CMS Proposes Nationwide Expansion of Comprehensive Care for Joint Replacement Model

The Centers for Medicare & Medicaid Services (CMS) has proposed to reestablish and expand the Comprehensive Care for Joint Replacement (CJR) Model through a new "Comprehensive Care for Joint Replacement Expanded" (CJR-X) Model. If finalized, the proposal would significantly broaden CMS's episode‑based payment initiatives for hip and knee replacement procedures and would require participation by most acute care hospitals nationwide beginning October 1, 2027.

Background on the Original CJR Model

In 2016, CMS launched CJR as a mandatory bundled payment model for hospitals located in selected metropolitan statistical areas. The model held participating hospitals accountable for the cost and quality of care for lower extremity joint replacement episodes, including hip and knee replacement procedures, with the goal of encouraging care coordination and reducing unnecessary spending.

Under CJR, hospitals were financially responsible for the total cost of an episode of care, which included the anchor hospitalization and all related post‑acute care following discharge. After each performance year, CMS compared actual episode spending with a preestablished target price. Hospitals that kept spending below the target while meeting quality standards could receive reconciliation payments, while hospitals with higher spending could be required to repay Medicare, subject to applicable stop-loss limits.

Importantly, the target price does not change how providers are paid for individual services during the episode. All providers and suppliers furnishing lower extremity joint replacement care to patients continue to be paid under existing Medicare payment systems, such as the Inpatient Prospective Payment System (IPPS), Outpatient Prospective Payment System (OPPS), or Physician Fee Schedule (PFS). Following the end of a model performance year, CMS aggregates the actual total Medicare spending for each episode and compares that amount to the participant hospital's prospectively established target price. Depending on the hospital's spending and quality performance, the hospital may receive an additional reconciliation payment from Medicare if spending falls below the target price, or may be required to repay a portion of the episode spending if spending exceeds the target price.

Over time, CMS modified and extended the model to account for evolving care delivery patterns, including the shift of joint replacement procedures to outpatient settings. Later evaluations of the effectiveness of CJR found that the model ultimately generated modest savings while maintaining quality outcomes, including reductions in post‑acute spending without increases in complications, readmissions, or mortality.

Based on these results, CMS is proposing to reestablish and expand the model on a nationwide basis as CJR-X.

Scope and Participation

If finalized, the CJR-X Model would apply to most acute care hospitals in all 50 states, the District of Columbia, and U.S. territories that perform qualifying lower extremity joint replacement procedures and are paid under both the Inpatient Prospective Payment System (IPPS) and the Outpatient Prospective Payment System (OPPS). CMS explained that limiting participation to hospitals paid under both systems is intended to avoid challenges in constructing episode target prices when procedures may initiate in either the inpatient or outpatient department but the hospital is not paid under the corresponding prospective payment system.

Certain hospitals would be excluded from participation, including:

• Hospitals participating in the Transforming Episode Accountability Model (TEAM);
• Maryland hospitals, due to the state's unique hospital rate‑setting system;
• Hospitals not paid under both IPPS and OPPS (for example, Indian Health Service and Tribal hospitals, which are paid under IPPS but not OPPS); and
• Hospitals not paid under IPPS, such as Critical Access Hospitals, Rural Emergency Hospitals, and hospitals participating in the Rural Community Hospital Demonstration.

Participation would remain mandatory for hospitals that meet applicable eligibility criteria, unless a hospital subsequently becomes ineligible or CMS modifies or terminates the model.

Episode Definition and Duration

Like the original model, CJR-X continues to focus on lower extremity joint replacement procedures, including total hip and total knee replacements.

Episodes would be triggered by an anchor event, defined as either an inpatient hospitalizations assigned to specific MS‑DRGs, or an outpatient procedure identified by certain HCPCS codes.

