CJR-X (Comprehensive Care for Joint Replacement Expanded) Model

Comprehensive Executive Analysis | ValuesEdge Strategic Intelligence

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1. Executive Summary and Strategic Context

What Is This Model and What Problem Does It Solve?

CJR-X (Comprehensive Care for Joint Replacement Expanded) is a mandatory, nationwide, episode-based payment model covering lower extremity joint replacement (LEJR) procedures — including total hip, total knee, and total ankle replacements — performed in both inpatient and hospital outpatient settings. It was finalized in the FY 2027 Hospital Inpatient Prospective Payment System (IPPS) Final Rule and launches January 1, 2028, with annual performance years aligned to calendar years.

The core problem CJR-X addresses is structural fragmentation in Medicare fee-for-service payment for LEJR procedures. Under standard FFS, providers and suppliers are paid separately for the anchor surgery and all subsequent services during the recovery period. That payment architecture creates financial disincentives for care coordination across the acute-to-post-acute continuum. The result is duplicated resource utilization, avoidable readmissions, unsupported care transitions, and unnecessary post-acute care intensity — all of which elevate episode costs without commensurate improvements in patient outcomes.

CJR-X resolves this through a single episode-based financial accountability structure: the participating hospital holds financial responsibility for all related Medicare Part A and Part B services from the date of the LEJR procedure through 90 days post-discharge. This includes the anchor hospitalization or outpatient procedure, physician services, skilled nursing facility (SNF) care, inpatient rehabilitation facility (IRF) care, home health, outpatient therapy, long-term care hospital (LTCH) services, durable medical equipment, clinical laboratory, and most Part B drugs and biologics. All providers and suppliers continue to bill and be paid under existing Medicare FFS rates; financial accountability is settled through an annual reconciliation process comparing actual episode spending against a risk-adjusted, quality-modified target price.

Strategic Significance for the VBC Market

CJR-X is not an incremental program adjustment. It is the first mandatory nationwide test of an episode-based payment model in U.S. healthcare history. Its predecessor, the CJR Model, was tested in only 34 Metropolitan Statistical Areas (MSAs) and ran from April 1, 2016 through December 31, 2024. The CMS Office of the Actuary (OACT) evaluation for performance years 6 and 7 (October 2021 through December 2023) documented $112.7 million in net savings while maintaining quality of care. CJR-X takes that validated framework and applies it to essentially every eligible acute care hospital in the United States — all 50 states, the District of Columbia, and U.S. territories.

The scale of this expansion is strategically decisive. Hospitals that have operated outside bundled payment accountability for LEJR — particularly those in markets not included in the original 34 CJR MSAs — will be drawn into episode accountability for the first time. The OACT actuarial certification (dated August 21, 2026) estimates that the target pricing methodology alone produces 0.6 percent net savings on LEJR episode spending before behavioral effects, and characterizes additional savings from behavioral change as likely but modest, while concluding that increases in episode spending are unlikely. The mandatory structure closes the voluntary participation loophole that undermined savings in BPCI Model 2, BPCI Model 3, and BPCI Advanced, all of which experienced net costs to Medicare despite achieving gross episode spending reductions, primarily because target pricing methodologies produced reconciliation overpayments or participation selection effects.

For post-acute care providers — SNFs, IRFs, home health agencies, and outpatient therapy groups — CJR-X will intensify the already-present financial pressure from hospitals seeking to reduce post-acute care intensity. The CJR Model's documented behavioral pattern was a reduction in IRF discharges offset by increases in home health use. CJR-X hospitals, now incentivized through a 2 percent discount factor applied to target prices (reduced from 3 percent in CJR, reflecting "national LEJR spending reductions over the past decade"), will face renewed pressure to steer patients toward lower-cost post-acute settings — or avoid institutional post-acute care entirely through the new post-discharge home visit waiver (up to nine visits) and expanded telehealth flexibilities.

For ACOs, the financial accountability overlap structure is critical: CJR-X episode spending counts within an ACO's total expenditures, but CJR-X reconciliation payments or repayments do not transfer into or out of ACO calculations. This creates a layered accountability environment in which hospitals must manage both their ACO population cost targets and their CJR-X episode financial performance independently.

