Payer Policy | FY 2027 IPPS Final Rule: 2.3% Inpatient Update and the Mandatory CJR-X Joint Replacement Model - Effective Date: October 01, 2026

Rcmaxis Billing & Policy Update  ·  Posted September 26, 2026  ·  Effective: October 01, 2026

Summary of the Rule or Edit Change

CMS issued the FY 2027 Hospital Inpatient Prospective Payment System and Long-Term Care Hospital final rule (CMS-1849-F) on July 31, 2026, and it was published in the Federal Register on August 4. It applies to discharges on or after October 1, 2026. The inpatient payment update is 2.3 percent: a 3.2 percent hospital market basket increase minus a 0.9 point productivity adjustment. CMS expects overall IPPS payments to rise by about $2.1 billion, plus about $779 million more in new technology add-on payments. LTCHs get the same 2.3 percent update to the standard rate.

The policy that reaches beyond hospitals is CJR-X. CMS is expanding its joint replacement episode model (CJR) into a mandatory, nationwide model for lower extremity joint replacements (hip, knee and ankle) for Original Medicare patients, in both inpatient and hospital outpatient settings, starting January 1, 2028. Orthopedic groups that operate at participating hospitals should expect episode cost and post-acute use to matter much more to their hospital partners.

The rule also brings the annual MS-DRG grouper changes, new and deleted ICD-10-PCS codes, and changes to the CC and MCC lists, all effective October 1. It adds a sepsis readmission measure to the Hospital Readmissions Reduction Program starting with FY 2030 payment, and it makes an electronic prior authorization measure optional in CY 2027 and required in CY 2028 under the Medicare Promoting Interoperability Program.

Action Required for Billing Teams