Both changes come from the FY 2027 IPPS final rule, CMS-1849-F, published on August 4, 2026 at 91 FR 49570. CJR-X covers hip, knee, and ankle replacements in inpatient and hospital outpatient settings, and participation is mandatory nationwide rather than selected by market.
This article covers the orthopedic provisions in detail. For everything else in the rule, see our FY 2027 IPPS Final Rule summary.
At a glance
Key facts
| Item | Detail |
|---|---|
| New MS-DRGs | 403 and 404, hip and knee procedures involving periprosthetic joint infection |
| MS-DRG effective date | October 1, 2026 |
| Model | CJR-X, Comprehensive Care for Joint Replacement Expanded |
| CJR-X scope | Hip, knee, and ankle replacements, inpatient and hospital outpatient |
| CJR-X participation | Mandatory nationwide |
| CJR-X start | January 1, 2028 |
| CMS savings estimate | $725 million across five performance years |
| Rule | CMS-1849-F, 91 FR 49570, issued July 31, 2026 |
Figures come from the CMS fact sheet and the Federal Register text. Code level assignments are in the Table 6P series on the CMS FY 2027 IPPS Final Rule Home Page.
Coding
Why did CMS create separate MS-DRGs for periprosthetic joint infection?
Periprosthetic joint infection cases consume substantially more resources than routine revision arthroplasty. Explantation, spacer placement, extended antibiotic therapy, staged reimplantation, and longer lengths of stay all sat inside what was previously a broader group. Separating these cases into MS-DRGs 403 and 404 lets payment track cost more closely.
The practical consequence is that classification now depends on documentation establishing periprosthetic joint infection as the condition driving the procedure. Where that documentation is thin, the case will group elsewhere, and the reimbursement difference will be material.
Relative weights for FY 2027 were recalibrated using FY 2025 MedPAR claims covering approximately 6.9 million discharges and FY 2024 Medicare cost report data. Pull the Table 6P files for the exact ICD-10-CM and ICD-10-PCS assignments before October 1.
Bundled payment
CJR-X, and what changed from the original model
CJR-X expands the Comprehensive Care for Joint Replacement Model, which CMS describes as having produced strong evidence of cost savings while maintaining quality of care. The original model ran from April 1, 2016 through December 31, 2024.
Three of those differences matter operationally.
Geography no longer protects anyone
The original CJR carved out participation by metropolitan statistical area. CJR-X does not, so a hospital that sat outside the model for eight years is now inside it.
Ankle replacement is in scope
Volume is small at most facilities, but it now sits inside the episode definition and inside the target price.
The model follows the site of service
Episodes are triggered by procedures performed in inpatient and hospital outpatient settings. As joint replacement volume continues migrating outpatient, the model moves with it rather than creating an incentive to shift sites.
Hospitals already participating in the Transforming Episode Accountability Model should confirm how attribution resolves between the two. CMS finalized TEAM refinements in the same rule, including attribution and quality measurement methodologies aligned with other CMS programs.
Exposure
Where the denial risk sits
Two distinct exposures, arriving from different directions, landing on the same claim.
DRG validation on the new groups
Every MS-DRG split CMS makes becomes a payer and Recovery Audit Contractor focus, typically within one to two quarters of the effective date. Joint replacement is already among the most audited inpatient service lines. A new infection specific group gives auditors a concrete target: cases coded to 403 or 404 where documentation does not clearly establish periprosthetic infection, supporting culture results, or the relationship between the infection and the procedure performed.
Level of care determinations
This exposure grows from a different direction. Under the CY 2027 OPPS and ASC proposed rule, CMS proposes removing 637 procedures from the Inpatient Only list, the second set in a three year phase out. As orthopedic procedures leave that list, inpatient admission stops being automatically supported and the Two Midnight determination becomes the deciding factor.
That rule was still proposed as of September 2026, with a final rule expected around November 1, 2026. Confirm the final removal list before changing utilization review criteria.
Action plan
What orthopedic revenue cycle teams should do now
Before October 1, 2026
Load the Table 6P code assignments for MS-DRGs 403 and 404. Brief coders and clinical documentation integrity specialists on what documentation supports the new groups. Build a query template for periprosthetic joint infection that captures the infection, its relationship to the prosthesis, and the procedural intent.
During FY 2027
Track denial patterns on 403 and 404 separately from other arthroplasty DRGs. Segmented denial data is the only reliable signal that the documentation changes worked.
When the CY 2027 OPPS final rule publishes
Cross reference the confirmed Inpatient Only removal list against your orthopedic case mix and update utilization review criteria for the affected procedures.
Before January 1, 2028
Model CJR-X episode economics using current cost and post acute utilization data. Two years sounds like a long runway. It is not, because the historical data that sets target prices is being generated now.
Automation
Automating orthopedic DRG and authorization denials
Orthopedics absorbs both exposures described above at the same time, and neither comes with additional staffing.
DRG validation appeals
These follow a pattern. A payer challenges whether the documentation supports MS-DRG 403 or 404. Resolving it means locating the operative note, culture results, and infectious disease documentation, mapping them to the coding guideline at issue, and building the argument. That work is structured enough to automate. An autonomous agent can read the denial, retrieve the supporting record elements, cite the applicable ICD-10-CM Official Guidelines section or Coding Clinic guidance, and assemble the appeal package.
Authorization denials
In orthopedics these are mostly process failures: authorization obtained for a planned procedure that changed intraoperatively, authorization that expired before a rescheduled surgery date, or authorization never passed from the surgical scheduler to billing. An agent monitoring scheduling, clinical, and billing systems catches these before the claim goes out.
Level of care denials
These need the admission decision documented at the time it was made. As Inpatient Only removals expand, the Two Midnight justification has to be captured contemporaneously. Retrieving it after the denial arrives is far harder than recording it on admission.
FAQ
Frequently asked questions
What are MS-DRGs 403 and 404?
New MS-DRGs finalized in the FY 2027 IPPS final rule for hip and knee procedures involving periprosthetic joint infection. They take effect October 1, 2026.
When does CJR-X start, and is it mandatory?
January 1, 2028, and yes. CJR-X is mandatory nationwide, unlike the original CJR model which applied to selected metropolitan statistical areas.
Does CJR-X cover outpatient joint replacement?
Yes. It covers lower extremity joint replacements performed in both inpatient and hospital outpatient settings.
Which joints does CJR-X cover?
Hip, knee, and ankle replacements.
How much does CMS expect CJR-X to save?
$725 million across five performance years.
Where do I find the code assignments for the new orthopedic MS-DRGs?
The Table 6P series on the CMS FY 2027 IPPS Final Rule Home Page contains the ICD-10-CM and ICD-10-PCS codes for all MS-DRG changes.
What documentation supports MS-DRG 403 or 404?
Documentation should establish the infection as periprosthetic, its relationship to the prosthesis including culture or synovial fluid findings where available, and that the procedure was performed to treat the infection.
What is the FY 2027 IPPS payment update for orthopedic cases?
There is no orthopedic specific update. The general IPPS operating rate increases 2.3 percent for hospitals meeting quality reporting and electronic health record requirements. Case level payment changes come from the MS-DRG reclassification and relative weight recalibration, not the base update.
Are orthopedic procedures being removed from the Inpatient Only list?
The CY 2027 OPPS and ASC proposed rule, CMS-1850-P, proposes removing 637 procedures, the second set in a three year phase out. That rule was still proposed as of September 2026, with a final rule expected around November 1, 2026.