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CMS has proposed a rule under the Medicare Hospital Inpatient Prospective Payment System (IPPS) that would increase reimbursement rates for services performed on Medicare beneficiaries by 2.4% in 2027. The proposed rule is also expected to increase new technology add-on payments for Breakthrough Devices by about $464 million.
Additionally, CMS wants to expand the Comprehensive Care for Joint Replacement (CJR) Model. CJR has shown that bundled payments covering episodes of care, which extend from surgery to 90 days post-op, reduced Medicare spending by incentivizing coordinated efforts among multi-specialty healthcare providers that reduced rates of hospital readmissions and reoperations.
Under the proposed “two-sided risk” system of the expanded CJR-X model, CMS would establish a target payment for the total cost of care covering the 90-day post-discharge period for patients who undergo hip, knee or ankle replacement surgery. Hospitals that meet quality care metrics for less than the established benchmark price would receive a performance-based bonus. Hospitals that provide care exceeding the baseline price would repay CMS the difference.
Industry experts believe the proposed IPPS would change orthopedic economic models and impact product development efforts by increasing the importance of technologies that improve coordinated care beyond the O.R.
Financial Accountability
Ryan Zimmerman, Managing Director and Medical Technology Analyst at BTIG, believes hospitals sharing the financial risk of quality care will scrutinize implant pricing and prioritize technologies that improve clinical and economic outcomes. Implants and enabling technologies would be evaluated based on the ways they contribute to the overall cost of quality care under the CJR-X model.
The CJR-X model would change the value equation for new product development, according to Zimmerman. Hospital customers will require orthopedic companies to show the impact devices and technologies have on reducing downstream costs, speeding patient recoveries and improving outcomes — and augment those claims with clinical and economic data.
The CMS proposed plan also allows hospitals to provide patients with up to $1,000 in technology to support recovery during the 90-day post-discharge period.
Zimmerman highlights this addition as a boon for the adoption of remote patient monitoring, wearable technologies and digital rehabilitation platforms, which can help reduce utilization of costly post-discharge resources such as skilled nursing facility stays and improve patient engagement in their recoveries and outcomes. Specifically, he called out Zimmer Biomet’s Persona IQ Knee System, which features Canary Medical’s smart sensor technology, as benefiting from the proposed payment update.
Bill Hunter, M.D., President and CEO of Canary Medical, said the postoperative care of joint replacement patients is often more expensive than the surgery itself, and believes CMS is acknowledging that economic reality with the proposed IPPS.
“The care loop most responsible for costs is the one containing emergency department visits, readmissions and downstream medical complications,” Dr. Hunter said. “If you can’t monitor patients after they leave the hospital, you can’t detect or correct problems before they become readmissions, and you can’t manage cost.”
Dr. Hunter said a real-world data comparison of 1,719 patients who underwent total knee replacements involving the Persona IQ system with 8,594 controls resulted in approximately $5,739 in average savings over the 90-day episode of care because of reduced emergency department visits, readmissions and complications.
“These will be the numbers required to be aligned with the economic incentives CMS is now putting in place,” he said.
Outpatient Benefits
ASCs are not included in the CJR-X model and, therefore, not subjected to the two-sided risk system, a factor that CMS believes could accelerate the migration of joint replacement cases to the outpatient setting.
Zimmerman said hospitals operating under bundled payment risk will prioritize cost efficiency and care coordination, while ASCs will continue to focus on procedural efficiency and surgeon preference, potentially attracting higher volumes of lower-acuity cases. For device manufacturers, he added, this dynamic introduces the need for more product development and commercialization strategies across care settings.
Product Development Opportunities
Robotic-assisted surgery, navigation platforms and other enabling technologies would be well-positioned under the CJR-X framework, according to Zimmerman. He acknowledges that these systems carry higher upfront costs but also noted that they can improve surgical precision and reduce variability, factors that align with CMS’ emphasis on minimizing complications and optimizing outcomes.
Zimmerman notes that technologies capable of reducing readmissions, shortening length of stay or improving procedural consistency will be particularly attractive to hospitals managing financial risk across the episode of care. In addition, he said infection prevention solutions and advanced biomaterials that reduce complication rates may see increased demand if they’re proven to result in cost savings under a bundled payment structure.
Analysts at the healthcare advisory firm Piper Sandler pointed to proposed increases for key joint replacement DRGs — including hip, knee and ankle procedures — as positives for large joint manufacturers.
They noted that the expansion of the CJR model could introduce some pricing pressure. Still, the overall impact is expected to be manageable for major orthopedic players, and CMS said the assignment of certain advanced implants into newly created DRGs with higher reimbursement levels — some offering increases of up to 98% — could provide meaningful tailwinds for advanced or patient-specific devices.
The Collaboration Problem
In The Surgeon’s Record, Ben Schwartz, M.D., M.B.A., questions the structure of CMS’ move toward outcome-based accountability.
Dr. Schwartz, Physician Executive and Senior Advisor at the Commons Clinic and Chair – Practice Management Committee of the American Association of Hip and Knee Surgeons, noted that inflation-adjusted Medicare reimbursement for joint replacement has declined 57% over the last 20 years.
“You could argue that CMS is effectively ‘taxing’ the perceived efficiency of surgeons to subsidize the ‘cognitive time’ of primary care,” he said. “But the more important point is that perpetuating the tug-of-war between primary and specialty care is counterproductive to CMS’ goals. You don’t foster collaboration by putting your thumb on the scales. Nor do you derive value by creating an accountability trap that catches patients in the middle.”
Dr. Schwartz surmises that CMS erroneously believes collaboration will solve the accountability problem in patient care.
“Collaboration sounds great in theory. In an ideal world, primary care physicians and specialists would closely co-manage patients to reduce fragmentation and gaps in care,” he said. “But collaboration isn’t what it used to be. The reality on the frontlines is that many physicians, specialists and primary care physicians simply don’t have the time or bandwidth for meaningful, consistent collaboration.”
Incentivizing collaboration through payment model design risks making it another gameable metric that sounds good in theory but ends up perfunctory in practice, according to Dr. Schwartz. “Ideally, you’d fix the underlying structural problems that made collaboration so difficult in the first place,” he said.
CMS will accept comments on the proposed rule through June 9, 2026.
