Cut through the noise, find the signal: Intelligence for serious healthcare leaders
Analysis updated November 9, 2026
CJR-X (Comprehensive Care for Joint Replacement Expanded) is a mandatory, nationwide, episode-based payment model covering lower extremity joint replacement (LEJR) procedures — specifically total hip, knee, and ankle replacements — performed in both inpatient and outpatient hospital settings. The model launches January 1, 2028, was finalized in the FY 2027 Hospital Inpatient Prospective Payment System (IPPS) Final Rule, and operates under Section 1115A(c) of the Social Security Act, which authorizes CMS to expand a tested model through rulemaking once statutory requirements are met.
The core problem CJR-X addresses is structural: under traditional Medicare fee-for-service, providers are paid separately for the surgery and every subsequent service during recovery. This architecture creates financial incentives for fragmentation — duplicated services, uncoordinated post-acute care transitions, avoidable readmissions, and unnecessary utilization in the 90 days following an LEJR procedure. Patients bear the clinical and experiential consequences, including post-operative complications, prolonged recovery, and gaps in rehabilitation support. CJR-X makes acute care hospitals financially accountable for the total cost of the episode — from the anchor procedure through 90 days post-discharge — incentivizing them to coordinate care across physicians, post-acute providers, home health agencies, and rehabilitation settings.
CJR-X is a Phase II expansion of the original CJR Model, which ran from April 1, 2016 through December 31, 2024 in 34 mandatory Metropolitan Statistical Areas (MSAs). The most recent evaluation, covering Performance Years 6 and 7 (October 2021 through December 2023), found that the CJR Model produced an estimated $112.7 million in net savings while maintaining quality of care. The model achieved an estimated 3.4 percent reduction in episode spending (p-value = 0.12) compared to non-participating hospitals. The largest behavioral savings came from reductions in discharges to Inpatient Rehabilitation Facilities (IRFs), though these were partially offset by increases in home health utilization.
The CMS Office of the Actuary (OACT) certified on August 21, 2026 that CJR-X expansion would not result in a net increase in program spending. OACT's analysis projects that the target pricing methodology alone — before any behavioral effects — would generate savings of 0.6 percent of LEJR episode spending, and that behavioral impacts under CJR-X are expected to be modest but directionally positive (further savings rather than cost increases).
Critically, OACT flagged an important caveat on generalizability: mandatory CJR participants were oversampled from high-cost MSAs, with baseline per-episode spending 16 percent higher ($32,516 vs. $28,005) than non-CJR hospitals. When OACT simulated a nationally representative cohort using nearest-neighbor matching, the estimated behavioral savings dropped from 3.4 percent to 1.6 percent (p-value = 0.47). This context is essential for hospital strategists: CJR-X will include hospitals with lower baseline spending and potentially smaller margin improvement opportunities than CJR participants historically experienced.
CJR-X represents the first mandatory nationwide test of an episode-based payment model in U.S. healthcare history. The transition from a 34-MSA experiment to full national deployment fundamentally changes the strategic calculus for every eligible acute care hospital in the country. No opt-out is available for eligible participants. This is not a voluntary value-based care program where motivated systems self-select — it is a universal financial accountability framework imposed across the entire acute care hospital sector.
The scope of LEJR procedures in Medicare is substantial: these are among the most frequent surgeries for Medicare beneficiaries. The site-of-service shift has been dramatic — by 2024, 86 percent of knee replacements were performed in outpatient or ambulatory surgical center (ASC) settings, and 61 percent of hip replacements were also performed outside the inpatient setting. CJR-X explicitly accounts for this shift by including hospital outpatient department (HOPD) procedures alongside inpatient cases, capturing HCPCS codes 27130 (Total Hip Arthroplasty) and 27447 (Total Knee Arthroplasty) as outpatient episode triggers in addition to the four inpatient MS-DRGs.
For health system CFOs, the financial accountability structure demands immediate attention: hospitals performing even modest LEJR volumes will face annual reconciliation settlements, with potential repayment obligations that do not exist under current FFS. For CMOs and physician group leaders, the model creates direct financial incentives to redesign care pathways, standardize implant selection, rationalize post-acute discharge patterns, and integrate patient-reported outcome (PRO) collection into clinical workflows.
