Final 2027 Medicare IPPS Rates Down -10 bps vs Proposed & -30 bps Y/Y; CJR-X Model Finalized

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Final 2027 Medicare IPPS Rates Down -10 bps vs Proposed & -30 bps Y/Y; CJR-X Model Finalized

(i.e., ~98K procedures generating ~$112.7M in savings). While CJR-X

generally received pushback from the industry, we do not anticipate a material

impact to the hospitals in 2027 given commentary from HCA/THC regarding

previous participation in the voluntary CRJ program. That said, we believe this

only continues to pressure hospital operators by introducing potential downside

risk from penalties to a sizable procedure category within a high-priority specialty

like orthopedics. For a historical summary of rate development and the forecasted

impact under the CJR-X model, please see our tables below.

• CJR-X model finalized. With the finalization of the CJR Expanded Model

(CJR-X) that builds on the original Comprehensive Care for Joint Replacement

(CJR) model that operated from 2016-2024, acute hospitals will be held

accountable for post-acute spending for Medicare beneficiaries undergoing

lower extremity joint replacement (LEJR) procedures in the first 90 days post-

op (including follow-up and PT), which we note is ~3x the episode length vs

the Transforming Episode Accountability Model (TEAM). CMS estimates

that CJR-X will generate ~$736M in net savings over five performance years

(vs initial of ~$725M), including ~$129M in savings during Year 1 (or ~17.5%

of total savings), with that figure steadily increasing to ~$171M by Year 5. We

note that when the CJR was first introduced in 2016, both HCA and THC were

voluntary participants, albeit on a smaller scale vs the more encompassing

setup under the finalized CJR-X model. While reporting on the proposed rule

had described negative feedback from industry stakeholders, particularly for