CMS Proposes New Model That Could Highlight PTs’ Impact in Joint Replacement

In its fiscal year 2027 Inpatient Prospective Payment System proposed rule, the Centers for Medicare & Medicaid proposed a nationwide expansion of its Comprehensive Care for Joint Replacement model. APTA will be submitting comments on the model, which the agency is calling “CJR-X”, by the June 9 deadline.

The CJR-X proposal builds on CMS’ original CJR model, which ran from 2016 through 2024. The core purpose of the previous model was to use an episode‑based payment structure for lower extremity joint replacement, or LEJR, procedures, in order to improve care for Medicare patients undergoing hip and knee replacements. In FY 2025, CMS also finalized its TEAM model, which considers LEJR through a multi-procedure model and which would serve as a complementary and comparative model with CJR-X. As with CJR, CJR-X offers a unique opportunity to highlight how PTs impact care.

While model participants are inpatient hospitals, these entities are responsible for:

Coordinating care, including prehabilitation and rehabilitation
Leveraging regulatory waivers that can be used to initiate post-acute care in a more timely manner, such as home health, skilled nursing facilities, and outpatient PT services
Contracting with preferred providers who can receive financial compensation for the savings achieved in this episodic model.

In short, while PTs are not the primary focus of the model, they will figure in as a critical element of Medicare’s most common surgical interventions. As a nationwide model, the data collected and analyses stemming from this proposed model can serve to bolster, affirm, and even show new ways that PTs have a meaningful impact on care.

Why Proposed IPPS Rule and the CJR-X Model Matters for Physical Therapists

Although CJR‑X remains a hospital‑focused model, it encompasses the full 90‑day episode of care, where rehabilitation services are visible as a core component to recovery. Post‑acute care has historically been a primary driver of both episode spending and care redesign under the original CJR. This places physical therapy squarely within the model’s focus, even if therapists are not direct participants in the payment structure.

The expansion of CJR‑X to include outpatient procedures and its broader national scope may further elevate the importance of:

Timely access to rehabilitation
Coordination across settings
Consistency in care pathways

Data and results from the model, at a national scale, have the opportunity to impact policymaking for years to come. For physical therapists, the proposal reinforces the growing importance of integration within the episode of care and the role of rehabilitation in both cost management and patient outcomes.

Key Dates and Model Structure for CJR-X

CMS proposes to launch CJR‑X beginning Oct. 1, 2027, although CMS has not specified a duration. As in the original model, participating hospitals would be held accountable for total Medicare spending during a 90‑day episode of care following a joint replacement. This includes all related services from the applicable surgical procedure (known as the “anchor procedure”) through post‑acute recovery.

Scope and Participants in the Proposed Model

Unlike the original CJR model, which applied only to acute care hospitals in selected metropolitan areas, CJR‑X would be mandatory nationwide and thus apply to most acute care hospitals. CMS also proposes targeted exclusions, including hospitals participating in other episode‑based models, such as TEAM, Indian Health Service Hospitals, and Critical Access Hospitals, among others. Currently, the model would not apply to Ambulatory Surgical Centers, which do perform these interventions, but CMS is considering their inclusion as a comment solicitation in the rule.

Covered Surgical Interventions Under CJR-X

CJR‑X applies to lower extremity joint replacement, including inpatient and outpatient total hip and total knee arthroplasty. Notably, CMS does not include outpatient total ankle replacement in its proposal, but it notes that, depending on results in the TEAM model, it may include it in the future.

For now, CMS proposes that episodes would be triggered by:

Inpatient hospitalizations (MS‑DRGs 469, 470, 521, and 522)
Outpatient joint replacement procedures performed in hospital settings

Broader Episode Definition Includes Both Inpatient and Outpatient Procedures

CJR‑X reflects the shift toward outpatient joint replacement by including both inpatient and outpatient procedures from the outset, rather than phasing them in over time as occurred during the original CJR. Additionally, the 90-day structure of CJR-X offers comparative insight with the 30-day TEAM model, offering an understanding of how the length of care impacts outcomes for Medicare beneficiaries.

Each episode under the model would include:

The anchor procedure or admission
All Medicare Part A and Part B services
The full 90‑day post‑discharge period, including post‑acute care and rehabilitation

Updated Payment Methodology With the New Model

The proposed model retains its predecessor’s target price and reconciliation framework, which follows these basic principles:

CMS establishes a prospective target price for each episode.
Actual spending during the episode is compared against that target
Participants may receive reconciliation payments if spending is below target, or owe repayments if spending exceeds it. Hospitals must achieve or exceed thresholds defined by CMS on a set of claims-based quality measures — such as complication rates, readmissions, and other episode‑relevant outcomes — to be eligible for the reconciliation payments described above.

CMS also proposes a few refinements to risk adjustment, alignment across inpatient and outpatient pricing, and continued downside financial risk.

Care Coordination and Waivers

CMS proposes to continue and expand model waivers designed to improve care coordination and patient access. These include flexibilities related to post‑acute care use and care transitions across settings. Several proposed policy waivers and flexibilities under CJR‑X can provide hospitals flexibility to get their patients timelier access to rehabilitative care, including physical therapy provided in a range of settings. For instance, CMS proposes that it would allow hospitals to waive the three‑day inpatient stay requirement for skilled nursing facility coverage, enabling earlier discharge to lower‑acuity settings when clinically appropriate.

Preferred Providers

The proposed model also creates new opportunities for collaboration through “sharing arrangements” between participating hospitals and other providers along the continuum of care in the 90-day episode, including physical therapists. Under CJR‑X, hospitals may designate preferred providers and recommend them to patients, which could open the door for physical therapy practices to establish closer, more formal partnerships with model participants. Preferred providers who enter gainsharing arrangements with participants can contract to receive a portion of the participating hospital’s reconciliation payments when their services contribute to episode‑level savings and quality performance.

However, participants cannot be restricted to a preferred network and patients cannot be directed in ways that violate existing Medicare protections. For PTs, this means that while there is increased potential to become a strategically aligned or “preferred” rehabilitation partner, success will depend on demonstrating value — such as timely access, coordinated care, and strong outcomes — rather than relying on exclusive referral relationships.

APTA Leading Feedback to CMS on Ways PTs Can Deliver Critical Interventions

As part of its ongoing advocacy efforts to advance payment, APTA will submit comments outlining how PTs can engage in the model and the effective delivery of these critical interventions, including:

Model design: Appropriateness of nationwide mandatory participation and episode scope

Payment methodology: Risk adjustment, target pricing, and reconciliation structure
Quality measurement: Measure selection and performance thresholds
Care coordination: Use of waivers and their impact on access to post‑acute and rehabilitative services
Equity considerations: Effects on hospitals with varying resources and patient populations.