For Medicare Advantage plan strategists, CJR-X operates exclusively in Original Medicare (fee-for-service) — MA beneficiaries are not included. However, the care coordination infrastructure, care pathway redesign, and clinical protocol investments hospitals make to succeed under CJR-X will likely produce spillover benefits for MA populations, making CJR-X participation a catalyst for broader value-based care capability building.
CJR-X was finalized under the current Trump administration through the FY 2027 IPPS Final Rule. The model's expansion authority derives from a certification by Chief Actuary Paul Spitalnic (dated August 21, 2026) that the expansion would not increase net program spending — a statutory prerequisite under Section 1115A(c). The Trump-era CMS leadership, including CMMI Director Abe Sutton and CMS Administrator Dr. Mehmet Oz, has proceeded with this mandatory model expansion, signaling that episode-based mandatory accountability is consistent with the current administration's approach to Medicare payment reform.
The model's alignment with deficit reduction goals is explicit in OACT's framing: mandatory models with retrospective target pricing (as opposed to the prospective pricing that led to large unearned payouts in BPCI Advanced) produce durable net savings to Medicare regardless of the magnitude of behavioral change. The OACT certification projects baseline savings of 0.6 percent of LEJR episode spending from pricing mechanics alone, with potential additional savings from provider behavior change.
The relationship between CJR-X and the Transforming Episode Accountability Model (TEAM) — which runs from 2026 through 2030 and covers five episode types including LEJR with a 30-day post-discharge window — creates a natural policy experiment. CMS has explicitly designed CJR-X and TEAM to generate a comparative evidence base on 30-day versus 90-day episode accountability. When TEAM concludes, formerly exempt TEAM hospitals will be required to enter CJR-X. This staged enrollment means that by the early 2030s, essentially the entire acute care hospital sector will operate under some form of mandatory episode-based payment for LEJR.
For ACO leaders and health system strategists, the CJR-X/ACO overlap treatment is strategically important: CJR-X episode spending counts in ACO expenditures, but CJR-X reconciliation payments or repayments are excluded from ACO spending calculations. Financial accountability remains entirely separate across models. This means that hospitals participating in both ACO programs and CJR-X must manage two parallel performance frameworks simultaneously, with no cross-model netting of gains or losses.
Eligible participants are acute care hospitals that initiate LEJR episodes and are eligible to be paid under both the Inpatient Prospective Payment System (IPPS) and the Outpatient Prospective Payment System (OPPS), located in any of the 50 states, the District of Columbia, or U.S. territories. Participation is mandatory — there is no application process, opt-out election, or voluntary track.
Excluded hospitals fall into five categories:
| Exclusion Category | Rationale |
|---|---|
| TEAM participants (mandatory and voluntary) | Prevents concurrent LEJR episode accountability; exclusion ends when TEAM concludes or hospital exits TEAM |
| Maryland hospitals | State's unique rate-setting authority incompatible with regional pricing methodology |
| Indian Health Service hospitals | Not eligible for both IPPS and OPPS payment |
| Tribal hospitals | Not eligible for both IPPS and OPPS payment |
| Critical Access Hospitals (CAHs) and Rural Emergency Hospitals (REHs) | Not eligible for both IPPS and OPPS payment |
| Rural Community Hospital Demonstration hospitals | Not eligible for both IPPS and OPPS payment |
Hospitals remain participants unless they no longer meet the eligibility definition, receive notice of termination, or CMS terminates the model. CMS maintains a continuously updated participant list on the CJR-X model webpage.
| Setting | Code | Description |
|---|---|---|
| Inpatient | 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 |
| Outpatient | HCPCS 27130 | Total Hip Arthroplasty |
| Outpatient | HCPCS 27447 | Total Knee Arthroplasty |
The episode begins upon admission for the anchor hospitalization or the date of the outpatient anchor procedure and extends for 90 days from the date of discharge. Day one of the post-acute period is the discharge date itself.
Beneficiary inclusion criteria require that at the time of the anchor event, the beneficiary: (1) is enrolled in Medicare Parts A and B; (2) has Original Medicare as the primary payer; (3) is not eligible for Medicare on the basis of end-stage renal disease (ESRD); (4) is not enrolled in a managed care plan including Medicare Advantage; and (5) is not covered under a United Mine Workers of America health plan. If a beneficiary no longer meets these criteria during the episode, the episode is cancelled.
