CJR-X Finalized & More Updates in the 2027 IPPS Rule

CMS released the FY 2027 IPPS final rule on July 31, 2026, and finalized the new CJR-X model, a mandatory nationwide joint replacement bundle that begins January 1, 2028. The IPPS rule updates inpatient payment, reshapes several quality measures, and creates a new reporting step for implanted devices. 

A number of those changes reach directly into both orthopedic and rehabilitation care.

CJR-X finalized

Under CJR-X, most acute care hospitals participating in Medicare's inpatient and outpatient systems will assume financial accountability for the full 90 days of a patient's recovery following a hip, knee, or ankle replacement. CMS specifically includes follow-up care, such as physical therapy, within that window. Hospitals in the Transforming Episode Accountability Model (TEAM) and hospitals in Maryland are excluded. 

The model reaches outpatient hip and knee replacements alongside inpatient stays, reflecting that most of these procedures are now performed on an outpatient basis. Quality is scored through five measures combined into a composite score, among them the risk-standardized complication rate after hip and knee replacement and the THA/TKA patient-reported outcome measure, which captures the pain and function patients report months after surgery. That patient-reported measure is already mandatory for hospital inpatient quality reporting, so CJR-X reuses data that hospitals already collect rather than adding a separate burden. Hospitals carry two-sided risk from the first performance year.

The biggest change from the proposed rule is timing. 

CMS proposed an October 1, 2027, start and finalized January 1, 2028, a three-month delay that the agency attributed to commenters who asked for more time to prepare. This effectively makes 2027 a preparation year in which hospitals receive baseline data before any dollars are at risk. Otherwise, hospitals did not get most of what they asked for. 

The American Hospital Association had pressed CMS to make participation voluntary, build a glide path before full downside risk, and raise the low-volume threshold. CMS declined each; participation stays mandatory, downside risk applies from year one, and the discount factor holds at 2 percent, lower than the 3 percent used in the original CJR Model. 

What hospitals did get—besides time—were improved risk adjustment, a low-volume pricing policy, and baseline and regional data sharing. Innovation Center Director Abe Sutton said the model gives hospitals "the right financial incentives to enhance care coordination,” while the AHA said it was "disappointed CMS failed to make meaningful improvements.”

Measures now count Medicare Advantage patients

CMS is integrating Medicare Advantage beneficiaries into claim-based hospital outcome measures and shortening the measurement window from three years to two. This change takes effect for the readmissions program with the FY 2027 program year and extends to a set of mortality measures. The TKA/ThA PRO-PM is not part of that change; however, the hip and knee readmission and complication measures are included. 

Because a majority of Medicare beneficiaries are now enrolled in Medicare Advantage, a hospital's publicly reported, payment-linked joint replacement outcomes will increasingly reflect its entire patient population. 

A new attestation for implantable devices

Under the Medicare Promoting Interoperability Program, hospitals will attest that they capture the Unique Device Identifier (UDI) for implantable medical devices in the electronic health record. This will begin with the CY 2027 reporting period, with an exclusion for hospitals that implant five or fewer such devices in the year. 

For orthopedics, implantable devices mean joint implants and spinal hardware. Consistent UDI capture is what makes device tracking and recall response possible. It is a small reporting step with real downstream value for implant-heavy service lines.

Payment

CMS finalized a 2.3 percent operating update for hospitals that report quality data and are meaningful EHR users, reflecting a 3.2 percent market basket increase reduced by a 0.9 percentage-point productivity adjustment. That update reaches the inpatient joint replacement stays that anchor CJR-X episodes. The AHA called it inadequate against rising costs and noted the productivity cut landed larger than the agency had proposed. 

The rule continues new-technology add-on payments for qualifying technologies, a pathway that matters whenever a new implant or spinal device clears the bar, and it lets the Medicare-Dependent Hospital program and the enhanced low-volume adjustment expire on December 31, 2026, absent congressional action, which affects small and rural hospitals.

The road ahead: get ready for CJR-X

The year ahead is a time of preparation for all hospitals and health systems. 

Facilities in CJR-X will need to prepare since it is risk-bearing from day one. TEAM facilities are also getting ready for their first risk-bearing year in the model (unless Critical Access Hospitals). Hospitals, surgeons, and rehabilitation teams should use 2027 to align on discharge planning, post-acute partnerships, and collecting outcomes. 

Medicare joint replacement is now about managing the whole episode of care. The orthopedic surgeons and therapy partners who can show they improve function, sustain adherence, and prevent readmissions will be the providers that hospitals will be partnering with. 

For more information on the IPPS rule, review the rule and factsheet.