Under the proposal, a CJR-X episode would generally be defined by the admission of an eligible Medicare fee‑for‑service beneficiary to a hospital paid under the IPPS or the furnishing of a qualifying outpatient procedure at a hospital paid under the OPPS that results in a discharge or claim associated with one of the following diagnosis‑related groups or procedure codes:

• MS‑DRG 469 – Major Hip and Knee Joint Replacement or Reattachment of Lower Extremity with Major Complications or Comorbidities (MCC), including Total Ankle Replacement
• MS‑DRG 470 – Major Hip and Knee Joint Replacement or Reattachment of Lower Extremity without MCC
• MS‑DRG 521 – Hip Replacement with Principal Diagnosis of Hip Fracture with MCC
• MS‑DRG 522 – Hip Replacement with Principal Diagnosis of Hip Fracture without MCC
• HCPCS 27447 – Total Knee Arthroplasty
• HCPCS 27130 – Total Hip Arthroplasty

Each episode would begin with the anchor hospitalization or outpatient procedure and extend through 90 days following discharge for inpatients, or for outpatient procedures, following the date of the procedure. CMS notes that the 90‑day episode duration demonstrated savings in the original CJR Model and aligns with the 90‑day global surgical payment period under the Medicare Physician Fee Schedule.

Items and Services Included in Episodes

CMS proposes that CJR-X episodes include all Medicare Part A and Part B items and services furnished during the episode that are related to the episode of care, unless specifically excluded.

Included services may include:

• Physician services
• Inpatient hospital services
• Hospital outpatient services
• Skilled nursing facility (SNF) services
• Inpatient rehabilitation facility (IRF) services
• Long‑term care hospital (LTCH) services
• Home health services
• Outpatient therapy services
• Clinical laboratory services
• Durable medical equipment
• Certain Part B drugs and biologics
• Hospice services

The broad range of services is intended to reflect the full continuum of care and total Medicare spending across the episode, encouraging hospitals to coordinate post‑acute care, manage complications, and reduce avoidable utilization.

Certain items and services would be excluded from episodes, including services unrelated to joint replacement procedures as well as items and services expressly excluded by CMS (e.g., certain high‑cost drugs or technologies reimbursed separately under Medicare payment systems).

Quality Measurement and Composite Quality Score

CJR-X includes five quality measures, which would be combined into a Composite Quality Score (CQS) for each participating hospital.

The proposed measures include:

• Hospital‑level complication rates following hip or knee replacement
• Hospital visits within seven days after outpatient surgery
• Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey
• Outpatient and Ambulatory Surgery CAHPS survey
• Patient‑reported outcome measures for joint replacement procedures

The composite score would combine measures across three quality domains:

• Complications (50%)
• Patient experience (40%)
• Patient‑reported outcomes (10%)

Under CJR-X, quality performance would be publicly reported and the composite score would be incorporated into the model's payment methodology.

Pricing Methodology

CJR-X adopts a regional pricing methodology based on three years of historical baseline regional claims data. Target prices would be established prospectively for each performance year by episode type and geographic region.

Key elements of the pricing methodology include:

• Regional benchmark prices based on historical spending
• Risk adjustment for patient characteristics and hospital factors
• A 2% discount factor
• Prospective and retrospective trend adjustments
• High‑cost outlier caps

Linking Quality Performance to Payment

CJR-X would link quality performance directly to financial outcomes by adjusting the discount factor applied to a hospital's episode target price based on the hospital's composite quality score.

Under the proposal, hospitals would initially be subject to a 2% discount factor, which represents Medicare's share of expected savings. Hospitals demonstrating higher quality performance could reduce or eliminate this discount, thereby increasing their potential reconciliation payment amount.

Quality categories would include:

• Excellent (CQS ≥ 17.1): discount reduced to 0%
• Good (CQS 12.1–17.0): discount reduced to 1%
• Acceptable (CQS 6.1–12.0): discount remains 2%
• Below acceptable (CQS ≤ 6.0): hospital not eligible for reconciliation payments

Reconciliation Payments and Repayments

At the end of each performance year, CMS would conduct an annual reconciliation comparing each hospital's actual episode spending with its reconciliation target price. Consistent with the original CJR Model, CMS would calculate a Net Payment Reconciliation Amount for each hospital, which reflects the difference between actual spending and the applicable target price, subject to quality performance and applicable adjustments.

If a hospital's spending, after accounting for applicable post-episode spending, is below the quality-adjusted target price, the hospital would receive the difference as a one‑time lump‑sum reconciliation payment from Medicare. If spending exceeds the target price, the hospital would be required to make a one‑time lump‑sum repayment to Medicare, subject to applicable stop-loss limits.

Stop-loss and stop-gain limits would cap both potential repayments and reconciliation payments at 20% of the hospital's aggregate target price for most hospitals. Certain hospitals, including rural hospitals and safety-net hospitals, would receive additional protection through a 5% stop-loss limit.