Episode cancellation also occurs on death during the episode, when extreme and uncontrollable circumstances apply, or when a beneficiary receives an LEJR at a CJR-X hospital during the 30-day post-discharge period following a TEAM episode (the spending is absorbed into the TEAM episode instead).
The episode includes all Medicare Part A and Part B items and services unless specifically excluded, encompassing: inpatient hospital services (IPPS operating and capital), physician services, skilled nursing facility (SNF) care, inpatient rehabilitation facility (IRF) services, long-term care hospital (LTCH) services, inpatient psychiatric facility (IPF) services, home health agency (HHA) services, hospital outpatient services, outpatient therapy, clinical laboratory, durable medical equipment (DME), most Part B drugs and biologics, and hospice services.
Excluded services include: hospital admissions for oncology, trauma, organ transplant, or ventricular shunts; admissions falling under MDC 02 (Eye), MDC 14 (Pregnancy), MDC 15 (Newborns), or MDC 25 (HIV); new technology add-on payments; OPPS transitional pass-through payments for medical devices; hemophilia clotting factors; and low-volume or high-cost drugs and biologics.
CJR-X uses a regional target price framework. The target price serves as the financial benchmark against which actual episode spending is measured at annual reconciliation.
Baseline Period: A 3-year rolling baseline of average episode spending, broken out by geography (Census Division) and MS-DRG/HCPCS episode type. This is a material improvement over the CJR Model's 1-year baseline, reducing year-to-year pricing volatility.
Prospective Trend Factor: Applied to baseline to produce the preliminary target price. At reconciliation, a retrospective trend factor is applied, capped at ±3 percent of the projected trend. This cap protects hospitals from large retroactive adjustments due to unpredictable spending trend shifts.
Normalization Factor: A prospective normalization factor is applied to preliminary prices, then updated at reconciliation and capped at 5 percent, ensuring risk adjustment does not systematically inflate or deflate average target prices.
Risk Adjustment: CJR-X uses 29 risk adjusters — a dramatic expansion from the 3 adjusters used in the original CJR Model. Adjusters operate at two levels:
These 29 adjusters are identical to those used in TEAM, enabling cross-model comparability.
Discount Factor: A 2 percent base discount is applied to baseline spending — 1 percentage point lower than the original CJR Model's 3 percent, explicitly acknowledging national LEJR spending reductions achieved over the past decade. The discount is then adjusted based on quality performance:
| CQS Category | CQS Score | Discount Factor | Eligible for Reconciliation Payment |
|---|---|---|---|
| Below Acceptable | ≤6.0 | 2.0% | No |
| Acceptable | ≥6.1 and <12.0 | 2.0% | Yes |
| Good | ≥12.1 and ≤17.0 | 1.0% | Yes |
| Excellent | ≥17.1 | 0.0% | Yes |
OACT assumed the following distribution across quality categories for financial modeling: 20% Below Acceptable, 30% Acceptable, 30% Good, 20% Excellent — producing a weighted average discount of approximately 1.3 percent.
The model overview provides a concrete worked example:
| Pricing 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") | 2.0% → adjusted to 1.0% at reconciliation |
| Preliminary Target Price | $94,241 |
| Retrospective Trend Factor (capped) | 1.060 |
| Final Normalization Factor | 0.870 |
| Final Risk Adjustment Multiplier | 1.050 |
| Reconciliation Target Price | $95,863 |
| Actual Episode Spending | $90,000 |
| Total Reconciliation Payment | $5,863 |
| Hospital Category | Stop-Loss | Stop-Gain |
|---|---|---|
| Standard hospitals | 20% of cumulative target price | 20% of cumulative target price |
| High-dual hospitals (high proportion of dually eligible patients) | 5% | 20% |
| "Geographically rural" hospitals (broader than statutory rural definition) | 5% | 20% |
| Medicare-dependent, small rural hospitals | 5% | 20% |
| Sole Community Hospitals | 5% | 20% |
OACT's analysis quantifies the financial impact of these limits: applying 20 percent stop-gain/stop-loss limits to all hospitals reduces average savings from 1.3 percent to 0.9 percent (a 0.4 percentage point reduction), due to the asymmetric distribution of episode spending (approximately 7 percent of hospitals exceed their target by ≥20 percent, while only 1 percent fall below by ≥20 percent). Applying the 5 percent stop-loss to high-dual and rural hospitals further reduces projected savings from 0.9 percent to 0.6 percent (an additional 0.3 percentage point reduction). Withholding reconciliation payments from "below acceptable" quality hospitals recovers approximately 0.1 percentage point, resulting in the net projected savings of 0.6 percent before behavioral effects.
