CJR-X mandatory bundled payment model begins for hospitals in 2028

Hospitals have 17 months to prepare for the first mandatory nationwide alternative payment model, as established in Medicare’s FY27 final rule for the Inpatient Prospective Payment System (IPPS) and long-term care hospitals (LTCHs).

The final rule makes no major changes to the proposal issued earlier this year for the CJR-X Model, which will require most hospitals to participate in episode-based bundled payments for lower-extremity joint replacements (LEJRs).

While most of the provisions in the rule take effect starting Oct. 1, 2026, CJR-X is set to begin Jan. 1, 2028. That’s three months later than initially proposed.

The rule also establishes an FY27 inpatient payment update of 2.3%, or a tenth of a percentage point lower than the rate in the proposed rule. The change is due to a small increase in the economywide productivity adjustment. LTCHs are set to receive the same update, according to a fact sheet.

“It cannot be overlooked that many hospitals face intense financial pressures, in part because the costs they incur for providing care far outpace government reimbursements,” Joanna Hiatt Kim, vice president for public policy with the American Hospital Association (AHA), said in written comments. “Despite this, CMS has made another inadequate update to inpatient payment rates, with an extremely high productivity cut even larger than proposed.”

CMS finalizes nationwide CJR-X participation

CJR-X (Comprehensive Care for Joint Replacement Expanded) is an extension of the Comprehensive Care for Joint Replacement (CJR) Model, which was mandatory in 34 metropolitan statistical areas for an 8 1/2-year period starting in 2016. Between 2021 and 2023, according to CMS, the CJR Model produced an estimated $112.7 million in net savings while maintaining care quality.  

Hospitals are required to participate in CJR-X if they’re paid under the inpatient and outpatient prospective payment systems (PPSs). Exceptions apply to the 716 hospitals participating in the mandatory Transforming Episode Accountability Model (TEAM). When TEAM reaches its end date, scheduled for Dec. 31, 2030, hospitals will switch to CJR-X.

Maryland hospitals also are exempt from CJR-X, given the state’s all-payer global budget model.

How CJR-X payments and reconciliation will work

CJR-X will work similarly to CJR and voluntary models such as Bundled Payments for Care Improvement.

“All providers and suppliers furnishing LEJR care to patients will continue to be paid under existing Medicare payment systems,” according to a fact sheet. “Following the end of a model performance year, actual total spending for the episode will be compared to the participant hospital’s target price and, depending on quality and spending performance, the hospital could receive an additional payment from Medicare or be required to repay a portion of the episode spending.”

Composite quality scores that help determine a hospital’s reimbursement under CJR-X will be based on five specified measures. Rural and safety-net hospitals will have a 5% stop-loss rate in the model.

CMS is touting the extensive risk adjustment methodology that will modify a hospital’s target price, with 29 adjusters (compared with three in CJR). The set of risk adjusters is the same for CJR-X and TEAM.

A hospital must perform at least 31 eligible LEJR procedures to be subject to payment reconciliation under CJR-X for a given year. Hospitals under the threshold still must participate in the model and report data.

“Mandatory models present significant challenges, and CMS’s low-volume threshold fails to ensure that hospitals have enough cases to integrate changes in care delivery and actually determine if they had an impact,” the AHA wrote.

FY27 inpatient payment update faces reductions

As is the case annually in the IPPS rule, the net payment update will vary based on hospital characteristics.

The 2.3% base update is projected to drop to 1.7% per discharge for the average hospital, in large part due to a 0.6% year-over-year decrease in high-cost outlier payments after the payments exceeded the statutory limit this past year.

Regional differences in the payment update will hinge largely on disparate wage-index values (see the table on page 2561 of the rule).

Rural hospitals will receive a lower payment update, 1.1% on average, in part due to annual adjustments to Medicare Severity Diagnosis-Related Group (MS-DRG) relative weights.

“Hospital categories that generally treat relatively less complex cases, such as rural hospitals and smaller urban hospitals, are expected to experience a decrease in their payments, while hospitals that generally treat relatively more complex cases, such as larger urban hospitals, are expected to experience no change in their payments as a result of the changes to the relative weights,” according to the rule.

Among supplementary payments, new-technology add-on payments for 41 returning items and 19 new items are projected to total more than $1.739 billion.

The combined increase in uncompensated payments and supplemental payments to Indian Health Service hospitals and Puerto Rico hospitals is estimated to be $228 million, or 2.9%.  

Within that payment category, urban hospitals are projected to receive a 3.4% increase, compared with a 4.6% decrease for rural hospitals. The discrepancy partially is because an increasing share of charity care and bad debt has been linked to urban hospitals on Worksheet S-10 of Medicare cost reports.

Changes to hospital quality-reporting requirements

CMS finalized advance care planning as a new electronic clinical quality measure (eCQM) for the Hospital Inpatient Quality (IQR) Program and the PPS-Exempt Cancer Hospital Quality Program, along with the Promoting Interoperability (PI) Program.

Two other new measures are being added to the IQR Program: excess days in acute care after hospitalization for diabetes and hospital harm as reflected by postoperative venous thromboembolism.

IQR also is updating five mortality measures and three excess-days measures by incorporating Medicare Advantage patients and shortening the performance period from three years to two.

“With the increase in Medicare Advantage beneficiaries to more than half of all Medicare beneficiaries, these modifications will better reflect overall patient care coordination among a broader population of patients, improving measure reliability,” CMS wrote. “Shortening the reporting period will also allow measure results to reflect more recent hospital performance and provide more actionable insights for quality improvement.”

Three eCQMs are becoming mandatory in IQR as CMS pushes electronic reporting.

In one of several changes to the PI Program, electronic prior authorization will be an optional bonus measure in 2027 and mandatory in 2028. The program also is adding two eCQMs and removing three in alignment with the IQR Program.

Updates to readmission penalties and value-based purchasing

CMS is adding a sepsis readmission measure to the Hospital Readmissions Reduction Program beginning with a confidential preview period for hospitals in FY28-29. Medicare reimbursement will be affected starting in FY30.

The changes to the five mortality measures in the IQR Program subsequently will be implemented in the Hospital Value-Based Purchasing Program starting in FY32.