Political Context and Administrative Alignment

CJR-X was finalized under the Trump administration — specifically through the FY 2027 IPPS Final Rule — and represents a meaningful alignment between mandatory payment reform and the administration's stated priorities around cost reduction and program efficiency. CMS Administrator Dr. Mehmet Oz and CMMI Director Abe Sutton lead the agencies responsible for CJR-X implementation. The model was authorized under Section 1115A(c) of the Social Security Act, which permits the Secretary to expand a successful model's scope and duration through rulemaking if the CMS Chief Actuary certifies that expansion would not increase net program spending. Chief Actuary Paul Spitalnic provided that certification on August 21, 2026.

The Section 1115A(c) expansion pathway is strategically significant because it carries a lower political and procedural threshold than de novo model creation: CMS needed only to demonstrate that CJR met savings and quality criteria in its test phase. The same authority would allow future modifications to CJR-X through notice-and-comment rulemaking, without requiring separate Congressional action.

The mandatory structure also reflects the administration's comparative interest in generating measurable Medicare savings — a priority consistent with DOGE-influenced cost-reduction efforts across the federal government. CJR-X, alongside TEAM (Transforming Episode Accountability Model, 2026-2030), creates a dual-model evidence base comparing 30-day versus 90-day episode accountability windows across overlapping but non-concurrent hospital populations.

Market Transformation Implications

The transition of LEJR procedures to outpatient settings represents the other major structural force shaping CJR-X's market impact. By 2024, 86 percent of knee procedures were performed as hospital outpatient or ambulatory surgical center (ASC) procedures, and 61 percent of hip procedures were performed outside the inpatient setting. CJR-X explicitly includes hospital outpatient LEJR procedures (HCPCS 27130 for total hip arthroplasty and 27447 for total knee arthroplasty) but does not include ASC-based procedures. This creates a site-of-service incentive dynamic: ASC procedures fall outside CJR-X financial accountability, which could influence hospital decisions about where to route elective LEJR volume. Health system strategists should model the financial consequences of ASC-versus-HOPD routing before the January 2028 start date.

The five-measure Composite Quality Score (CQS) framework — with the Patient-Reported Outcome Performance Measure (PRO-PM) now mandatory rather than voluntary as it was in the original CJR — signals CMS's intent to anchor financial performance to patient-centered outcomes rather than process measures alone. Hospitals that have not invested in systematic PRO collection infrastructure are at a material disadvantage entering CJR-X.

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2. Model Architecture and Payment Structure

Participation Structure

Eligible participants are acute care hospitals that: (1) initiate LEJR episodes; (2) are located in any of the 50 states, DC, or a U.S. territory; and (3) are eligible to be paid under both the IPPS and the OPPS. Participation is mandatory and continuous unless a hospital no longer meets the participant definition, receives a termination notice, or CMS terminates the model.

Excluded hospitals include:

Exclusion Category	Rationale
TEAM participants (mandatory and voluntary)	Prevents concurrent 30-day and 90-day LEJR episode overlap; exclusion ends when TEAM concludes (2030) or participant exits TEAM
Maryland hospitals	State's unique rate-setting authority incompatible with regional pricing methodology
Critical Access Hospitals (CAHs)	Not paid under both IPPS and OPPS
Rural Emergency Hospitals	Not paid under both IPPS and OPPS
Rural Community Hospital Demonstration hospitals	Not paid under both IPPS and OPPS
Indian Health Service hospitals	Not paid under both IPPS and OPPS
Tribal hospitals	Not paid under both IPPS and OPPS

Low-volume hospitals — defined as fewer than 31 LEJR episodes during the applicable 3-year baseline period — are excluded from reconciliation for that performance year but remain nominal participants. Because the baseline period rolls forward with each PY, a hospital may qualify as low-volume in one year and be subject to reconciliation in a subsequent year.

Beneficiary eligibility requires enrollment in Medicare Parts A and B, Original Medicare (not Medicare Advantage) as primary payer, absence of ESRD Medicare eligibility, non-enrollment in managed care or United Mine Workers health plans.