Reconciliation occurs annually, approximately 6 months after each performance year ends. Performance years align with calendar years beginning January 1, 2028. The process involves: (1) comparing aggregate episode spending to the reconciliation target price; (2) applying stop-gain/stop-loss limits; (3) calculating post-episode spending in the 30-day period following episode completion (amounts more than 3 standard deviations above the regional average are subtracted from the net payment reconciliation amount); and (4) issuing either a reconciliation payment or a repayment amount.
Low-volume hospitals — defined as those with fewer than 31 LEJR episodes during the applicable 3-year baseline period — are excluded from reconciliation for that performance year. Their episodes still count toward future baseline periods, meaning a hospital may qualify as low-volume in one year and be subject to reconciliation in a subsequent year as the rolling baseline advances.
Quality performance gates access to reconciliation payments and directly modifies the discount factor. CJR-X uses a Composite Quality Score (CQS) based on five measures, with data drawn automatically from the Hospital Inpatient Quality Reporting (HIQR) and Hospital Outpatient Quality Reporting (HOQR) programs — hospitals do not submit separate quality data for CJR-X.
| # | Measure | CMIT ID | Setting | Domain Weight in CQS |
|---|---|---|---|---|
| 1 | Hospital-Level RSCR Following Elective Primary THA/TKA | 350 | Inpatient | Complications: 50% |
| 2 | Hospital Visits Within 7 Days of HOPD Surgery | 344 (OP-36) | Outpatient | Complications: 50% |
| 3 | HCAHPS Survey | 338 | Inpatient | Patient Experience: 40% |
| 4 | OAS CAHPS Survey | 162 | Outpatient | Patient Experience: 40% |
| 5 | Hospital-Level THA/TKA PRO-PM | 1618 | Both | Patient-Reported Outcomes: 10% |
The CQS is a points-based system (inpatient and outpatient CQSs each capped at 20 points) with performance percentile rankings compared to the national distribution of hospitals eligible for each measure. Points scale from 0 points (below 30th percentile) up to 10 points (above 90th percentile) for complications measures, and proportionally for patient experience and PRO measures.
The inclusion of the PRO-PM (CMIT ID #1618) as a required (not voluntary) measure is a material departure from the original CJR Model, in which PRO submission was voluntary. The addition of two outpatient measures (OP-36 and OAS CAHPS) reflects the dramatic shift in procedure site of service documented in OACT's analysis.
| Milestone | Date |
|---|---|
| OACT Certification Memo | August 21, 2026 |
| CJR-X Model Overview Slides Published | October 30, 2026 |
| FY 2027 IPPS Final Rule Published | 2026 (finalizing CJR-X) |
| CJR Model ended | December 31, 2024 |
| TEAM Model active | 2026–2030 |
| CJR-X Performance Year 1 begins | January 1, 2028 |
| First reconciliation settlement (PY1) | Approximately mid-2029 |
| TEAM hospitals transition to CJR-X | Upon TEAM conclusion (expected 2030/2031) |
Three waivers are available to CJR-X participants to support care coordination:
CJR-X operates within the Federal Anti-Kickback Statute Safe Harbor for CMS-sponsored model arrangements, permitting three tiers of financial arrangement:
Participants may offer in-kind patient engagement incentives — including home monitoring technology — provided the item is reasonably connected to medical care and advances a clinical goal. Technology items may not exceed $1,000 retail value per beneficiary per episode. Items with retail value exceeding $75 must remain the participant's property and be retrieved at episode end or documented with good-faith retrieval attempts.
For each performance year, participants elect either the Advanced APM (AAPM) option (requiring attestation to Certified Electronic Health Record Technology use and annual submission of a CMS EHR Certification ID) or the Non-AAPM option. AAPM participants must submit Financial Arrangement Lists and Clinician Engagement Lists quarterly during each performance year, covering all physician, nonphysician practitioner, and therapist relationships with TIN and NPI detail, or attest quarterly that no reportable individuals exist. Participants must submit a Data Sharing Agreement (DSA) and Data Request and Attestation (DRA) form annually to receive beneficiary-identifiable claims data. CMS shares 3 years of baseline data annually prior to each performance year and performance year data monthly, with 6 months of claims runout after year-end.