward for every performance year, such that October 2024 through September 2027 claims would be used for the second performance year starting October 1, 2028. CMS proposes:
CMS proposes to apply a discount factor of 2% to the benchmark price. During reconciliation, CMS would risk-adjust the discounted target price, apply a retrospective trend factor, incorporate a composite quality score, and apply a high-cost outlier cap to calculate the net payment reconciliation amount for each hospital. CMS also proposes to apply a 20% stop-gain/stop-loss limit for most CJR-X participants, and a 5% stop-gain/stop-loss limit for CJR-X participants that are safety net or rural hospitals, Medicare-dependent, small rural hospitals, and sole community hospitals. Hospitals with fewer than 31 joint replacement procedures for original Medicare beneficiaries in the applicable three-year baseline period would be exempt from reconciliation for CJR-X.
The original CJR model waived certain telehealth service requirements during CJR episodes for beneficiaries that were not classified as rural. CMS believes that similar telehealth waivers would be necessary for CJR-X to maximize participants’ opportunity to improve care quality and efficiency. CMS proposes to create four HCPCS G-codes to describe evaluation and management services furnished to CJR-X beneficiaries in-home via telehealth, and to make these codes and their respective Medicare payment rates available to CJR-X participants before the first performance year.
If finalized, CJR-X could start a new era in how CMS pays for episodes of care. Folks who have been in the healthcare policy arena for a while may remember how the creation of the Medicare IPPS in the mid-1980s established a policy framework for bundling hospital services. In the following decades, Congress passed legislation to create Medicare prospective payment systems for outpatient hospital services, home health, skilled nursing facilities (in the Balanced Budget Act of 1997), and end-stage renal disease (in the Medicare Improvements for Patients and Providers Act of 2008).
The proposed expansion of the CJR model might represent the start of CMS testing and then nationalizing more episode-based payment models. Next on the list might be the spinal fusion, coronary artery bypass graft, major bowel procedure, and surgical hip and fracture treatment episodes currently being tested in TEAM. CMS could replicate the formula used for initial CJR model and TEAM to test other common episodes of care going forward.
An important feature of these models is their guarantee of savings to the Medicare program. Because they are mandatory models, they remove the risk of self-selection, and they build in a discount factor (a price cut) that is applied to the episode price. Once models like TEAM conclude, CMS may be able to collect the evidence it needs through evaluation reports to nationalize them under the CMS Innovation Center authority, avoiding the need for congressional action.
The creation of more episode-based payment models with built-in price cuts could potentially increase financial pressure on hospitals. Stakeholders would need to think through long-term advocacy and financial strategies appropriately.
Hospitals and other stakeholders are currently reviewing the proposed model carefully and will likely submit comments to CMS by the IPPS proposed rule comment due date of June 9, 2026. CMS must issue the final IPPS rule by around August 1, 2026, 60 days prior to the start of the fiscal year on October 1, 2026. Should CMS finalize CJR-X without major changes in the IPPS final rule, most US hospitals that perform a meaningful volume of joint replacement procedures for original Medicare beneficiaries will have one year until the model begins on October 1, 2027, to figure out how to better manage the care their patients receive after being discharged from the hospital. This might include encouraging patients to move towards lower-cost post-acute settings of care, where appropriate.
Hospitals should also keep in mind that their regional benchmark is rebased every year. If all hospitals within a region successfully learn how to maximize post-acute care placement to minimize episode spend, those same hospitals might need to find ways to produce more efficient care once the regional benchmark is rebased and captures those efficiencies. In other words, hospitals could wind up facing price cuts on all Parts A and B spend related to joint replacement care each year.
With respect to rural hospitals, it is important to remember that the original CJR model was mandatory for a select number of metropolitan statistical areas. With CJR-X, the model would be expanded not only to metropolitan statistical areas nationwide, but to micropolitan statistical areas and counties located outside of metropolitan and micropolitan statistical areas. Some hospitals located outside of metropolitan statistical areas may start at a disadvantage if they have access to fewer high-quality post-acute care providers. Hospitals with relatively high episode costs for joint replacement might need to decide whether to invest in their care to create more efficient episodes or scale back their joint replacement service line to satisfy the CJR-X low-volume exclusion.
It is definitely not an overstatement to conclude that the proposed CJR-X is a big deal, not only in its scope (a national model that affects almost all hospitals) and its financial impact (a 2% reduction for LEJR episodes of care), but also in what it potentially signals. The administration could be setting the stage to move even more providers into mandatory alternative payment models (APMs) and promote additional site-neutral payment policies. CJR-X satisfies both criteria, both as a proposed APM and because it would create a financial incentive for hospitals to encourage patients towards the lowest-cost post-acute care setting that can maintain quality care. All in all, CJR-X could represent just the beginning in CMS’s long-term effort to transform Medicare payments and reduce overall spending.
Until next week, this is Jeffrey (and Devin) saying, enjoy reading regs with your eggs.
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