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CMS finalizes 2.3% inpatient pay bump, CRJ Model expansion

The final rule for the FY 2027 IPPS will increase inpatient payments by about $2.1B and introduce a new mandatory bundled payments model for nearly all hospitals.

Jacqueline LaPointe
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Published: 31 Jul 2026

The Centers for Medicare and Medicaid Services will expand the Comprehensive Care for Joint Replacement model to most hospitals by 2028, according to a final rule released this afternoon.

The rule will also update the Inpatient Prospective Payment System payment rates for the 2027 fiscal year, giving hospitals a 2.3% increase starting Oct. 1, 2026. The CMS said the final update -- down slightly from the 2.4% increase proposed in April -- reflects a hospital market basket percentage increase of 3.2%, reduced by a 0.9 percentage-point productivity adjustment.

This final change in IPPS payment rates will contribute to a $2.1 billion increase in Medicare payments to hospitals next year, the CMS reported.

Long-term care hospitals will also receive a 2.3% annual update in FY 2027, according to the final rule. In total, the CMS expects LTCH PPS payments to increase by about 2.2%, or $54 million, driven by the finalized annual update.

Additionally, the rule finalized new technology add-on payments, which the CMS anticipates will pay hospitals an additional $779 million for using new medical technologies during inpatient stays.

Medicare-Dependent Hospitals could also see an additional $0.3 billion in Medicare payments in FY 2027, the rule stated. However, this all depends on whether Congress extends these payments before they expire at the end of this year. Although lawmakers have yet to let these payments expire since they were established in FY 2011.

Introducing the CRJ-X model

As part of the rule, the CMS also finalized an expansion of the CJR Model, a mandatory bundled payment model for lower extremity joint replacements. The model generated $112.7 million in net savings to Medicare during its run from 2021 through 2023.

In light of the savings, the CMS will introduce the Comprehensive Care for Joint Replacement Expanded, or CJR-X, Model in January 2028. The updated bundled payment model will be mandatory for most hospitals and cover hip, knee and ankle replacement episodes.

The CMS said this is the first expanded mandatory test of a bundled payment model, but should incentivize hospitals, surgeons and post-acute care providers to coordinate care and prevent avoidable adverse events and costs.

"Expanding the joint replacement pilot program to support more of our seniors will help match financial incentives in Medicare with improved health outcomes, safeguard taxpayer resources, and ensure patients experience a positive, comprehensive care journey throughout the surgical process," CMS Administrator Mehmet Oz said in an announcement today.

The CJR Model also influenced the Transforming Episode Accountability Model, another mandatory bundled payment model through the CMS Innovation Center. However, TEAM is only mandatory in designated regions, whereas the CJR-X Model will be mandatory nationwide.

Hospital groups, including the American Hospital Association, have criticized the addition of another mandatory Innovation Model, arguing that a voluntary or phased approach would better prepare hospitals to build the capabilities for success.

This is an evolving story. Stay tuned for additional reporting on this rule and its impact on hospitals.

Jacqueline LaPointe is an Executive Editor at Xtelligent Healthcare Media, covering revenue cycle management, healthcare payers, health policy and health IT since 2016.

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