CMS Proposes Resurrection and Nationwide Expansion of Mandatory Joint Replacement Bundled Payment Model (CJR-X) 

The first nationwide test of a mandatory episode-based payment model has been unveiled. In the Fiscal Year (“FY”) 2027 Inpatient Prospective Payment System (“IPPS”) Proposed Rule, the Centers for Medicare & Medicaid Services (“CMS”) proposes resurrecting and expanding the original Comprehensive Care for Joint Replacement (“CJR”) Model to establish a mandatory, nationwide episode-based payment model for most hospitals paid under the IPPS beginning October 1, 2027.     

Under the proposed model, known as the Comprehensive Care for Joint Replacement Expanded Model (“CJR-X”), most hospitals paid under the IPPS would be held accountable for spending and quality of care during an inpatient stay or hospital outpatient procedure and for the 90 days following hospital discharge. The proposal reflects CMS’s continued focus on expanding risk-based reimbursement models that hold hospitals accountable for both the cost and quality of care. 

Background

The original CJR Model, implemented in 2016, tested whether bundled payments for lower extremity joint replacement (“LEJR”) procedures could improve care coordination and reduce costs. The model applied to hospitals in select metropolitan areas and included a 90-day episode of care, beginning with the procedure and extending through post-acute recovery. CMS indicated that the model increased Medicare savings while maintaining the quality of care. Based on these results, CMS now proposes to reinstate and expand the model nationwide. 

Key Features of CJR-X

• Mandatory Participation. CJR-X would apply to most IPPS hospitals nationwide, with limited exceptions. Hospitals participating in the Transforming Episode Accountability Model (“TEAM”) would be excluded during their participation in TEAM. Critical Access Hospitals (“CAHs”) and rural emergency hospitals would also be excluded. Maryland hospitals, which are not paid under the IPPS, and certain specialty hospitals would likewise be excluded. CMS also noted that it considered, but ultimately did not include, ambulatory surgery centers as mandatory participants. 
• Episode Design. CJR-X would maintain the 90-day episode structure used in the original model. Episodes would be triggered by specified inpatient or outpatient LEJR procedures and would include most Medicare Part A and Part B services furnished during the episode, including post-acute care. Specifically, LEJR episodes would be triggered by IPPS discharges under MS-DRGs 469, 470, 521 or 522, and Outpatient Prospective Payment System (“OPPS”) OPPS claims for HCPCS codes 27130 or 27447. 
• Payment Methodology. Hospitals and other providers would continue to be paid under existing Medicare payment systems during the year. CMS would then perform an annual reconciliation, comparing actual episode spending to a predetermined target price. Depending on performance, hospitals may receive a reconciliation payment or be required to repay Medicare. 
• Quality Requirements. Consistent with prior models, CJR-X would incorporate a quality-first framework. Hospitals must meet minimum quality thresholds to qualify for reconciliation payments. CMS proposes a composite quality score based on complication rates, patient experience measures and patient-reported outcomes.  
• Risk Adjustment and Protections. CMS proposes several refinements to the CJR model to address concerns raised under the original model, including:  
  • A more robust risk adjustment methodology that accounts for patient complexity; 
  • Exclusion of low-volume hospitals (i.e., hospitals that perform 31 or fewer LEJR episodes during the applicable baseline period) from reconciliation for the performance year; 
  • Adjustments based on factors such as dual eligibility status and comorbidities; and 
  • A 5% stop-loss cap for certain safety net and rural hospitals. 

CJR-X Collaborators

CJR-X mandated hospitals would bear financial responsibility for repayment obligations to CMS but may share both upside and downside risk with entities that contribute to episode performance through financial arrangements. These entities, referred to as “CJR-X collaborators,” include providers, suppliers and Medicare ACO participants that play a role in furnishing care during the episode, including the 90-day post-discharge period. 

The proposed definition of collaborators is intentionally broad and includes a wide range of Medicare-enrolled entities, such as physicians, hospitals (including CAHs), skilled nursing facilities, home health agencies, inpatient rehabilitation facilities, long-term care hospitals, therapy providers and physician group practices, as well as participants in Medicare ACO initiatives.

Financial Arrangements

CMS proposes permitting CJR-X hospital participants to enter into financial arrangements with CJR-X Collaborators. These arrangements would allow hospitals to share reconciliation payments or repayment responsibility with CJR-X collaborators that contribute to episode management. 

Specifically, CMS states that, if finalized, it expects the Anti-Kickback Statute (“AKS”) safe harbor for CMS-sponsored model arrangements (42 C.F.R. § 1001.952(ii)) to be available to protect certain remuneration exchanged pursuant to CJR-X, provided the arrangements comply with both the model requirements and the conditions of the safe harbor. In practice, these arrangements may include: 

• Gainsharing with physicians tied to episode cost and quality performance; 
• Gainsharing arrangements with post-acute providers to support care coordination and reduce readmissions; 
• Care coordination or infrastructure support payments to entities assisting with episode management; and 
• Agreements with third-party vendors for data analytics, care redesign or patient engagement services. 

CMS also addresses beneficiary incentives, including in-kind items or services reasonably tied to the beneficiary’s care, signaling that, if finalized, such incentives may also qualify for protection under the AKS safe harbor for CMS-sponsored model arrangements.  

Waivers of Medicare Program Requirements

CMS proposes to continue using its waiver authority to provide flexibility under CJR-X, consistent with prior episode-based models. Notably, CMS may waive certain Medicare requirements, including the three-day inpatient stay requirement for skilled nursing facility admission and key telehealth restrictions, to support more efficient care delivery and expanded access to services in the home. 

Practical Takeaways

• Evaluate operational and financial impact. Hospitals should assess how CJR-X may affect care delivery, margins and post-acute utilization given its mandatory, nationwide scope.  
• Prepare for increased risk exposure. CJR-X reflects CMS’s continued shift toward mandatory, risk-based reimbursement models.  
• Strengthen care coordination. Alignment with physicians and post-acute providers will be critical to managing episode costs and quality outcomes.  
• Enhance data and analytics capabilities. Hospitals should evaluate their ability to track episode spending, utilization and quality performance. 

Next Steps

The CJR-X model is currently proposed and subject to notice and comment rulemaking. Hospitals and other stakeholders may wish to consider submitting comments to CMS regarding the model’s design and implementation. CMS will accept comments on the proposed rule through June 9, 2026.  

If you have any questions or would like assistance with submitting comments, please contact:

• Jennifer Skeels at (317) 977-1497 or jskeels@hallrender.com;
• Sarah Crosby at (317) 429-3663 or scrosby@hallrender.com;
• Raminta Kizyte at (303) 557-2112 or rkizyte@hallrender.com; or
• Your primary Hall Render contact.