The Centers for Medicare & Medicaid Services (CMS) on Friday proposed significant updates to Medicare hospital payment policies for fiscal year 2027, including a nationwide expansion of its long-running joint replacement payment model that could improve care coordination while lowering costs for beneficiaries.
The 1,586-page FY 2027 Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital Prospective Payment System (LTCH PPS) proposed rule is expected to be published in the Federal Register on Tuesday. It includes both across-the-board payment updates and a nationwide expansion of CMS’ episode-based payment model hip, knee, and ankle replacements.
Mandatory episode-based model expansion
A centerpiece of the proposal is the planned expansion of the Comprehensive Care for Joint Replacement (CJR) Model into a new, mandatory program (CJR-X) that would apply to most hospitals nationwide beginning October 1, 2027. The model would cover hip, knee, and ankle replacements performed in both inpatient and hospital outpatient settings.
CMS based the proposal on results from the CMS Innovation Center’s CJR Model, which operated from April 2016 through December 2024 and generated Medicare savings while maintaining quality of care. Under CJR, hospitals were accountable for total Medicare spending across the surgical episode, including the hospital stay and the first 90 days of recovery with follow-up care, such as physical therapy.
The model aims to create strong incentives for hospitals to coordinate care more effectively, avoid unnecessary services like avoidable re-hospitalization and emergency care, and focus on delivering the best outcomes for patients. It would specifically encourage better communication with post-acute care providers to support recovery.
“Patients would have a more seamless, better care experience through the CJR-X Model, allowing them to focus on recovery instead of acting as the go-between for their own care,” said CMS Innovation Center Director Abe Sutton in the announcement about the proposed expansion. .
Payment rate updates
In a fact sheet, CMS explained the proposed rule includes a projected 2.4 percent increase in IPPS payment rates for FY 2027, reflecting a 3.2 percent market basket update offset by a 0.8 percentage point productivity adjustment. CMS estimates that overall IPPS payment changes would increase hospital payments by approximately $1.4 billion in FY 2027, excluding other statutory or legislative extensions.
Similarly, CMS is proposing a 2.4 percent payment update for long-term care hospitals, with projected LTCH PPS payment increases of approximately $55 million in FY 2027. These changes may affect post-acute care utilization patterns and network economics for plans managing complex and high-acuity populations.
Expanded quality measurement and reporting
CMS also proposes new electronic clinical quality measures (eCQMs), including advance care planning and postoperative venous thromboembolism harm measures, and modifications to several mortality and utilization metrics.
The agency wants to add Medicare Advantage patients to multiple mortality and utilization measures and shorten performance periods from three years to two years, changes that reinforce CMS’ broader push to blend quality assessment across delivery and coverage models.
CMS is also proposing to remove selected legacy eCQMs and streamline reporting requirements over time, signaling a shift toward fewer but more outcome-focused measures.