Episode Definition and Triggering Procedures

A CJR-X episode initiates upon admission for an anchor hospitalization or outpatient procedure coded under the following MS-DRGs or HCPCS codes:

Code	Description	Setting
MS-DRG 469	Major hip/knee joint replacement or reattachment of lower extremity with MCC or Total Ankle Replacement	Inpatient
MS-DRG 470	Major hip/knee joint replacement or reattachment of lower extremity without MCC	Inpatient
MS-DRG 521	Hip replacement with principal diagnosis of hip fracture with MCC	Inpatient
MS-DRG 522	Hip replacement with principal diagnosis of hip fracture without MCC	Inpatient
HCPCS 27130	Total Hip Arthroplasty (THA)	Hospital Outpatient
HCPCS 27447	Total Knee Arthroplasty (TKA)	Hospital Outpatient

The episode length is 90 days from the discharge date (inpatient) or date of the outpatient procedure. Day one of the post-acute period is the discharge or procedure date itself.

Excluded from episode spending: admissions for oncology, trauma, organ transplant, and ventricular shunts; admissions falling under MDC 02 (Eye), MDC 14 (Pregnancy), MDC 15 (Newborns), MDC 25 (HIV); new technology add-on payments; OPPS transitional pass-through payments for medical devices; hemophilia clotting factors; and certain low-volume, high-cost drugs and biologics.

Payment Methodology and Target Price Construction

All providers continue to bill Medicare FFS throughout the episode. Financial accountability is determined through annual reconciliation, occurring approximately six months after each performance year ends.

Target price construction follows a multi-step methodology:

Pricing Component	CJR-X Specification
Baseline period	3-year rolling baseline (vs. 1-year in original CJR)
Benchmark geography	Regional (U.S. Census Division), broken out by MS-DRG/HCPCS episode type
Prospective trend factor	Applied to preliminary target prices before PY begins
Retrospective trend factor	Applied at reconciliation; capped at ±3 percent of projected trend
Normalization factor	Prospective normalization applied to preliminary prices; updated at reconciliation, capped at 5 percent
Discount factor	2 percent base (reduced from 3 percent in CJR); modified by quality performance
Risk adjustment	29 risk adjusters at beneficiary and hospital level (vs. 3 in CJR)
Stop-gain limit	20 percent of cumulative target price for all hospitals
Stop-loss limit	20 percent for most hospitals; 5 percent for rural and high-dual hospitals

The 29 risk adjusters include: beneficiary age, HCC count, dual eligibility status, procedure type, disability as original Medicare enrollment reason, prior PAC use, 21 specific HCCs, hospital bed count, and hospital proportion of dually eligible beneficiaries. These are identical to the 29 risk adjusters used in TEAM.

Simplified Payment Calculation Example (from model overview slides):

Component	Value
Benchmark Price	$100,000
Prospective Trend Factor	1.030
Prospective Normalization Factor	0.896
Risk Adjustment Multiplier (Preliminary)	1.042
Discount Factor (Preliminary, "Good" CQS)	2.0%
Preliminary Target Price	$94,241
Retrospective Trend Factor (capped)	1.060
Final Normalization Factor	0.870
Final Risk Adjustment Multiplier	1.050
Final Discount Factor ("Good" CQS = 1.0%)	0.990
Reconciliation Target Price	$95,863
Actual Episode Spending	$90,000
Reconciliation Payment to Hospital	$5,863

Quality Measures and Composite Quality Score

Quality is linked directly to payment through the Composite Quality Score (CQS), which adjusts the discount factor applied to the reconciliation target price. Hospitals that fail to achieve a minimum CQS threshold are ineligible for reconciliation payments but remain subject to repayment obligations.

Five quality measures constitute the CQS, weighted across three domains:

Quality Domain	Measure	CMIT ID	Weight in CQS
Complications (50%)	Hospital-Level RSCR Following Elective Primary THA and/or TKA	#350	—
Complications (50%)	Hospital Visits Within 7 Days of HOPD Surgery	#344, OP-36	—
Patient Experience (40%)	HCAHPS Survey	#338	—
Patient Experience (40%)	OAS CAHPS Survey	#162	—
Patient Reported Outcomes (10%)	Hospital-Level THA/TKA PRO-PM	#1618	—

Data is retrieved directly from the Hospital Inpatient Quality Reporting (HIQR) and Hospital Outpatient Quality Reporting (HOQR) programs. Hospitals do not submit quality data separately to CJR-X. The PRO-PM (#1618) applies to both inpatient and outpatient episodes.

