On April 14, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule as part of the Fiscal Year 2027 Hospital Inpatient Prospective Payment System (IPPS) rulemaking that would establish the Comprehensive Care for Joint Replacement Expanded (CJR-X) Model, a mandatory alternative payment model for lower extremity joint replacement (LEJR) procedures that would apply to virtually all acute care hospitals beginning October 1, 2027. CJR-X is the latest in a growing number of mandatory Innovation Center models—joining the Transforming Episode Accountability Model (TEAM) and the Ambulatory Specialty Model (ASM)—that are reshaping the Medicare payment landscape and that may serve as a catalyst for widespread adoption of value-based care arrangements.
Background
CJR-X is a proposed expansion of the original Comprehensive Care for Joint Replacement (CJR) Model, which CMS tested from April 2016 through December 2024 in selected metropolitan statistical areas. The CJR Model was a retrospective bundled payment model that held participant hospitals accountable for the total cost and quality of care during an LEJR episode, including the initial hospitalization and a 90-day post-discharge period. Based on evaluation results indicating that the CJR Model achieved $112.7 million in net savings to Medicare across Performance Years 6 and 7 while maintaining quality of care, CMS determined that the model met the statutory requirements for expansion under Section 1115A(c) of the Social Security Act.
Key Features of the Proposed CJR-X Model
Mandatory, Nationwide Participation
CJR-X would be mandatory for all acute care hospitals that initiate LEJR episodes and are paid under both the IPPS and the Outpatient Prospective Payment System (OPPS), other than those currently participating in TEAM (which also tests LEJR episodes, but with a 30-day post-discharge period) and hospitals located in Maryland. CJR-X would begin on October 1, 2027, and, unlike prior models, CMS has yet to set a clear end date for CJR-X.
Episode Definition
Under CJR-X, episodes would begin with an LEJR inpatient hospitalization or outpatient procedure and would extend for 90 days following discharge. With a few exceptions, this episode would include all related items or services paid under Medicare Part A and Part B for eligible CJR-X patients, including the cost of the procedure, hospital stay, post-discharge therapy, and follow-up visits. This 90-day episode is longer than TEAM’s 30-day post-discharge window, which CMS believes will allow it to compare the relative effectiveness of the two-episode durations.
Two-Sided Financial Risk
CJR-X is a two-sided risk model from the outset. CMS will calculate regional, risk-adjusted target prices for applicable procedures using three years of baseline data, trended forward to the performance year. If a participant hospital’s actual performance year spending is below the reconciliation target price, the hospital may receive a reconciliation payment. If aggregate spending exceeds the target price across applicable episodes, the hospital must make a repayment to CMS. CJR-X also includes a proposed stop-loss and stop-gain limit of 20% for most hospitals, with a reduced 5% stop-loss for rural hospitals, Medicare-dependent small rural hospitals, sole community hospitals, and safety net hospitals.
Quality-Linked Payment
CMS proposes five quality measures—including those involving complication rates, readmissions, patient experience surveys for both inpatient and outpatient settings, and a patient-reported outcomes measure—that would be combined into a composite quality score. A hospital’s score would determine whether it is eligible for a reconciliation payment and would affect the discount factor applied to its target price. Hospitals with “below acceptable” quality performance would be ineligible for reconciliation payments.
Projected Savings
CMS projects CJR-X would generate approximately $725 million in net Medicare savings over the first five performance years, with $128 million in projected savings in the first performance year alone.
CJR-X in Context: A Growing Landscape of Mandatory Models
CJR-X does not exist in isolation. It is part of an accelerating trend in which CMS is deploying mandatory alternative payment models across the healthcare system.
TEAM
The Transforming Episode Accountability Model, finalized in August 2024, is a five-year mandatory model that began January 1, 2026. More than 700 acute care hospitals in 188 designated core-based statistical areas are required to participate, bearing upside and downside financial risk for 30-day episodes involving five common surgical procedures: coronary artery bypass graft, LEJR, major bowel procedure, surgical hip/femur fracture treatment, and spinal fusion. The covered episodes are projected to involve nearly $30 billion over the five-year period, with savings to Medicare projected to be nearly $500 million.
ASM
The Ambulatory Specialty Model, finalized in October 2025, is a mandatory model that holds individual specialists financially accountable for the quality and cost of care for heart failure and low back pain, two high-volume, high-cost chronic conditions with aggregate annual spending of $16 to $21 billion under Medicare Parts A and B. Unlike TEAM and CJR-X, which center on hospitals, ASM measures performance at the individual clinician level, subjecting each participating specialist to potential Medicare Part B payment adjustments of up to 9–12%. CMS has described ASM as a “ready framework for moving more specialists into APMs for high-volume, high-cost conditions or procedures.”
Taken together, these models represent a substantial expansion of mandatory, two-sided risk payment models across the continuum of care, from acute care hospitals to post-acute care settings to specialist physicians.