To discourage providers from shifting necessary care outside the episode window, CMS also proposes to monitor spending in the 30 days following the episode of care.

Collaborator Arrangements, Gainsharing, and Fraud and Abuse Protections

The proposal would allow participating hospitals to enter into financial arrangements with physicians and other providers, referred to as CJR-X collaborators, to support care coordination and episode management.

Eligible collaborators may include:

• Physicians and physician group practices
• Skilled nursing facilities
• Home health agencies
• Inpatient rehabilitation facilities
• Long term care hospitals
• Therapy group practices
• Medicare Accountable Care Organizations (ACOs) and other participating providers

Hospitals could share reconciliation payments with collaborators through gainsharing payments tied to quality performance and participation in model-related activities. Collaborators may also make alignment payments to hospitals to share downside financial risk.

CMS proposes safeguards governing these arrangements, including documentation requirements, limits on payment amounts, and prohibitions on payments tied to referral volume or value or other business generated outside the model. The model also permits distribution arrangements allowing physician groups and similar entities to distribute gainsharing payments to participating clinicians.

Because these arrangements could otherwise implicate federal fraud and abuse laws, CMS indicates that fraud and abuse waivers may be made available in connection with the model. As with the original CJR Model, the Secretary of Health and Human Services has authority to issue waivers of certain provisions of the federal Anti-Kickback Statute, the Beneficiary Inducements Civil Monetary Penalty (CMP) law, and potentially the Physician Self-Referral Law (Stark Law) where necessary to implement the model.

In connection with the original CJR Model, CMS and the Office of Inspector General (OIG) exercised this authority by issuing a joint notice of waivers, effective January 1, 2018, that protected certain financial arrangements entered into solely pursuant to the model and described in the regulations at 42 C.F.R. Part 510. These waivers were limited to arrangements that complied with the model requirements and did not extend to unrelated financial relationships.

For the proposed CJR-X Model, CMS notes that while the Secretary retains authority to issue similar waivers, any applicable fraud and abuse waivers would need to be finalized and implemented through rulemaking or separate waiver notices, and would apply solely to arrangements entered into under CJR-X.

In addition, CMS expects that many model-related arrangements, including gainsharing payments, alignment payments, distribution payments, and certain beneficiary engagement incentives, may qualify for protection under OIG's safe harbor for CMS sponsored model arrangements (42 C.F.R. § 1001.952(ii)), provided the arrangements comply with the model's requirements and applicable safe harbor conditions. For example, the safe harbor requires that the terms of the CMS‑sponsored model arrangement be set forth in a signed writing in advance of, or contemporaneous with, the commencement of the arrangement.

CMS emphasizes that OIG would retain authority to audit and investigate model participants, and hospitals and collaborators will need to structure these arrangements carefully to ensure compliance with both the model requirements and applicable fraud and abuse laws.

Key Takeaways

• CMS proposes reestablishing and expanding the CJR Model into a mandatory nationwide episode‑based payment model beginning in FY 2028 (October 1, 2027).
• Most acute care hospitals performing lower extremity joint replacement procedures would be accountable for cost and quality across a 90‑day episode of care.
• Payment outcomes would depend on prospectively set, regional spending benchmarks, risk adjustment, and quality performance.
• Hospitals could receive reconciliation payments for achieving savings relative to target prices, but may also face repayment obligations if spending exceeds targets, subject to applicable limits.
• The model is designed to encourage care coordination across hospitals, physicians, and post‑acute providers through gainsharing and other financial arrangements.

Next Steps

CMS is currently seeking public comment on the proposed model, including episode definition, pricing methodology, quality measurement, and financial arrangements.

Stakeholders, including hospitals, physician groups, and post‑acute providers should consider reviewing the proposal and evaluating how participation could affect clinical operations and financial performance.

Organizations that perform lower extremity joint replacement procedures may wish to begin assessing:

• Historical episode spending and post‑acute care utilization patterns
• Opportunities to improve care coordination and discharge planning
• Potential collaboration arrangements with physicians and post‑acute providers, including gainsharing and alignment structures
• Infrastructure or analytics needed to manage episode‑based financial risk

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Caitlin Forsyth is a partner in the Portland office, and Robert Homchick and Adam Romney are partners in the Seattle office of DWT. For questions or more insights, reach out to the authors or another member of our healthcare team and sign up for our alerts.