The Centers for Medicare & Medicaid Services (CMS) has finalized a 2.3% increase in base inpatient hospital payment rates for fiscal year 2027 while also postponing the nationwide rollout of its mandatory Comprehensive Care for Joint Replacement Expanded (CJR-X) Model.

The approved payment increase is lower than the rate proposed in the Inpatient Prospective Payment System (IPPS) draft rule released in April. CMS based the update on a 3.2% annual market basket adjustment offset by a statutory productivity reduction of 0.9 percentage points, slightly larger than the 0.8 percentage point adjustment initially proposed.

Despite the lower base rate increase, CMS estimates that the changes included in the nearly 2,700-page final rule will boost hospital payments by approximately $2.1 billion compared with the previous year. The agency also expects around $780 million in extra payments involving inpatient cases with newly approved medical technologies. Both figures exceed earlier projections of roughly $1.4 billion in higher hospital payments and $464 million in technology-related add-on payments.

The update follows last year’s IPPS final rule, which increased base inpatient payment rates by 2.6%.

CMS also finalized the same payment rate increase for long-term care hospitals operating under the standard payment system, a change expected to generate an additional $54 million in payments, while leaving the outlier threshold unchanged.

Alongside payment updates, the IPPS final rule introduces a range of regulatory changes affecting areas such as interoperability and quality reporting. It also expands the agency’s bundled payment strategy through the CJR-X Model.

Under CJR-X, most hospitals nationwide will become financially accountable for Medicare spending associated with joint replacement procedures, including surgery, hospitalization and the first 90 days of post-operative recovery, covering follow-up care as well. Although CMS originally planned to launch the mandatory model in October 2027, the agency has delayed implementation until Jan. 1, 2028, following feedback from hospital organizations requesting additional preparation time.

CMS Administrator Mehmet Oz said the expansion is intended to improve care for seniors undergoing knee, ankle and hip replacement procedures by better aligning Medicare’s financial incentives with patient outcomes. He added that the initiative is designed to promote coordinated care, use taxpayer resources more efficiently and improve patients’ experience throughout the surgical and recovery process.

The original CJR program operated between 2016 and 2024 and generated savings of more than $100 million for Medicare while maintaining the quality of patient care. CMS Innovation Center Director Abe Sutton said in a statement that those results reflected the impact of financial incentives that encourage stronger care coordination, reduce avoidable emergency department visits and hospital readmissions, and improve collaboration with post-acute care providers to support patient recovery.

During the public consultation process, hospital organizations opposed the broad mandatory participation requirements proposed under CJR-X. They urged CMS to consider a voluntary rollout, a phased implementation or an initial observation period instead. Industry groups also argued that certain elements of the payment model were unnecessarily complex and could create overlapping accountability requirements for participating hospitals.

CMS Finalizes 2.3% Hospital Pay Increase, Delays CJR-X

The CMS has finalized a 2.3% increase in the base payment rate for hospitals while delaying the launch of the CJR-X model. The changes could have important implications for hospitals participating in Medicare and organizations preparing for new value-based payment arrangements.

The latest CMS decision reflects the agency’s ongoing efforts to balance hospital payment updates with broader reforms designed to improve quality, efficiency, and patient outcomes.

CMS Finalizes Hospital Payment Increase

The CMS payment update provides hospitals with a higher base reimbursement rate. For hospitals managing rising labor, supply, technology, and operational costs, the adjustment could provide additional financial support.

However, the actual financial impact of the CMS update will vary depending on hospital-specific factors, including patient volume, quality performance, geographic adjustments, and other Medicare payment components.