CJR-X Mandatory Bundled Payment Model: What Healthcare Leaders Must Know

CMS’s first nationwide, mandatory bundled payment model puts most acute care hospitals at financial risk for joint replacement episodes beginning in January 2028.

On July 31, the Centers for Medicare & Medicaid Services (CMS) issued the FY 2027 Inpatient Prospective Payment System (IPPS) final rule, which finalizes a significant change: the expansion of the Comprehensive Care for Joint Replacement (CJR) Model into a mandatory, nationwide bundled payment model known as the Comprehensive Care for Joint Replacement Expanded (CJR-X) Model. Beginning Jan. 1, 2028, most acute care hospitals in the United States will be required to participate in CJR-X, which carries potentially significant Medicare reimbursement implications for lower extremity joint replacement (LEJR) procedures.  

Earlier this month, CMS issued the CJR-X Participant List, which includes more than 2,200 acute care hospitals across 49 of the 50 states and the District of Columbia. CMS has excluded only a very narrow population of acute care hospitals from participation in CJR-X: acute care hospitals that are currently participating in the Transforming Episode Accountability Model; and acute care hospitals located in the State of Maryland.  

As an initial step, acute care hospitals should look to the CJR-X Participant List to confirm their required participation in CJR-X and submit the CJR-X Point of Contact Form for each hospital listed to identify two individuals who will serve as primary points of contact for CJR-X-related communications from CMS. 

CJR-X represents the most significant expansion of mandated episode-based payment accountability for hospitals since CMS launched the CJR Model in 2016. For hospitals, physicians, post-acute care providers, and other stakeholders involved in LEJR care, the implications are substantial — touching reimbursement, care coordination, quality measurement, compliance, and strategic planning. 

Three Key CJR-X Issues for Hospitals and Health Systems

1. Key Model Features and Financial Mechanics: Hospitals Bear Two-Sided Risk

CJR-X makes hospitals accountable for the total Medicare Part A and Part B cost and quality of each LEJR “episode” — inpatient hip, knee, and ankle replacements and outpatient hip and knee replacements — from the procedure through 90 days after discharge. Providers continue to bill Medicare under fee-for-service; after each performance year, CMS reconciles actual episode spending against a regional, risk-adjusted target price that builds in a 2% discount, reduced to 1% or 0% for “Good” or “Excellent” quality. Hospitals that beat the target earn a reconciliation payment only if they meet a minimum composite quality score across five measures, while hospitals that exceed it must repay CMS. Unlike many other CMS value-based models, CJR-X does not phase in downside risk. Gains and losses are capped at 20% for most hospitals, and losses are capped at 5% for rural, sole community, Medicare-dependent, and safety-net hospitals. CMS will also separately recoup excessive spending in the 30 days after an episode ends.

2. Fraud and Abuse Law Compliance: CJR-X Relies on the AKS Safe Harbor for CMS-Sponsored Model Arrangements

In a notable departure from the original CJR Model, CMS will not issue model-specific fraud and abuse waivers for CJR-X. Instead, protection for financial arrangements in CJR-X will depend on compliance with a relevant Anti-Kickback Statute (AKS) safe harbor or physician self-referral law (Stark Law) exception, as applicable, such as the CMS-Sponsored Model Arrangements safe harbor (42 C.F.R. § 1001.952(ii)) and the Stark Law’s value-based exceptions (42 C.F.R. § 411.357(aa)). Under this safe harbor and these exceptions, hospitals with properly structured arrangements may share savings (gainsharing payments) and losses (alignment payments) with “CJR-X collaborators,” such as physicians, group practices, and post-acute providers. These arrangements may also permit further downstream distributions. Payments must be based on quality and CJR-X care redesign activities, may not reflect the volume or value of referrals, and alignment payments are capped at 50% of a hospital’s repayment amount.

3. Downstream Partnership Strategy: Build the Network Before the Clock Starts

In prior Medicare bundled payment models, more than 40% of joint replacement spending occurred after the hospital stay, and CMS’s evaluations of CJR found that surgeon engagement and preferred post-acute networks drove hospital success. Priority partners include orthopedic groups and physician practice management companies, which influence site of service and discharge destination; skilled nursing facilities, which may admit patients without a qualifying three-day inpatient hospital stay if they meet CMS quality standards; and home health agencies and outpatient therapy providers. Agreements should align partners around shared care pathways, data sharing, and the complication, readmission, patient experience, and patient-reported outcome measures that CMS will score.

How Hospitals Should Prepare for CJR-X in 2027

Because CJR-X begins on Jan. 1, 2028, hospital and health system leaders should treat 2027 as a pre-implementation year, during which hospitals and downstream collaborators can begin to align their operations with the model’s requirements. Successful early participation in the CJR-X Model will depend on ensuring collaborator agreements, governance structures, compliance controls, and data analytics are in place prior to Jan. 1, 2028.

Our Insider Perspective on CJR-X

Barnes & Thornburg is uniquely positioned to advise clients on CJR-X, as the firm recently added two attorneys with direct experience developing and implementing the policies that underpin this model.

Gabriel Scott, Partner

Gabriel Scott joined Barnes & Thornburg in August 2026. Before entering private practice nearly a decade ago, Gabriel served at CMS from 2013 to 2017, where he played a leading role in creating and implementing the original CJR Model. His work at CMS included developing the CJR Model’s structure and drafting the proposed and final rules that established policies governing how participant hospitals, collaborators, and other entities could arrange gainsharing payments, distribution payments, and patient engagement incentives. Those policies became the foundation for financial arrangements in CJR — and now CJR-X. Gabriel’s practice regularly involves advising hospitals and other providers on legal and compliance issues with value-based care implementation and he brings a rare insider’s perspective on how CMS designs, implements, and evaluates mandatory payment models — insight that is invaluable for hospitals and health systems preparing for CJR-X.

Meredith Williams, Counsel

Meredith Williams joined Barnes & Thornburg in April 2026. Meredith spent more than 20 years at the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), where she was instrumental in developing the fraud and abuse waivers issued in connection with the CJR Model. Her work at HHS-OIG included extensive contributions to proposed and final rules jointly issued by HHS-OIG and CMS as part of HHS’s Regulatory Sprint to Coordinated Care. Meredith’s deep understanding of the federal government’s views on fraud and abuse law compliance in the context of value-based payment is critical as hospitals and downstream providers navigate the compliance complexities of CJR-X.

Together, Gabriel and Meredith offer clients a combined perspective that spans the full lifecycle of the CJR Model — from model design and financial arrangement policies at CMS to fraud and abuse waiver development at HHS-OIG. This cross-agency expertise positions Barnes & Thornburg to provide comprehensive, practical guidance on CJR-X participation, compliance, and strategy.

This is the first of a six-part series of alerts on CJR-X. Future alerts in the series will be issued on a regular cadence and will cover specific aspects of CJR-X, including: care partnerships; the financial model; operational, technology, and data considerations; compliance and fraud and abuse considerations. The series will conclude with an implementation checklist for hospitals and care partners to consider in 2027 as they complete the legal, operational, financial, data, and compliance work necessary to properly plan for participation in CJR-X.