Performance point values are assigned based on national performance percentile:

Percentile	Complications Points (max 10.00)	Patient Experience Points (max 8.00)	PRO-PM Points (max 2.00)
>90th	10.00	8.00	2.00
≥80th and <90th	9.25	7.40	1.85
≥70th and <80th	8.50	6.80	1.70
≥60th and <70th	7.75	6.20	1.55
≥50th and <60th	7.00	5.60	1.40
≥40th and <50th	6.25	5.00	1.25
≥30th and <40th	5.50	4.40	1.10
<30th	0.00	0.00	0.00

The inpatient CQS and outpatient CQS are each capped at 20 points.

CQS-to-discount-factor mapping:

CQS Score	Category	Eligible for Reconciliation Payment	Discount Factor Applied
≤6.0	Below Acceptable	No	2.0%
≥6.1 and <12.0	Acceptable	Yes	2.0%
≥12.1 and ≤17.0	Good	Yes	1.0%
≥17.1	Excellent	Yes	0.0%

Based on OACT's actuarial analysis, the assumed distribution of hospitals across quality categories is: Below Acceptable 20%, Acceptable 30%, Good 30%, Excellent 20%, producing a blended average discount of approximately 1.3 percent.

Medicare Program Waivers

Three waivers support care coordination flexibility under CJR-X:

Waiver	Description
Post-Discharge Home Visits	Up to 9 home visits during the episode for in-home monitoring for beneficiaries who do not qualify for home health services
Telehealth	Removes geographic site and originating site requirements for telehealth visits
SNF 3-Day Rule	Waives the 3-day inpatient stay requirement for SNF Medicare coverage; qualifying SNFs must hold at least 3 stars in the CMS Five-Star Quality Rating System for 7 of the prior 12 months

Financial Arrangements and Beneficiary Incentives

Under the Anti-Kickback Statute Safe Harbor for CMS-sponsored model arrangements, CJR-X participants may enter three tiers of financial arrangements: (1) sharing arrangements between the participant hospital and collaborators (e.g., ACOs) for gainsharing and alignment payments; (2) distribution arrangements between collaborators and collaboration agents (e.g., physician group practices); and (3) downstream distribution arrangements between collaboration agents and downstream collaboration agents (e.g., individual physicians).

Participants may also offer in-kind patient engagement incentives directly connected to medical care. Technology items (e.g., home monitoring devices) must not exceed $1,000 retail value per beneficiary per episode. Items with retail value over $75 must remain hospital property and be retrieved at episode end, with documented good-faith retrieval attempts if unsuccessful.

Key Timelines

Milestone	Date
FY 2027 IPPS Final Rule finalized	2026
OACT Certification	August 21, 2026
CJR Model ended	December 31, 2024
TEAM Model active	2026–2030
CJR-X model launch (PY1 begins)	January 1, 2028
Performance years	Annual, aligned to calendar years
Reconciliation timing	Approximately 6 months after each PY ends
Data sharing (baseline)	Annually prior to PY start
Data sharing (PY)	Monthly, with 6 months claims runout after year-end

APM Designation and Reporting Requirements

CJR-X participants elect one of two APM options for each performance year. Advanced APM (AAPM) option requires attestation to Certified Electronic Health Record Technology (CEHRT) use and annual submission of a CMS EHR Certification ID. The Non-AAPM option requires no CEHRT attestation. AAPM participants must submit Financial Arrangements Lists and Clinician Engagement Lists (covering physicians, nonphysician practitioners, and therapists with financial or contractual relationships to the participant) quarterly during each performance year. Hospitals with neither type of reportable relationship must attest to that effect.

Data sharing requires annual submission of a Data Sharing Agreement (DSA) and a Data Request and Attestation (DRA) form. Participants receive summary beneficiary-identifiable claims data, raw beneficiary-identifiable claims data (including diagnosis/procedure codes and dual eligibility indicators), and de-identified regional aggregate data showing Census Division average episode spending.