Financial Arrangements Under CJR-X
Recognizing that hospitals cannot succeed under episode-based payment models without the cooperation of physicians, post-acute care providers, and others, CMS proposes to permit CJR-X participants to enter into sharing arrangements with a broad set of collaborators, including physicians, skilled nursing facilities, home health agencies, inpatient rehabilitation facilities, long-term care hospitals, and others. Similar to the original CJR Model and TEAM, these sharing arrangements would allow CJR-X participants to make gainsharing payments to collaborators from reconciliation payment amounts paid by CMS and to receive alignment payments from collaborators to share repayment obligations for amounts owed to CMS.
CMS expects to determine that the federal Anti-Kickback Statute (AKS) safe harbor for CMS-sponsored model arrangements (42 C.F.R. § 1001.952(ii)) would be available to protect certain financial arrangements and beneficiary incentives under CJR-X. With respect to the physician self-referral law (the Stark Law), CMS notes that it may consider issuing waivers of certain fraud and abuse provisions under Section 1115A(d)(1) of the Social Security Act, but it did not propose a waiver in the proposed rule.
The Value-Based Framework: A Critical Tool for Providers Under Mandatory Models
The CMS-sponsored model safe harbor will protect certain CJR-X sharing arrangements from the AKS, but it will not, standing alone, be sufficient for many hospitals. As we have discussed in the context of TEAM and ASM, sharing arrangements represent only a narrow class of financial arrangements that hospitals may want to enter into with physicians, post-acute care providers, and others to manage cost and quality across the episode. Moreover, sharing arrangements with physicians could create compensation arrangements that take into account the volume or value of the physician’s referrals for designated health services—for example, where the surgeon is the source of the referral for the inpatient or outpatient hospital service that anchors the episode—which would preclude reliance on most traditional Stark Law exceptions.
As a result, hospitals and other providers may need to rely on the value-based enterprise (VBE) framework established through the Regulatory Sprint to Coordinated Care. Through the VBE framework, hospitals and physicians can structure their arrangements as value-based arrangements that satisfy the Stark Law exceptions and the AKS safe harbors for value-based arrangements, which generally do not require that remuneration be consistent with fair market value and permit volume-sensitive compensation.
To use these protections, the parties must first create a VBE—two or more entities or individuals who collaborate to achieve value-based purposes for a target patient population under one or more value-based arrangements. Much of the VBE infrastructure is supplied by models like CJR-X, whose program requirements go a long way toward satisfying the elements of a VBE. Hospitals, physicians, and post-acute care providers could form a VBE and act as VBE participants who collaborate to achieve value-based purposes that are part and parcel of the bundled payment model, such as coordinating and managing the care of the target patient population comprising model beneficiaries.
For CJR-X specifically, a hospital participating in the model may wish to enter into value-based arrangements with surgeons, post-acute care providers, and primary care providers to coordinate discharge planning and care transitions, adhere to clinical protocols, share data, provide in-kind support such as advanced practice providers, and engage in other value-based activities designed to improve quality and reduce costs during the 90-day episode. Outside of a value-based arrangement, many of these types of arrangements would be difficult to protect under the traditional Stark Law exceptions and AKS safe harbors.
Key Takeaways
The proliferation of mandatory bundled payment and value-based models—TEAM, ASM, and now CJR-X—signals a clear direction from CMS: providers across the continuum of care will increasingly be held financially accountable for the cost and quality of defined episodes and conditions. Hospitals and health systems should consider the following as they evaluate the CJR-X proposed rule:
Assess Operational Readiness
Mandatory participation presents significant challenges, particularly for hospitals without prior experience in CMS bundled-payment models or that lack the resources to make the necessary investments in care redesign. Hospitals that are new to mandatory episode-based payment should begin evaluating their LEJR episode costs, post-acute care utilization patterns, and care coordination infrastructure.
Evaluate Strategic Partnerships
Success under CJR-X will depend on building the infrastructure and partnerships needed to achieve shared savings and improved outcomes. Hospitals should begin identifying key providers—including surgeons, post-acute care providers, and primary care physicians—who could collaborate with the hospital to promote accountability for quality, cost, and overall care during the episode.
Consider the VBE Framework
As mandatory value-based models proliferate, the need to make use of the VBE framework and the value-based exceptions to fraud and abuse laws will only grow. Hospitals that have not yet created a VBE should evaluate whether doing so is appropriate in light of the arrangements they may need to succeed under CJR-X, TEAM, and other models.
CMS is soliciting comments on all aspects of the proposed rule, which are due by June 9, 2026. Comments are particularly important on topics such as the mandatory participation requirement, the October 1, 2027 start date, the 90-day episode duration, the quality measures and composite quality score methodology, the pricing and reconciliation methodology, and the financial arrangement requirements.
If you have questions about CJR-X, TEAM, ASM, or other value-based payment models, please contact the authors.